University of Michiga n Retirement Savings Plan

Transcription

1 University of Michiga n Retirement Savings Plan

2 Ask the Experts Have a question? Need help? Contact TIAA-CREF and Fidelity Investments for these inquiries and services: Questions/help choosing your investment funds Account and income information Brochures and booklets on services and financial planning Change of address or beneficiary Divorce, Qualified Domestic Relations Order (QDRO) Rollovers into the U-M Retirement Plan Forms for cash withdrawals and distributions, rollovers, transfers, loans, and income options Changing your investment funds Transferring accumulations between funds and between TIAA-CREF and Fidelity Income and payment methods (lifetime annuity, cash withdrawals, etc.) Tax questions (withdrawal penalty, minimum distribution, federal withholding) Schedule individual counseling; register for workshops Information on fund management fees TIAA-CREF 730 Third Avenue New York, NY Hour Automated Phone Center Telephone Counseling Center Monday Friday, 8:00 a.m. 10:00 p.m., EST Saturday, 9:00 a.m. 6:00 p.m., EST Workshops or Individual Counseling Fidelity Investments P.O. Box Cincinnati, OH Hour Automated Phone Center Fidelity Retirement Specialists Monday Friday, 8:00 a.m. midnight, EST Workshops or Individual Counseling Visit TIAA-CREF and Fidelity Online TIAA-CREF and Fidelity Investments websites provide a variety of tools and information, including: current information on fund descriptions, performance, and investment strategy to assist you in choosing your investment funds interactive worksheets and calculators check your account balance, change the funds you invest in, and transfer accumulations between funds request forms and many free publications information about other available products and services

3 Benefits Information The HR/Payroll Service Center can answer many of your benefits questions. Call or toll-free Service Center Representatives are available Monday Friday, 8:00 a.m. 5:00 p.m. Have your UMID number available when you call. You can also meet with a Benefits Consultant on a walk-in basis at both the Ann Arbor and Flint locations. U-M Ann Arbor Wolverine Tower Low Rise G250 (Ground Floor) 3003 South State Street Ann Arbor, MI Monday Friday, 8:00 a.m. 5:00 p.m., EST U-M Flint UHR-Flint 213 University Pavilion 303 East Kearsley Street Flint, MI Monday Friday, 8:00 a.m. 5:00 p.m., EST Telephone Services for People Who Are Deaf, Hard of Hearing, or Have Speech Disorders TTY/TDD phone service is available through the Michigan Relay Center. Call (toll-free) and ask the operator to connect you to the HR/Payroll Service Center. Limitations The university in its sole discretion may modify, amend, or terminate the plan. Nothing in these materials gives any individuals the right to continued plan benefits beyond those accrued at the time the university modifies, amends, or terminates the plan. Anyone seeking or accepting any of the benefits provided will be deemed to have accepted the terms of the plan and the university s right to modify, amend, or terminate the plan. Statement of Intent This booklet describes the University of Michigan Retirement Plan. It is intended to provide information to U-M faculty and staff about participating in the plan. Every effort has been made to ensure the accuracy of information in this booklet. However, if statements in this booklet differ from applicable contracts, certificates or riders, then the terms and conditions of those documents, as interpreted by the Benefits Office, prevail. Possession of this booklet does not constitute eligibility for the retirement plan. IRC regulations, as well as university and investment company policies, are subject to change and/or correction without notice. Information is based on the university s current understanding of highly complex Internal Revenue Code (IRC) and U.S. Treasury Department regulations and is provided for general informational purposes only. The University of Michigan does not provide tax or investment advice. Questions or concerns should be addressed to a qualified tax adviser. Contents The U-M Retirement Savings Plan at a Glance Waiting Period for Retirement Plan Contributions Good Reasons to Join How Does the Retirement Savings Plan Work? IRS Retirement Saver s Credit Important Plan Information TIAA-CREF Fidelity Investments Eligible Compensation How to Enroll Save More with an SRA How Much Can I Contribute? Your Per Paycheck Limit Do Not Exceed the Limit Your Limit if You Retire or Terminate I m Enrolled, Now What? Rollovers into the U-M Retirement Plan Quarterly Statements Compulsory Participation Divorce (QDRO) Military Leave of Absence Direct Transfers Cash Withdrawals: Current Employees SRA Disability Withdrawal SRA Hardship Withdrawal SRA Age 59 1 /2 Withdrawal SRA Loans Chart of SRA Withdrawal and Loan Options What Are My Options When I Leave U-M? Rollovers Cash Withdrawals: Former Employees TIAA-CREF Income Options TIAA-CREF and Fidelity Income Options Chart of Basic Plan Income Options IRS 10% Early Withdrawal Penalty Federal Income Tax Michigan Income Tax How to Choose a Financial Planner Myths & Misconceptions Visit the U-M Retirement Plan Website (b) Deferred Compensation Plan Fund Fees & Expenses Plan Administrator inside back cover benefits.umich.edu UNIVERSITY OF MICHIGAN RETIREMENT SAVINGS PLAN 1

