2012 House Officer November Lump Sum Payments And Retirement Savings

Transcription

1 UNIVERSITY OF MICHIGAN BENEFITS OFFICE RETIREMENT PLAN ADMINISTRATION WOLVERINE TOWER LOW RISE G SOUTH STATE STREET ANN ARBOR, MI benefits.umich.edu/plans/retire 2012 House Officer November Lump Sum Payments And Retirement Savings The collective bargaining agreement between The University of Michigan House Officers Association and the University of Michigan calls for a lump sum payment to be included in the November pay date. The 2012 amount by level is as follows: Level Lump Sum Payment Lump Sum Payment minus FICA Tax (5.65%) House Officer I $3,537 $3,337 House Officer II $3,726 $3,515 House Officer III $4,758 $4,489 House Officer IV $5,176 $4,884 House Officer V $5,494 $5,184 House Officer VI $5,894 $5,561 House Officer VII $6,178 $5,829 House Officer VIII $6,511 $6,143 A Benefits Representative will be at the House Officer Lounge on Tuesday, October 23 rd from 11:00 AM to 1:00 PM FAX your form(s) to the Benefits Office at (734) by Wednesday, October 31st

2 Frequently Asked Questions Saving for Retirement: SRA and 457(b) Do I have to do anything to receive the lump sum payment? No. If you are eligible, the payment will be added automatically to your November paycheck. Can I invest the lump sum payment? You can direct all or part of the lump sum payment into the U-M 403(b) SRA (Supplemental Retirement Account) and/or the U-M 457(b) Deferred Compensation Plan. Is contributing to an SRA and/or 457(b) mandatory? No. The payment (if you qualify) will be added automatically to your pay unless you elect to contribute it to the SRA or 457(b). Is there a tax advantage to investing in the SRA and/or 457(b)?, the contribution is tax-deferred. You do not pay city, state, or federal income tax when it is deducted from your paycheck. The 5.65% Social Security and Medicare tax will be assessed on the entire lump sum payment. This will reduce your take home pay if you direct the full lump sum amount into the SRA and/or 457(b). Is there a University match for contributing to the SRA and/or 457(b)? No. How much can I contribute? The IRS limit for 2012 is $17,000 for each plan. Is there a Roth after-tax option? No. Can I put the lump sum into an IRA? You could do this on your own, but not through the benefits/payroll system. How do I sign up for the SRA and/or 457(b) contribution? To contribute to the SRA: Complete the Salary or Annuity Option Plan Agreement (TV form) to indicate the amount to contribute for November, and optionally a continuing amount for December and beyond. To contribute to the 457(b): Complete the Salary Deferral Agreement (TX form) to indicate the amount to contribute for November, and optionally a continuing amount for December and beyond. Return your form(s) to the Benefits Office no later than Wednesday, October 31 th to be effective for the November paycheck. Do I have to make a regularly occurring monthly contribution? No, you may sign up for a one-time contribution for November, and no further contributions will occur unless you specify it. Can I have the lump sum payment go to the SRA and/or 457(b) and sign up for a monthly contribution that will continue?. The forms have two locations: one for November s contribution and another for December 2012 and each month going forward. Is this my only chance to contribute to an SRA and/or 457(b)? No. You can start a monthly contribution for an SRA or 457(b) anytime. This is being offered now to coincide with the annual lump sum payment to encourage saving for retirement.

