Retirement, Health and Education Savings

Traditional IRA

Not only is the money you earn tax-deferred until you begin making withdrawals, but you might also qualify for a current tax deduction. Please consult your tax advisor before making any financial decisions.

Benefits

• Earnings are tax-deferred until withdrawn after 59½ when they will be taxed at your current tax rate.
• Contributions may be tax-deductible.

Eligibility
You can set up and make contributions to a Traditional IRA if:

• You (or, if you file a joint return, your spouse) received taxable compensation during the year, and
• You were not age 70½ by the end of the year.

You can have a Traditional IRA whether or not you are covered by any other retirement plan. However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan.

Investments
FNCB IRA funds are invested in Certificates of Deposit.

Withdrawals

• You must start taking a minimum withdrawal when you reach the age of 70½.
• A withdrawal cannot be made before the age 59½ without incurring penalties and tax liabilities.
• Traditional IRAs are tax-deferred, which means you don't pay federal income taxes on any gains until you begin to take withdrawals from the account.

Roth IRA — No minimum distribution requirement

This retirement savings account offers tax-deferred growth and tax-free withdrawals in retirement. It really is the best of both worlds! Please consult your tax advisor before making any financial decisions.

Benefits

• Qualified withdrawals of earnings are tax-free and IRS penalty free after a five-year holding period.
• Withdrawals of Roth contributions are tax-free and IRS penalty free at any time.
• There is no mandatory age 70½ minimum distribution requirement.
• Your beneficiaries can receive tax-free distributions.

Eligibility
You can set up and make contributions to a Roth IRA for 2013 if you received taxable compensation during the year and your modified adjusted gross income (MAGI) meets the following limitations:

• Full contribution if MAGI is less than $112,000 (single) or $178,000 (joint)
• Partial contribution if MAGI is less than $127,000 (single) or $188,000

To learn more about eligibility requirements, read IRS Publication 590 or consult your tax advisor.

IRA Investments
FNCB Roth IRA funds are invested in Certificates of Deposit.

Withdrawals
Once a five-year holding period is met, any earnings withdrawn for a qualified distribution are tax-free and IRS penalty free. Qualified distributions include:

• Distributions made on or after the date on which the customer attains age 59½,
• Distributions made to a beneficiary upon account holder's death,
• Distributions attributable to the owner being permanently disabled and
• Qualified first time homebuyer distributions up to $10,000 (lifetime limit).

Rollover IRA

If you recently changed jobs or will be changing jobs soon, you can use a Rollover IRA to consolidate retirement funds from your previous employer and protect them from taxes and penalties. Please consult your tax advisor before making any financial decisions.

Benefits

• Keeps your retirement funds tax-deferred and protected from taxes and penalties.
• Convenient access to your money when you start taking distributions at retirement.

Direct Rollover
The check from your qualified employer plan assets is made out to the financial institution where you have chosen to place your IRA funds for "the benefit of you". Since the funds are deposited directly from the qualified employer plan to the IRA, no taxes are withheld.

Indirect Rollover
The check from your qualified employer plan assets is made payable to you. Your former employer must withhold a mandatory 20% for taxes. You have 60 days to deposit the funds into a new IRA and you are required to make up that percentage from your own personal funds. If you do not make up the 20% on deposit, the 20% withheld is considered a taxable distribution and only 80% will continue to earn interest tax-free. Additionally, if you are under age 59½, you are subject to an additional early withdrawal penalty of 10%.

IRA Investments
FNCB IRA funds are invested in Certificates of Deposit.

Simplified Employee Pension Plan (SEP)

This is a great retirement savings account for small business owners and self-employed individuals. It’s easy and inexpensive to set up and also offers tax advantages. Please consult your tax advisor before making any financial decisions.

Benefits

• Contributions to a SEP are tax deductible and your business pays no taxes on the earnings on the investments.
• The employer is not locked into making contributions every year. In fact, you decide each year whether, and how much, to contribute to your employees' SEP-IRAs.
• Generally, you do not have to file any documents with the government.
• You may be eligible for a tax credit of up to $500 per year for each of the first 3 years for the cost of starting the plan.

Eligibility
An eligible employee is an employee who:

• Is at least 21 years of age, and
• Has performed service for you in at least 3 of the last 5 years.

Once an employee meets the eligibility requirements, they cannot be excluded from the plan.

IRA Investments
FNCB SEP funds are invested in Certificates of Deposit.

Withdrawals

• Participants cannot take loans from their SEP-IRA
• Participants can make withdrawals at any time, to be rolled over tax-free to another SEP-IRA, to another traditional IRA, or to another employer's qualified retirement plan.
• Funds withdrawn from a SEP-IRA (and not rolled over to another plan) are subject to income tax for the year in which an employee receives a distribution. If you are under 59½, additional taxes may apply.
• Participants must start taking a minimum withdrawal when they reach the age of 70½.

Coverdell Education Savings (CESA)

This account is a great way to get a jumpstart on saving for your children’s college educations. The money you contribute grows tax-free until withdrawn for qualified education expenses. Please consult your tax advisor before making any financial decisions.

Benefits

• Funds deposited in the account grow tax free until distributed.
• There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. However, the total contributions for the beneficiary in any year cannot exceed $2,000.
• The designated beneficiary can be changed to a member of the beneficiary's family. There are no tax consequences if, at the time of the change, the new beneficiary is under age 30.

Eligibility
You can set up and make contributions to a Coverdell Education Savings Account if:

• Your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return).
• The designated beneficiary must be under age 18 when the account is established and when the contribution is made.
• Contributions must be made in cash.

IRA Investments
FNCB CESA funds are invested in Certificates of Deposit.

Withdrawals

• Distributions can be taken at any time.
• Distributions are tax-free as long as the distributions do not exceed the beneficiary's adjusted qualified education expenses for the year.

Health Savings Account (HSA)

An HSA offers you the ability to save money for out-of-pocket medical expenses on a tax-deferred basis. And distributions are tax-free if used to pay for qualified medical expenses. Please consult your tax advisor before making any financial decisions.

Benefits
Accounts are owned by the individual (not the employer) and the individual decides:

• How much to use to for medical expenses,
• Which medical expenses they want to pay from the account
• Whether to pay for medical expenses from the account or save the account for future use, and
• Where the account will be opened.

Distributions are tax-free if taken for qualified medical expenses.

Unspent funds in the account remain in the account until the owner decides to use them. There are no "use it or lose it rules".

An HSA is "portable" so it stays with you if you change employers or leave the work force.

Eligibility
An individual is eligible for an HSA if:

• They are covered by a High Deductible Health Plan (HDHP),
• They are not covered by other health insurance,
• They are not enrolled in Medicare, and
• They cannot be claimed as a dependent on someone else's tax return.

There are no income limits on who may contribute to an HSA.

There is no requirement of having earned income to contribute to an HSA.

HSA Investments
FNCB HSA funds are invested in an interest bearing deposit account. The account provides a competitive tiered interest rate based on a tiered account balance.

Withdrawals

• Account may be accessed through a FNCB Check Card.
• Distributions are tax-free if taken for qualified medical expenses.
• There is no time limit on when a distribution must occur.
• Rollovers from Archer MSAs and other HSAs are permitted, but only one per year.