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  • Writer's pictureStephen Boatman

Gilead Sciences 401k Plan Breakdown

Gilead's 401k plan comes with a 61-page summary plan description (SPD) that details all the options and nuances that can differ between 401k plans. I've read through this document and broken out the key points below that I would like to know if I was an employee of Gilead Sciences. Some of these you may already know, and others may be new to you. Regardless, I hope you find this interesting and helpful in your search to make wise financial decisions.

 

Mega BackDoor Roth conversions


  • These allow you to contribute north of $30,000 into your Roth 401k on top of your normal 401k contributions. Gilead allows this valuable planning strategy within its 401k and is worth considering if you are a high earner. I've broken down the contributions below with the following assumptions: salary = $230k, age = 51, total 401k contribution $76,500.

    1. 10% employee contribution = $23,000

    2. Employer Match = $15,000

    3. Over age 50 catch-up contribution = $7,500

    4. Employee after tax contribution = $31,000

    5. This brings your total contribution to $76,500, which is the 2024 limit. You would then convert $31,000 of after-tax contributions into your Roth 401k. Allowing you a massive Roth contribution that would take five years to reach with normal backdoor Roth IRA contributions of $7,000/yr.

    6. This contribution can't exceed 50% of your total compensation. To be allowed to make this contribution, you would need to earn $153,000 = $76,500 x 2.

Employer Matching Contribution


  • 100% company match until contributions reach $15,000.

Vesting and Employer Matching


  • Employees are 100% vested in employer matches, and employer matches are capped at $15,000 per year.

  • All employer matching contributions are pre-tax; employer contributions won't contribute to the Roth portion of your 401k.

  • A vesting schedule applies to employees who transferred their benefits over from CGI Pharmaceuticals, Triangle Pharmaceuticals, and if you were an employee of Gilead pre-2006. These schedules can be seen below.

CGI & Triangle Vesting Schedule



If employment was terminated before 2006, then your vesting schedule is below.


Roth and Traditional 401k options are available


  • Roth Options are typically recommended for lower income or younger employees and Traditional 401k's are typically better options for employees closer to retirement and in their highest earning years.


In-plan Roth conversions


  • You are allowed to convert your traditional 401k dollars into your Roth 401k as a taxable event to save taxes on your possible future earnings. Instead of being taxed at an income tax rate upon withdrawal, your earnings will be tax-free. This makes the most sense for individuals in lower tax brackets or who have a long time horizon between now and withdrawal.

401k Loan


  • You can receive a 401k loan from your Gilead Sciences 401k.

    1. Set Up Fee: $35 and an annual recurring Fee of $15.

    2. Only one loan at a time is allowed per employee.

    3. The amount ranges from $1,000 to $50,000 while being below 50% of your vested account balance. Thus, you would need $100,001 vested in your 401k to qualify for a $50,000 loan.

    4. Interest Rate: Prime + 1.5% and is fixed throughout the loan. However, this interest is paid back into your account, meaning it's more like moving money from one pocket to the other and less about a penalty.

    5. Payback is made through payroll, with a minimum of 4 payments per year. The loan must be paid back in 5 years through fixed payments unless it is for a principal residence, in which case you may have up to 15 years.

    6. The loan must be repaid in total if you leave the company.

Hardship Withdrawals


  • Hardship withdrawals allow you to withdraw your funds without a 10% penalty, but they will still be subject to income tax. Qualified hardship withdrawals are below.

    1. Medical expenses

    2. Principal residence purchase

    3. Prevent foreclosure

    4. Education expenses

    5. Funeral expenses

    6. Federally declared disaster-related loss

    7. Qualified military absence

Investment Options


  • Gilead offers excellent investment options with Vanguard, Fidelity, and DFA funds, not to mention some idiot-proof target date funds. I'd give this fund selection an 8.5 out of 10 regarding 401k investment options.


Withdrawing Assets before age 59.5 without the 10% penalty


  • This plan allows employees who separate from service after age 55 to begin taking distributions from their 401k without paying the 10% early withdrawal penalty. However, you must still pay taxes on the withdrawn amount.

  • A balance must remain in the employer's 401k during these distributions.

  • If this is of interest to you, then you should also investigate 72(t) distributions.

Closing


I hope you found this 401k plan breakdown helpful, and if you have any lingering questions or concerns, feel free to call or email me.

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