4 The Retirement Savings Plan at a Glance Type of Plan Investment Companies Enrollment Deadline Final Enrollment Deadline Vesting Schedule Basic Plan Eligibility SRA Eligibility Contribution Rate 403(b) and 401(a) tax-deferred defined contribution retirement savings plan TIAA-CREF and Fidelity Investments You may enroll at any time. To view deadlines for a specific paycheck go to: benefits.umich.edu/plans/retire/retdeadlines.html December 1 is the final deadline to enroll in the Basic Retirement Plan for the calendar year. Enrollments received after December 1 are effective no earlier than the following January and retroactive contributions cannot be provided in accordance with IRS regulations All contributions are immediately vested (see page 4) Regular faculty and staff with a 1% appointment or greater, with university funding for 4 continuous months or longer LEO Lecturers I and Supplemental Instructional Staff (Adjunct, Visiting I/II, Clinical I titles) with a 50% appointment or greater, with university funding for 4 continuous months or longer House Officers, Research Fellows, Graduate Students (Staff Assistant, Research Assistant, and Instructor), and Professional Specialists and temporary staff are not eligible but may contribute to an SRA Regular faculty and staff, Supplemental Instructional Staff, House Officers, Research Fellows, Graduate Students (Staff Assistant, Research Assistant, and Instructor), LEO and Professional Specialists with a 1% appointment or greater, with university funding for 4 continuous months or longer. Temporary staff are also eligible Basic Plan You contribute 5% of your eligible tax-deferred salary (up to a salary cap of $245,000 for 2010) U-M provides a 10% matching contribution (up to a salary cap of $245,000 for 2010). Individuals hired or newly eligible to participate in the Basic Plan on or after January 1, 2010 must complete a waiting period of twelve consecutive months of eligible service in order to become eligible to receive the university 10% contribution to the Basic Plan (see page 4) You may cancel participation at any time; your contributions and the university match will end as a result of cancellation SRA You may contribute a fixed amount to an account separate from the Basic Plan. This is not matched by U-M but is still tax-deferred You may enroll, increase, decrease, or cancel the SRA contribution at any time 2 YOUR BENEFITS

5 Eligible Compensation How to Enroll Form Needed to Enroll 403(b) Limit for 2010 Retirement contributions are based on earned compensation that is paid to you as a University of Michigan employee, subject to federal income tax withholding through the university, and reported on a W-2 issued by the university Your enrollment in the U-M Retirement Plan as a new hire or newly eligible employee cannot be processed until after your enrollment for medical, dental, life, etc. has been processed. Your enrollment in the retirement plan will be delayed if your other benefit choices have not been submitted and processed. Therefore, retirement contributions may not start on your first paycheck Salary or Annuity Option Plan Agreement This authorizes the payroll deduction and indicates how much you wish to contribute to TIAA-CREF and/or Fidelity There are no applications for you to complete to open your account with TIAA-CREF and/or Fidelity. The Benefits Office will send an enrollment notice to your chosen investment company to create your account once your properly completed Salary or Annuity Option Plan Agreement has been received. Your 2010 contribution limit includes up to three components: $16,500 general limit $5,500 increase if you are age 50 or older $3,000 increase if you have 15 or more cumulative years of service at the University of Michigan and your 403(b) elective deferrals to the U-M Retirement Plan in prior years average less than $5,000 per year The limit applies to your 403(b) elective deferrals into the Basic Plan and SRA; it does not apply to the U-M 10% contribution. Elective deferrals you have made to other retirement plans will reduce your limit for making contributions to the U-M plan (see page 24) Contribution limits are periodically increased by the IRS. Consult with the Benefits Office if you have questions on the limit for the current year. Options When You Leave U-M Where to Return Forms Lifetime annuity Cash withdrawal (some restrictions apply, see page 45) Rollover (some restrictions apply, see page 43) Leave the accumulations until a later date By FAX (for fastest service) By Mail Benefits Office Retirement Plan Area Wolverine Tower Low Rise G South State Street Ann Arbor, MI UNIVERSITY OF MICHIGAN RETIREMENT SAVINGS PLAN 3