3 YOUR INVESTMENT CHOICES TIAA-CREF You may create your TIAA-CREF account online by clicking the Enroll Now button and selecting the SRA and/or 457(b) option. Fidelity Investments plan.fidelity.com/uofm When can I cash out or elect a rollover? Once you have terminated your employment with the University you may cash out the SRA or 457(b) at any age or roll it over to an IRA or another employer s retirement plan. You may take a loan at any time. Cash withdrawals that meet IRS definitions of hardship and disability are also available on the SRA but not the 457(b). Am I required to cash out the SRA or 457(b) when I leave U-M? No. The IRS allows you to postpone taking a withdrawal until age 70½. Do I need to complete forms to open an account with TIAA-CREF and/or Fidelity? There are no paper applications to fill out to open your account with TIAA-CREF and/or Fidelity. Once your properly completed Salary or Annuity Option Plan Agreement or Salary Deferral Agreement has been received by the Benefits Office, an enrollment notice will be sent to your chosen investment carrier(s) to establish your account. TIAA-CREF and/or Fidelity will then mail you a packet with information on how to designate your beneficiary. The investment fund will automatically be a TIAA-CREF Lifecycle Index or a Fidelity Freedom Index fund, based on your date of birth. You may change this at any time. If you already have a U-M SRA and/or 457(b) account, your contributions will be sent to that account. You may want to review your fund allocations and beneficiaries. U-M SRA website benefits.umich.edu/plans/retire/sra U-M 457(b) website benefits.umich.edu/plans/retire/457b QUESTIONS? Call the HR/Payroll Service Center at or toll free at Can I change my choice of investment funds after I enroll?. You can transfer money among the funds offered by TIAA-CREF and Fidelity, or transfer money between the two companies, at any time.

4 457(b) vs. the SRA How do I choose which plan? How are the 457(b) and the SRA similar? Both plans have the following in common: Tax-deferred contributions and earnings. The same investment fund options. The same income options at any age once you have terminated employment. The ability to take a loan at any time. Cash withdrawals and rollovers at any age once you have terminated employment. How are the 457(b) and the SRA different? The IRS 10% penalty on withdrawals made prior to age 59 ½ applies to the SRA but not to the 457(b). The SRA allows cash withdrawals as a current member of the faculty or staff if you become disabled, in the event of financial hardship, or at age 59 ½ or older. These options are not available under the 457(b). The 457(b) allows cash withdrawals as a current member of the faculty or staff at 70 ½ or older, or as a one-time withdrawal if your account balance is no more than $5,000 and you have made no contributions to the plan during the two years prior to the distribution. The SRA may be a good option if: You want the flexibility to cash out the SRA before you terminate employment due to: Disability Financial hardship At age 59 ½ or older The 457(b) may be a good option if: You anticipate taking a cash withdrawal before age 59 ½ and you want to avoid the IRS 10% early withdrawal penalty. You already contribute the maximum allowable to the SRA and want to save more. You do not need to cash out the accumulations before you terminate employment or reach age 70½. 457(b) vs. SRA Plan Feature 457(b) SRA In-service disability withdrawal? In-service hardship withdrawal? In-service withdrawal at age 59 ½? In-service withdrawal at age 70½? Subject to minimum distribution at 70 ½? Subject to IRS early withdrawal penalty? No No No No Already available at 59 ½ Loans Income tax is due on all withdrawals. An IRS 10% penalty generally applies to withdrawals made prior to age 59 ½ on the SRA but not the 457(b). Consult with a qualified tax advisor for information on taxation of distributions and the IRS early withdrawal penalty. If you default on the loan, income taxes are due, and an IRS early withdrawal penalty may apply if you are under age 59½ on the SRA loan.

