Transcript Module 7: Voluntary Retirement Programs

MnSCU Retirement Plans
Basic Training for Campus HR
Administrators
The Minnesota State Colleges and Universities system is an Equal Opportunity employer and educator.
Planned Modules:
• Module 1: Retirement Plan Concepts
• Module 2: Eligibility for Primary Plans
• Module 3: Reporting in SCUPPS
• Module 4: SRP: Eligibility and Coding
• Module 5: Forms Completion & Processing
• Module 6: Phased Retirement Programs
• Module 7: Voluntary Retirement Programs
• Module 8: Retirement Plan Distributions
Slide 2
TIAA-CREF
Defined Contribution Plans
The Minnesota State Colleges and Universities system is an Equal Opportunity employer and educator.
Distribution Options With
TIAA-CREF
• Life Annuity Options
– One-life or Two-life Annuities
• Cash Withdrawals
• Systematic Withdrawals
• TIAA-Traditional Transfer Payout Annuity
• TIAA-Traditional Interest Only Payments
• Minimum Distribution Option
Slide 4
Life Annuities:
Income You Cannot Outlive
• An arrangement that provides income
payments for life.
• One- and Two-Life Annuities:
– One-Life Annuities provides lifetime income to
the annuitant only.
– Two-Life Annuities provides lifetime income to
the annuitant and a second person.
Slide 5
Life Annuities - Beneficiaries
• Beneficiary – an individual or organization that
inherits payments following your death
• Guaranteed Period*
– Outlines the number of years your beneficiaries
can collect income payments after your death
– Guaranteed period begins when your annuity
income contract is opened
– Options: 10, 15 or 20 years
– Beneficiary can collect payments for the remainder
of the guaranteed period
– Assumes you and your annuity partner
die within the time frame
Slide 6
Life Annuity - Investments
• Fixed or Variable Investments
• Fixed – TIAA-Traditional, a guaranteed
account for a stable income stream.
• Standard or Graded payment options.
• Variable – CREF Annuities and TIAA-Real
Estate Account – NOT Mutual Funds.
• Payments can fluctuate significantly each
year directly related to performance.
Slide 7
Cash Withdrawals:
Lump-sum or Systematic
• Cash Withdrawals
– Distribute according to your needs, with risk of
outliving your available assets.
– May allow for distribution of significant assets
to beneficiaries.
– Available from TIAA Traditional in 10 annual
installments (Transfer Payout Annuity).
– Available from the CREF Accounts, TIAA Real
Estate Account, and all the Mutual Fund
Options.
Slide 8
TIAA-Traditional Interest Only Payments
– Receive monthly interest payments from your TIAA
Traditional account
– Your principal remains intact
– Available for account holders who:
1.Are between the ages of 55 and 691/2*
2.Have GRA TIAA Traditional accumulations of at
least $10,000
– Guidelines for receiving payments:
1.Receive payments for at least 12 months
2.May continue past 701/2 if still employed
3.May convert to Transfer Payout
Annuity, annuity income or Minimum Distribution
Option**
Slide 9
Minimum Distribution Option
• IRS requires distributions to begin at age 70 ½,
unless continuing to work.
• First payment due April 1 of the year, following
the year you attain age 70 ½.
• Pays IRS Required Minimum Distribution.
• Maximizes income tax deferral and preserves
accumulation.
• Delays deciding on lifetime income.
Slide 10
Remember…
• …Eligible rollover distributions are subject
to a mandatory 20% Federal withholding
tax, including:
• Cash withdrawals
• Systematic withdrawals
• TIAA Interest Only payments
• Transfer Payout Annuities
Slide 11
Module 8: Retirement Plan Distributions
• Questions?
Thank you!
Slide 12
Teachers Retirement Association
Defined Benefit Plan
The Minnesota State Colleges and Universities system is an Equal Opportunity employer and educator.
Defined Benefit Plan
• Guaranteed monthly lifetime retirement
benefit; survivor benefit options available
• Member cannot outlive benefit
• Benefit based on formula; usually
percentage of final average pay multiplied
by years of service
• Pre-retirement survivor death benefits
• Disability benefits
Slide 14
No Refund Plan
• Member receives a lifetime benefit
• Beneficiary does not receive a benefit
Slide 15
Guaranteed Refund Plan
• Member receives a lifetime benefit
• Beneficiary receives monthly payments of the
remainder of the member’s TRA contributions,
plus interest, less the benefits already paid to the
member
Slide 16
Guaranteed Refund Plan Example
Member contributions
Interest accumulations
Total in account
Member collected
Balance at death
$
50,000
+$
50,000
$ 100,000
- $
80,000
$
20,000
$20,000 ÷ $2,000* = 10 months to be paid
to beneficiary
*Member’s original monthly benefit amount
Slide 17
15-Years Guarantee
• Member receives a lifetime benefit
• Beneficiary receives the same monthly
amount for the remaining years of the
guarantee
Slide 18
Survivorship With Bounceback
Slide 19
•
Member receives a lifetime benefit
•
When the member dies, the optional joint annuitant (OJA) receives
100, 75 or 50 percent of member’s monthly payment, depending on
the plan chosen. Benefit amount determined by the ages of the
member and the OJA.