6 Waiting Period for University Retirement Plan Contributions Individuals Hired or Newly Eligible on or after January 1, 2010 What is the waiting period? The waiting period means an individual must complete 12 consecutive months of eligible service in order to become eligible for the university 10% contribution to the Basic Retirement Plan. To whom does the waiting period apply? The waiting period applies to individuals hired or newly eligible to enroll in the plan on or after January 1, It also applies to individuals hired before January 1, 2010 but who were not eligible to enroll in the plan until on or after January 1, To whom does the waiting period not apply? The waiting period does not apply to individuals who were hired and were eligible to enroll in the plan before January 1, Does the waiting period apply to individuals who belong to a union or bargaining unit? Check with the terms of the collective bargaining agreement to see if you are subject to the waiting period. Can I get credit toward meeting the waiting period based on time I worked at my previous employer? No, meeting the waiting period is based on eligible service completed at the University of Michigan. Do I have to fulfill the waiting period if I lose eligibility for the plan or am rehired? Individuals who become ineligible for the plan or terminate employment and are rehired or become newly eligible on or after January 1, 2010 must complete the 12-month waiting period to become eligible to receive the 10% university contribution if the gap in employment or eligibility is one year or greater. Does the waiting period mean I cannot enroll until after I complete 12 months of service? No. The waiting period refers to becoming eligible to receive the 10% university retirement plan contribution. You may enroll in the plan and contribute 5% at any time. However, if you are hired or become eligible to enroll in the plan on or after January 1, 2010 university contributions are not provided until after you have completed a 12-month waiting period. How is the waiting period measured? You must complete 12 consecutive months of service in a job title eligible to enroll in the plan. The waiting period is measured from the date you are first eligible to enroll in the plan, which is typically your date of hire. If you were hired into a job not eligible for the plan (ex. temp, House Officer, Research Fellow, etc.) but later become eligible due to a change in effort or job title, the waiting period is measured from the effective date of your job change. Can I enroll in the Basic Plan before completing the waiting period? Yes. You may enroll in the Basic Plan at any time and contribute 5% but there will be no university contribution until you have completed the waiting period and you are enrolled in the Basic Plan. 4 YOUR BENEFITS

7 Basic Retirement Plan contribution rate once enrolled During first 12 months of service You contribute 5% U-M does not contribute After 12 months of eligible service You contribute 5% U-M contributes 10% When will the 10% U-M contribution begin? Once you have completed the 12-month waiting period and you are enrolled in the Basic Retirement Savings Plan, the 10% university contribution will be provided. If you are not enrolled after completing the waiting period, you must affirmatively enroll in order to receive the 10% university contribution. Enrollment in the Basic Retirement Savings Plan and university contributions do not automatically begin due to completing the waiting period. Will the 10% U-M contribution be made retroactively to cover the waiting period once I complete it? No. The 10% U-M contribution will be provided with respect to compensation earned after you have fulfilled the waiting period and you are enrolled in the plan. Do I have to contribute to the plan for 12 months to fulfill the waiting period? No. The waiting period means you have completed 12 consecutive months of service in a job title eligible to enroll in the plan. You do not have to contribute your 5% to the plan for 12 months in order to fulfill the waiting period. Does a period of non-appointment for instructional staff count toward completing the waiting period? Yes, provided that you return to an appointment eligible to enroll in the Basic Retirement Plan following the period of non-appointment. Note that this is different than a 0% appointment effort, which results in the loss of eligibility for the plan. Can I simply wait until after completing the waiting period to enroll in the plan? Yes. Can I contribute less than 5% during the waiting period? You must contribute 5% to enroll in the Basic Retirement Plan. If you wish to start saving for retirement by contributing less than 5%, you may enroll in a Supplemental Retirement Account or SRA. The SRA allows you to contribute a fixed dollar amount per pay period that is taxdeferred. There is no university contribution to the SRA. However, once you fulfill the waiting period you will need to affirmatively enroll in the Basic Retirement Plan if you want to receive the university contribution. You will not be enrolled automatically once you are eligible for the university contribution. How do I lose eligibility for plan participation? You become ineligible for plan participation if any of the following apply to you: You have a 0% appointment effort. You terminate employment. You change jobs to one that is not eligible to participate in the plan. This includes temporary hourly staff, LEO Lecturers I and Supplemental Instructional Staff (Adjunct, Visiting I/II, Clinical I titles) with a 49% appointment effort or less, House Officers, Research Fellows, Graduate Students (Staff Assistant, Research Assistant, and Instructor), and Professional Specialists. Your appointment duration is less than four continuous months. You do not have compensation eligible to be contributed to the plan. UNIVERSITY OF MICHIGAN RETIREMENT SAVINGS PLAN 5