5 TIAA-CREF Fidelity Investments What is TIAA-CREF? TIAA-CREF is the nationwide retirement and financial services system for people who work at more than 15,000 colleges, universities, independent schools, and other nonprofit education, hospital and health care, and research institutions throughout the United States. In fact, the University of Michigan was the first in the nation to offer TIAA in TIAA has the highest rating for insurance financial strength from all four major rating agencies: Moody s; S&P; Fitch; A.M. Best and received the highest ranking for trust in the financial services and insurance industries by The Harris Poll (2010). What are my investment choices? The investment fund is automatically defaulted to an age-appropriate TIAA-CREF Lifecycle Index Fund. You may change this at any time. TIAA-CREF offers more than 40 fund choices, including mutual funds, and fixed and variable annuities. Domestic and international stock funds, bond funds, money market funds and real estate funds are available, along with a guaranteed fixed annuity and socially responsible funds. For a complete list of available investment funds visit: and click Investment Choices. TIAA-CREF Institutional Class Mutual Funds All TIAA-CREF mutual funds available through the University of Michigan plans are offered under the Institutional share class. The Institutional Class is the share class with the lowest management fees and expenses TIAA-CREF offers and charges 25 basis point (¼ of a percent) less in expenses than the Retirement share class that is typically offered through most employers. The low fees mean more of your money remains in your account, working toward your financial future, and your retirement account balances have more earning potential. Where can I find more information? You can schedule a meeting with a TIAA-CREF investment professional by calling What is Fidelity Investments? Fidelity Investments was founded in 1946 by Edward C. Johnson II and today is the largest mutual fund company in the world. Fidelity is one of the nation s top providers of 403(b) retirement savings plans for not-for-profit organizations, including colleges and universities, healthcare institutions, foundations, and charitable organizations. The University of Michigan added Fidelity Investments to its retirement plan in What are my investment choices with Fidelity? The investment fund is automatically defaulted to an age-appropriate Freedom Index Fund. You may change this at any time. Fidelity Investments offers over 100 mutual funds, including domestic and international stock funds, bond funds, money market funds and real estate funds. In addition, the Select Portfolio Funds allow you to invest in highly specialized sectors of the economy. For a complete list of available investment funds visit: plan.fidelity.com/uofm and click Choosing Investments. Fidelity Freedom Index Funds: Class W The Fidelity Freedom Index Funds available through the University of Michigan plans are offered as Class W shares. Class W is the share class with the lowest management fees Fidelity offers for the Freedom Funds. The low fees mean that more of your money goes to purchasing investments and you keep a higher percentage of the potential returns generated, which can help you reach your retirement goals faster. Where can I find more information? You can schedule a meeting with a Fidelity Investments professional by calling Fidelity Retirement Specialists TIAA-CREF Telephone Counseling Center

6 Enrolling with TIAA-CREF and Fidelity Investments Do I need to complete forms to open my account with TIAA-CREF and/or Fidelity? There are no paper forms to complete to open your account with TIAA-CREF and/or Fidelity. How is my account established? The Benefits Office will send an enrollment notice to your chosen investment company to create your account once your properly completed and signed Salary or Annuity Option Plan Agreement or Salary Deferral Agreement has been received. Notifications are sent to Fidelity on a weekly basis. Notifications to TIAA-CREF are sent with your first contribution; this is the first business day of the month after your first deduction. What should I do next? 1) Designate Your Beneficiary The investment company you selected will send you a welcome packet with information on how to designate your beneficiary. Fidelity will include a beneficiary designation form in the packet. Contact TIAA-CREF at to request a beneficiary designation form or update it online at: Complete the form and return it to the investment company as soon as possible. 2) Choose Your Investment Funds The investment fund will automatically be an ageappropriate Lifecycle Index Fund if you select TIAA- CREF or a Freedom Index Fund if you select Fidelity. You may change this by contacting TIAA-CREF or Fidelity Investments directly at any time once your account has been created. For example, this can be done once you receive your welcome packet from the investment carrier. What are the Lifecycle Index or Freedom Index Funds? A TIAA-CREF Lifecycle Index Fund or Fidelity Freedom Index Fund is a mutual fund that is a diversified portfolio of other mutual funds offered by that company. This includes domestic and international stock funds, bond funds, and money market funds. Each Lifecycle Index or Freedom Index Fund automatically selects the allocation of stock, bond, and money market funds that are appropriate for a target retirement date of approximately age 65. The Lifecycle Index and Freedom Index Funds gradually adjusts over time to become more conservative by decreasing the underlying equity holdings and increasing the fixed income holdings as the fund s target retirement date nears. The gradual shift into fixed income from equities provides the potential for growth while reduces volatility as the retirement date approaches. TIAA-CREF Lifecycle Index and Fidelity Freedom Index Funds are actively managed, however, the underlying mutual funds within each portfolio are index mutual funds. An index fund is a passive investment strategy that aims to replicate the movements of a specific benchmark that are held constant, regardless of market conditions. Using underlying index funds are a lower cost option to meet your retirement savings goals. Your date of birth will be included in the enrollment notice sent to your chosen investment company. This will determine the specific Lifecycle Index or Freedom Index Fund into which you will be enrolled. Lifecycle Index and Freedom Index Funds provide a simple solution if you lack the time, confidence, or investment knowledge to create and manage a welldiversified portfolio. Each fund is professionally managed and provides you with a simple, single investment fund. What are my other investment choices? Both TIAA-CREF and Fidelity offer a wide selection of stock, bond, money market, and real estate funds. If you do not want your investment fund to be a Lifecycle Index or Freedom Index Fund, contact TIAA-CREF or Fidelity to designate a different fund.