•
Married members must choose a survivorship plan covering their
spouse, unless spouse waives rights to this type of annuity
Survivorship With Bounceback
(Cont.)
•
Designate any person(s) as an OJA
– If someone other than a spouse is designated:
• Spouse must waive rights to receiving a survivorship plan
• May designate a Supplemental Needs Trust as recipient of a
lifetime annuity benefit, if the spouse waives their rights.
• IRS has restrictions on the age difference between the
member and the OJA, when choosing the 100 percent or 75
percent survivorship plan.
– If the OJA predeceases the member, the benefit “bounces back”
to the greater No Refund Plan amount for the remainder of the
member’s lifetime.
Slide 20
Six Annuity Plans
Assumes member is age 59
Monthly Beneficiary’s Life Plan
Amount
Age
No Refund
Guaranteed Refund
$2,021
$2,010
N/A
N/A
15-Years Guaranteed
$1,955
$1,816
$1,731
$1,899
$1,862
$1,794
$1,927
$1,910
$1,862
$1,955
N/A
59
49
69
59
49
69
59
49
69
100% Survivorship with Bounceback
75% Survivorship with Bounceback
50% Survivorship with Bounceback
Slide 21
Annual Statements Reflect
No Refund Plan Estimates
Acceleration
Age 59 as of July 1, 2010
Acceleration
Acceleration
No
Acceleration
To 62
After 62
To 65
After 65
To NRA
After
NRA
No Refund
$2,021
$3,159
$1,718
$2,982
$1,415
$2,924
$1,314
Guaranteed Refund
$2,010
$3,150
$1,708
$2,974
$1,407
$2,917
$1,306
15-Years Guaranteed
$1,955
$3,104
$1,662
$2,936
$1,369
$2,882
$1,271
100% Survivor
$1,816
$2,986
$1,544
$2,839
$1,271
$2,792
$1,181
50% Survivor
$1,910
$3,066
$1,624
$2,905
$1,337
$2,853
$1,242
75% Survivor
$1,862
$3,025
$1,583
$2,871
$1,303
$2,821
$1,210
*For this example, normal retirement age (NRA) means age 66.
Slide 22
Acceleration
Retiree Statistics – Annuity Fund
Selection
Retirements between May 16 – September 16 2009
50% Survivor
12.6%
75% Survivor
8.4%
No Refund
13.7%
Guaranteed
Refund
12.5%
15-Years
Guaranteed
7.2%
100% Survivor
45.6%
Slide 23
Cancel or Change Plans
• You have two (2) months following your initial
payment to:
– Cancel an application for retirement
– Choose a different annuity plan
– Change the accelerated annuity option
– Change your optional joint annuitant
Slide 24
Disability Benefits
• Eligibility requirements
– You must be vested and actively teaching or on an official
leave of absence at the time your disability occurs
– Must be a total and permanent disability
– The application for benefits must be made within 18 months
following the termination of your teaching service or leave of
absence due to your disabling condition
• Contact TRA if you are retiring due to health reasons
• Uses the Tier II formula and high-5 average salary, with
no actuarial reduction
Slide 25
Refund of Contributions
 Cannot take a refund while on a leave of absence
 If vested, consider deferring/delaying receiving monthly benefits
until you are eligible
 Retirement benefit has a greater value than a refund
 To take a refund:
 Apply online or contact TRA for a refund application
 Apply at least 30 days after termination
 Receive member contributions plus interest – employer
contributions are not included
 Roll over to a traditional IRA, Roth IRA or an eligible
employer plan
Slide 26
Refund of Contributions
(continued)
 May repay refund after accumulating 2 years of
allowable service credit with TRA or another state
public pension fund (combined service)
 Payment must be received before your effective date of
retirement
 Repay with interest (8.5 percent compounded annually)
 You may repay using money from a 403(b) taxsheltered annuity account, governmental 457(b) plan, a
Roth IRA, a traditional IRA or another qualified plan
 Partial repayment option: With 2 or more years of
refunded service, you may repay 1/3 minimum
Slide 27
Module 8: Retirement Plan Distributions
• Questions?
Thank you!
Slide 28