8 10 Good Reasons to Join Enjoy your retirement You will need more than one source of income to maintain a comfortable standard of living once you retire. Consider the following: There is no pension plan at the university. You must enroll in the Retirement Savings Plan and your income is based on the contributions you and the university make to the plan and the earnings on those contributions. Social Security may provide some income at retirement, however, it likely will be less than you need. The only way to have enough money for your retirement is to save. Enroll in the U-M Retirement Savings Plan and start investing for your future. The 2-for-1 match When you contribute 5% of your salary, the university contributes 10% when you are eligible (see page 4). In other words, for every $1 you save, the university contributes $2! It s like getting an immediate 200% return! Immediate vesting You are immediately vested in the U-M Retirement Savings Plan, meaning the university s contributions to your account cannot be forfeited if you terminate employment. However, vesting does not mean that you can cash out the accumulations at any time (see cash withdrawal rules on page 37). Reduce your taxes You get an immediate tax break because you do not pay state or federal income taxes on your contributions when deducted from your paycheck. You get to invest year after year on dollars that would have otherwise been taxed. An easy way to save Your contributions are made through a tax-deferred deduction from your paycheck. Most people find that having the money taken out of their paycheck immediately before they even see it is the most painless way to save. Tax-deferred Growth You do not pay taxes on the contributions and earnings until you take it out at termination or in retirement. This lets your money compound more quickly than it would if it were taxed each year. Control and flexibility You may transfer accumulations between TIAA-CREF and Fidelity at any time. You can also change your investment funds and/or transfer accumulations between funds within each investment company. When you are eligible for a cash withdrawal, you may rollover accumulations. Contact TIAA-CREF and/or Fidelity for assistance. An easy way to diversify The mutual funds and annuities available through Fidelity and TIAA-CREF pool money from thousands of investors to construct a diversified portfolio of stocks, bonds, real estate, money market, and other securities less expensively than you could on your own. Both TIAA-CREF and Fidelity offer a broad array of funds that have varying degrees of risk and return. They also provide ongoing professional investment management services and offer free group workshops and individual consultations. Low fees TIAA-CREF and Fidelity Investments have among the lowest fund management fees in the industry. There are no account maintenance or record keeping fees, although some funds have a short-term trading fee. Information on fees may be found in the prospectus of each investment fund, on each company s website, or through each company s telephone counseling center. Save more through an SRA Open an SRA to save more for your retirement and further lower your taxes. These additional contributions are not matched by the university. You have the same fund choices and tax-deferred advantages, plus the SRA offers more flexibility to cash out accumulations while actively employed or to take a loan (see page 37). 6 YOUR BENEFITS

9 How Does the Retirement Savings Plan Work? What kind of plan is the U-M Retirement Plan? The university s plan is a combination 403(b) and 401(a) tax-deferred defined contribution retirement plan. What does tax-deferred mean? You do not pay state or federal income taxes on your contributions and the university contributions at the time they are made to the retirement plan. However, you still pay the 7.65% FICA (Medicare and Social Security) tax. In addition, you do not pay income tax on the contributions and earnings until you take a distribution from the plan at a later date, such as when you are in retirement. What is a defined contribution plan? A defined contribution plan defines the contribution rate you make as a participant. In the University of Michigan plan, you contribute 5% of your salary and the university contributes 10% when you are eligible (see page 4). What are my options for retirement income? You can select a variety of payment methods such as: What do the numbers 403(b) and 401(a) mean? These numbers refer to Internal Revenue Code (IRC) sections that designate different types of employer retirement savings plans. Many people have heard of 401(k) plans, but those apply to for-profit employers. The University of Michigan is a non-profit organization that offers the 403(b) plan for employee contributions and the 401(a) plan for University contributions. Structuring the plan under both IRC sections enables the university to meet various Federal requirements and regulations regarding retirement plan benefits, reporting, and plan administration. It also allows the university to give employees a generous matching contribution and offer features unique to the plan. The following shows the tax classification of contributions for voluntary participants: University 10% contribution (a) Staff Member 5% contribution (b) Staff Member SRA contribution (b) Life annuity Cash withdrawals Interest-only Minimum distribution at age 70 1 /2 These options will be covered later on in this booklet (see pages 42 to 52). UNIVERSITY OF MICHIGAN RETIREMENT SAVINGS PLAN 7