7 Why do I need to designate a beneficiary? The beneficiary you designate will receive the accumulations in your account in the event of your death. Designating a beneficiary is critical to ensure that your retirement account is paid to the beneficiary of your wishes, and helps avoid legal disputes over your account. It is important to keep your beneficiary designations up to date. Family status changes, such as marriage, divorce, birth, or adoption may affect your desired beneficiary intentions. It is recommended that you review and update your beneficiaries periodically to make sure they reflect your wishes as your circumstance change. Please note that updating your beneficiary for life insurance does not update it for the SRA or 457(b). You must complete a separate beneficiary designation for each plan in which you are enrolled. Doesn t the enrollment process declare my beneficiary? No. You must designate your beneficiary directly with TIAA-CREF and/or Fidelity Investments. Isn t my beneficiary automatically the one I listed for life insurance? No. Life insurance, the SRA, and the 457(b) are separate benefit programs. Designating or updating a beneficiary for one plan does not affect the other. What happens in the event of my death if I don t designate a beneficiary for the SRA or 457(b)? Under current plan terms, the order of the beneficiary determination will be as follows: TIAA-CREF The beneficiary will be your estate. This will involve probate court determining who will receive the benefits of your account. Fidelity Investments The account will be paid according to person or persons surviving you in the following order: a) spouse, b) children, c) parents, d) brothers or sisters, e) personal representative (executor or administrator). TIAA-CREF Log on to the TIAA-CREF website at: Designate Your Beneficiary First-time visitors to the TIAA-CREF site will need to register by clicking Register for Online Access and completing the process to create an ID and PIN. Click the My Profile tab and then select Beneficiaries. If you have questions, contact a TIAA-CREF representative by calling , Monday through Friday, 8:00 a.m. to 10:00 p.m., or Saturday 9:00 a.m. to 6:00 p.m. Eastern time. Fidelity Investments After your account is established, log on to Fidelity NetBenefits at: First-time visitors to Fidelity NetBenefits will need to first register on the site by clicking the Register Now link. Follow the instructions for creating your Customer ID and PIN. Click the Your Profile tab, then select Beneficiaries. After you make your elections, you will immediately be able to view your beneficiary information online. This will supersede any prior beneficiary election form you have submitted. If you have questions, contact a Fidelity Retirement Services Specialists by calling , Monday through Friday, 8:00 a.m. to midnight, Eastern time. For more information visit: benefits.umich.edu/events/beneficiary.html