10 IRS Retirement Saver s Credit What is the saver s credit? This is a tax credit available to eligible individuals who make elective contributions to certain types of retirement plans. Its purpose is to encourage people to save for retirement. Consult with a qualified tax adviser for more information and to see if you qualify. Eligible contributions You may be eligible for a credit of up to $1,000 for voluntary contributions you make to the following types of plans: Employer-sponsored 401(k) or 403(b) plans, a governmental 457(b) plan, SIMPLEs, and SEPs Individual or spousal contributions to an IRA (both traditional and Roth) After-tax contributions you make to a qualified retirement plan Maximum contribution and credit Annual contributions of up to $2,000 may be considered for this credit. Depending on your adjusted gross income, you may be eligible to take the credit for up to 50% of the contribution, with a maximum credit of $1,000. Who is not eligible You are not eligible for the credit if any of the following conditions apply to you: Your adjusted gross income for 2010 is more than $27,750 ($41,625 if head of household; $55,500 if married filing jointly). You are under age 18 You are claimed as a dependent on another taxpayer s tax return, or are a full-time student The amount of the credit If you are eligible, the amount of the saver s credit is based on the adjusted gross income (AGI) of you and your spouse. See the chart below for more specific information. Other considerations The credit is reduced by taxable distributions taken from an employer-sponsored retirement plan or IRA by you or your spouse during the year the credit is claimed, during the two preceding years, or during the time between the end of the year the credit is claimed and the due date for the taxpayer s income tax return. The reduction also applies to any Roth IRA distribution that is not rolled over, regardless of whether it is taxable. Eligibility and Amount of Credit ADJUSTED GROSS INCOME Single or Married Filing Separately Head of Household Married Filing Jointly AMOUNT OF CREDIT $16,750 or less $25,125 or less $33,500 or less 50% $16,751 to $18,000 $25,126 to $27,000 $33,501 to $36,000 20% $18,001 to $27,750 $27,001 to $41,625 $36,001 to $55,000 10% These limits are periodically indexed by the IRS. 8 YOUR BENEFITS

11 Important Plan Information Plan Features Type of Plan Basic Retirement Plan SRA (Supplemental Retirement Account) Description The University of Michigan Basic Retirement Plan An option to contribute a fixed dollar amount per paycheck that is separate from (or in addition to) the Basic Plan. These amounts are not matched, but are still tax-deferred Type of Account Basic Plan with TIAA-CREF and/or Fidelity SRA with TIAA-CREF and/or Fidelity Eligibility Faculty and Staff You are eligible if you have an appointment of 1% or greater, with University funding for 4 continuous months or more LEO Lecturer I Supplemental Instructional Staff House Officer, Research Fellow, Professional Specialist, and Graduate Student Assistant (GSSA, GSRA, GSI) You are eligible if you have an appointment of 50% or greater, with university funding for 4 continuous months or more Not eligible You are eligible if you have an appointment of 1% or greater, with university funding for 4 continuous months or more You are eligible if you have an appointment of 1% or greater, with university funding for 4 continuous months or more Temporary Staff Not eligible Eligible Contributions Contribution Rate Changing Your SRA Contribution You contribute 5% of your eligible tax-deferred salary per pay period, and U-M contributes 10% when you are eligible (see page 4) Not applicable You specify an exact dollar amount, not a percentage, per pay period. The amount is subject to Internal Revenue Code limitations (see pages 23 28) You can change the amount of your contribution at any time. Contact the Benefits Office for the necessary form Contributions to Another Retirement Plan Elective deferrals you have made to another 403(b), 401(k), SEP-IRA, 408(k)(6) SARSEP, Keogh, or SIMPLE will offset the amount you can contribute to the U-M Retirement Plan and the SRA. Consult a tax adviser to determine whether the combined contributions you are making to the U-M Plan and your contributions to other retirement plans do not exceed Internal Revenue Code limits UNIVERSITY OF MICHIGAN RETIREMENT SAVINGS PLAN 9