8 Fund Management Fees and the U-M Plans Investment carriers pay for operational expenses, portfolio management, record keeping, quarterly statements, general administration, and customer service by assessing fees on its investment funds. The fees are subtracted from the investment returns or earnings of those funds, with the net return being credited to participant accounts. The prospectus of each fund summarizes its various fees. The combination of these fees will generally equal a fund s expense ratio. The expense ratio is reported as a percent of assets under management. There are no sales charges or loads on any fund offered by TIAA-CREF or Fidelity Investments through the U-M plans. All transaction fees (ex. for taking a loan, cash withdrawals, etc.) have been waived and there are no account maintenance fees. In addition, U-M does not pay any fees to TIAA-CREF or Fidelity Investments. All TIAA-CREF mutual funds and the Fidelity Freedom Index Funds available through the University of Michigan plans are offered at the lowest cost share class available. Low fees mean more of your money remains in your account, working toward your financial future, and your retirement account balances have more earning potential. TIAA-CREF LIFECYCLE INDEX FUNDS FIDELITY FREEDOM INDEX FUNDS: CLASS W Fund Name Ticker Symbol Expense Ratio Fund Name Ticker Symbol Expense Ratio TIAA-CREF Lifecycle Index Retirement Income TRILX 0.21% TIAA-CREF Lifecycle Index 2010 TLTIX 0.20% TIAA-CREF Lifecycle Index 2015 TLFIX 0.19% TIAA-CREF Lifecycle Index 2020 TLWIX 0.20% TIAA-CREF Lifecycle Index 2025 TLQIX 0.19% TIAA-CREF Lifecycle Index 2030 TLHIX 0.19% TIAA-CREF Lifecycle Index 2035 TLYIX 0.19% TIAA-CREF Lifecycle Index 2040 TLZIX 0.19% TIAA-CREF Lifecycle Index 2045 TLXIX 0.19% TIAA-CREF Lifecycle Index 2050 TLLIX 0.19% Fidelity Freedom Index Income: Class W FIKFX 0.19% Fidelity Freedom Index 2010: Class W FKIFX 0.19% Fidelity Freedom Index 2015: Class W FLIFX 0.19% Fidelity Freedom Index 2020: Class W FPIFX 0.19% Fidelity Freedom Index 2025: Class W FQIFX 0.19% Fidelity Freedom Index 2030: Class W FXIFX 0.19% Fidelity Freedom Index 2035: Class W FIHFX 0.19% Fidelity Freedom Index 2040: Class W FBIFX 0.19% Fidelity Freedom Index 2045: Class W FIOFX 0.19% Fidelity Freedom Index 2050: Class W FIPFX 0.19% Where to Find More Information Information and a breakdown of the fees assessed by TIAA-CREF and Fidelity Investments for its funds may be found in each fund s prospectus. A fund prospectus may be requested by phone or downloaded from each carrier s website. You may view an explanation of the types of fund management fees at: benefits.umich.edu/plans/retire/fundfees.html Information on a fund s current and historical investment performance, as well as benchmarks, may also be found online at TIAA-CREF and Fidelity Investments. In addition, you may also provide direction on your investment choices by calling TIAA-CREF and Fidelity Investments at the phone numbers listed below or through their secure websites. TIAA-CREF Fidelity Investments

9 TV Salary or Annuity Option Plan Agreement For Tax-Deferred Retirement Plan Contributions at the University of Michigan House Officers November 2012 SRA Election Please print in black ink. On this form, you authorize the amount(s) to be deducted from your salary and contributed to a tax-deferred 403(b) retirement account on your behalf. Benefits Office Use Only TIAA: Def OF Prep by Fidelity: Def OF Date FAX to by October 31, House Officer Information. Name (Last, First, Middle Initial) UMID # U.S. Social Security Number Pager # Daytime Phone FAX 2. Amount to be Contributed Per Pay Period. November 2012 Indicate the total amount to be contributed; this should be: 1) The amount to be contributed from the lump sum payment plus 2) Any monthly SRA contributions currently in effect. December 2012 and Future Pay Periods All contributions will be canceled effective with the December pay unless you indicate an amount below to be contributed with each pay period beginning with December This amount will generally continue until you change or cancel it. To TIAA-CREF SRA $ To TIAA-CREF SRA $0 To Fidelity SRA $ To Fidelity SRA $0 Total for November 2012 $ Total On-Going Contribution $0 3. Tax Deferring Agreement, Certification and Signature. Your Signature is required below. I understand and agree to the following terms and conditions: 1. This Agreement is legally binding and irrevocable between the University of Michigan and myself. If the University of Michigan modifies future versions of this Agreement to comply with federal law or regulations, I agree that this Agreement shall be administered according to such modified Agreements. 2. I agree to hold harmless and indemnify the University of Michigan for any and all liability and expenses by it as the result of any misstatement or omission made by me in this Agreement. 3. This Agreement revokes any previously signed Agreement. 4. This salary reduction agreement is covered under and shall be interpreted consistent with U.S. Treasury Regulations. 5. This Agreement will generally become effective with respect to University of Michigan compensation paid on or after the date I sign it and the Benefits Office receives it. 6. During the year, the Benefits Office will lower or suspend my contribution if the my salary reduction will cause me to exceed the Internal Revenue Code (IRC) 402(g), 401(a)(17), and/or 415 limits. If my contribution is lowered or suspended to keep me within IRC limits, my elected amount will generally resume the following year. If I participate in another tax-deferred plan outside the U-M, I need to contact a tax advisor to ensure I do not exceed IRC limits. 7. I understand that I will not be automatically enrolled in the Basic Plan as a result of a change in job title, even if I already contribute to the SRA. I understand that my participation in the SRA and/or Basic Plan will generally cease if I experience a change in job title between temporary and regular and that it is my responsibility to reenroll in the Basic Plan and/or SRA if my job title changes. Signature Date University of Michigan Benefits Transaction Team, 4073 Wolverine Tower, 3003 S. State Street, Ann Arbor, MI Phone: (734) FAX to: (734)