12 Plan Features Type of Plan Basic Retirement Plan SRA (Supplemental Retirement Account) Canceling Your Contributions Voluntary Participant Compulsory Participant You may cancel your 5% contribution at any time; the U-M 10% contribution (see page 4 to determine if you are eligible) will also be canceled All contributions will be discontinued indefinitely until you submit a Salary or Annuity Option Plan Agreement to restart them You will be enrolled in the Reduced Benefit Option (see page 32) Your participation at the reduced rate will continue indefinitely until you submit a Salary or Annuity Option Plan Agreement You may cancel your SRA contributions at any time without canceling your Basic Plan 5% and the university s 10% contributions (see page 4 to determine if you are eligible) You may cancel your SRA contributions at any time without canceling your Basic Plan 5% and the university s 10% contributions (see page 4 to determine if you are eligible) Changing Your Investment Choices Changing Your Investment Company Changing Investment Funds Direct Transfers Between TIAA-CREF and Fidelity You may change the amount or percentage of contributions sent to TIAA-CREF and/or Fidelity at any time. Submit a Salary or Annuity Option Plan Agreement to the Benefits Office to indicate the change. You may change your chosen investment funds at TIAA-CREF and Fidelity at any time You may transfer accumulations between TIAA-CREF and Fidelity at any time. Contact the company that will receive the transfer for assistance Remember to submit a Salary or Annuity Option Plan Agreement to the Benefits Office to change your investment instructions. This is necessary to ensure your future retirement contributions are directed to the newly chosen investment company 10 YOUR BENEFITS

13 Plan Features Type of Plan Basic Retirement Plan SRA (Supplemental Retirement Account) Loans Not available Available with restrictions (see page 40) Cash Withdrawal Current Employee Not available At age 59 1 / 2 or older Financial hardship Disability Former Employee 1 Employee contributions and earnings at any age University contributions and earnings at age 55 or older At any age U-M Retiree 2 At any age At any age Rollovers Out of the U-M Plan Current Employee Not available At age 59 1 / 2 or older Former Employee 1 Employee contributions and earnings at any age University contributions and earnings at age 55 or older At any age U-M Retiree 2 At any age At any age TIAA-CREF Lifetime Annuity Current Employee Not available At age 59 1 / 2 or older Former Employee 1 At any age At any age U-M Retiree 2 At any age At any age Note: Income tax is due on withdrawals, and an IRS 10% penalty generally applies to withdrawals made prior to age 59 1 / 2. 1 A former employee is someone who has terminated employment with the University of Michigan. Termination of employment does not include being on a reduction in force (RIF), leave of absence, long-term disability, 0% effort appointment, or periods of non-appointment. 2 A retiree is a former employee who has met the age and years of service requirements under Standard Practice Guide to officially retire from the University of Michigan and has been granted the status of a U-M Retiree. UNIVERSITY OF MICHIGAN RETIREMENT SAVINGS PLAN 11

14 TIAA-CREF What is TIAA-CREF? Founded in 1918, 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-CREF fund fees are among the lowest in the variable annuity and mutual fund industry. In addition, TIAA holds top ratings from all four leading insurance company agencies: A.M. Best, Co.; Fitch; Moody s Investors Service; and Standard & Poor s. What does the name mean? TIAA is the Teachers Insurance and Annuity Association, an insurance company founded in 1918 by the Carnegie Foundation for the Advancement of Teaching. CREF is the College Retirement Equities Fund, first set up in 1952 and now registered with the Securities and Exchange Commission as an open-end, diversified management company under the federal Investment Company Act of What are my investment choices? 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: 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 ( 1 /4 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 meet with a TIAA-CREF investment professional by calling or sign-up for a meeting or workshop online at TIAA-CREF Ann Arbor Office 333 Maynard Street, Suite 500 Ann Arbor, MI TIAA-CREF Telephone Counseling Center YOUR BENEFITS