10 TX Salary Deferral Agreement University of Michigan 457(b) Deferred Compensation Plan House Officers November (b) Election On this form, you authorize the amount(s) to be contributed from your salary to a tax-deferred 457(b) deferred compensation plan on your behalf. Please print all information in black ink. For Benefits Office Use Only 4/2008 Prep by TIAA: Def OF Date Fidelity: Def OF FAX to by October 31, House Officer Information. Name (Last, First, Middle Initial) UMID # U.S. Social Security Number Pager # Daytime Phone FAX 2a. Salary Deferral Amount NOVEMBER 2012 Enter whole dollar amounts only. If you already defer compensation and are changing the amount, indicate the new total amount of the deferral, not just the amount of the change. I request to defer my eligible U-M compensation into the U-M 457(b) deferred compensation plan by the amount indicated below. NOVEMBER 2012 $ DECEMBER 2012 AND FUTURE PAY PERIODS Enter the amount of compensation you wish to defer per pay period (enter whole dollar amounts only). This amount will remain in effect until you submit another form to change or cancel it. If you already defer compensation and are changing the amount, indicate the new total amount of the deferral, not just the amount of the change I request to defer my eligible U-M compensation per pay period into the U-M 457(b) deferred compensation plan by the amount indicated below. TOTAL ON-GOING DEFERRAL $0 3. Salary Deferral Agreement and Signature I understand and agree to the following terms and conditions: 1. This Agreement is legally binding and irrevocable between the University of Michigan and myself. 2. The Internal Revenue Code (IRC) limits the aggregate amount an individual taxpayer can tax-defer. During the year, the Benefits Office will lower or suspend my salary deferral contribution if it will cause me to exceed the IRC 457(b)(2), 457(b)(3), or 414(v) limits. If my contribution is lowered or suspended during the year to keep me within IRC limits, my elected amount will generally resume the following year. If I participate in a 457(b) plan outside of the University of Michigan, I may need to consult with a tax advisor to ensure I do not exceed IRC limits. 3. I agree to hold harmless and indemnify the University of Michigan for any and all liability and expenses by it as the result of any misstatement or omission made by me in this Agreement. 4. This Agreement revokes any previously signed Agreement. 5. This Agreement shall become effective as soon as administratively feasible, with respect to University of Michigan compensation not yet earned, but not earlier than the first day of the month following the date this Agreement is filed with the Benefits Office. This salary reduction agreement is covered under and shall be interpreted consistent with U.S. Treasury Regulations. 6. If the University of Michigan modifies future versions of this Agreement to comply with federal law or regulations, I agree that this Agreement shall be administered according to such modified Agreements. 7. I understand my deferred compensation and earnings cannot be withdrawn until I have terminated employment, or as an employee, I am age 70½ or older, or elect a one-time withdrawal pursuant to IRC Section 457(e)(9)(A). 8. I understand this form does not enroll me in the University of Michigan Basic Retirement Plan or change any elections I have made with regards to the University of Michigan Basic Retirement Plan or Supplemental (SRA) Retirement Plan. 2b. Investment Company I request to allocate the deferral amount indicated in Section 3a to the investment company(ies) as indicated below. (Check one) 100% TIAA-CREF 100% Fidelity Investments 50% TIAA-CREF & 50% Fidelity Investments Other: % TIAA-CREF & % Fidelity Signature Date Benefits Transaction Team 4073 Wolverine Tower 3003 S. State Street Ann Arbor, MI Phone: (734) FAX: (734)