15 Two Ways to Invest with TIAA-CREF 1. Lifecycle Index Fund The default investment fund designation for TIAA-CREF is automatically a Lifecycle Index fund. Your date of birth will be included with your enrollment data that will be sent to TIAA-CREF in order to determine the Lifecycle Index fund that is appropriate for you based on your age. Each fund is a diversified portfolio of TIAA-CREF mutual funds, including stocks, bonds, and real estate investment trusts targeted to a specific retirement date. LIFECYCLE INDEX FUNDS TIAA-CREF Lifecycle Index 2010 TIAA-CREF Lifecycle Index 2015 TIAA-CREF Lifecycle Index 2020 TIAA-CREF Lifecycle Index 2025 TIAA-CREF Lifecycle Index 2030 TIAA-CREF Lifecycle Index 2035 TIAA-CREF Lifecycle Index 2040 TIAA-CREF Lifecycle Index Create a Custom Portfolio You can create your own custom-made portfolio by allocating your contributions among the various TIAA-CREF variable annuities and mutual funds according to your own specifications. You will receive a welcome packet from TIAA-CREF after you have been enrolled. It will contain information about how to change your investment choices if you do not want a Lifecycle Index fund. To find out more about TIAA- CREF fund choices: Visit: Call TIAA-CREF at Meet with a TIAA-CREF investment professional by calling You may also create your account online at: by entering in all caps UMBASIC to enroll in the Basic Plan, UMSRA to enroll in the SRA, and BASICSRA to enroll in both. A Special Note on TIAA Traditional TIAA Traditional accumulations in the Retirement Annuity (RA) under the Basic Retirement Plan are not available for lump-sum or single-sum cash withdrawals, rollovers, or direct transfers. Withdrawals, rollovers, and direct transfers are available through the TIAA Transfer Payout Annuity, which makes payments over a nine-year and one-day period (ten payments). The Group Retirement Annuity (GRA) replaced the Retirement Annuity (RA) for most enrollments in the Basic Retirement Plan beginning in May of TIAA Traditional accumulations in the Group Retirement Annuity under the Basic Retirement Plan are still subject to the nine-year Transfer Payout Annuity for transfers to Fidelity and other TIAA-CREF funds or annuities while you re employed at the University of Michigan. However, lump-sum or single-sum withdrawals and rollovers of these lump-sum or single-sum withdrawals are available to former employees if taken no later than 120 days after termination of employment, subject to a 2.5% surrender charge. The lump-sum or single-sum withdrawal is not available beyond 120 days after termination of employment. In addition, after termination of employment, distributions from the TIAA Group Retirement Annuity are available through a fixed period annuity that can last from five to thirty years, based on your choice of time periods and depending on availability according to IRS rules and regulations and subject to limits on cash withdrawals to former employees (see page 45). Distributions made through the fixed period annuity are eligible for rollover if the payment received is for a period of less than 10 years, according to current IRS rules and regulations. Additional information regarding the TIAA Traditional Account can found at: TIAA Traditional accumulations in the SRA and 457(b) are not subject to the Transfer Payout Annuity and may be cashed out, rolled over, or transferred in a single or lump sum. For more information, contact TIAA-CREF at: UNIVERSITY OF MICHIGAN RETIREMENT SAVINGS PLAN 13

16 Fidelity Investments 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? Fidelity Investments offers over 100 mutual funds, including domestic and international stock funds, bond funds, money market funds and real estate funds. In addition, numerous Select Portfolio Funds are available. These funds allow you to invest in highly specialized sectors of the U.S. economy, but are subject to high-risk. Where can I find more information? You can meet with a Fidelity Investments professional by calling or sign-up online at: Fidelity Investments Ann Arbor Office 500 E. Eisenhower Parkway, Suite 100 Ann Arbor, MI Fidelity Retirement Specialists YOUR BENEFITS

17 Two Ways to Invest with Fidelity Investments Freedom Index Fund Class W 1. Freedom Index Fund Class W The default investment fund designation for Fidelity Investments is automatically a Freedom Index Fund Class W. Your date of birth will be included with your enrollment data that will be sent to Fidelity in order to determine the Freedom Index Fund Class W that is appropriate for you based on your age. Each fund is a diversified portfolio of Fidelity mutual funds, including stocks, bonds, and money market funds targeted to a specific retirement date. 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. 2. Create a custom portfolio You can create your own custom-made portfolio by allocating your contributions among the various Fidelity mutual funds. Fidelity will mail you a welcome packet after you have been enrolled with information on the many Fidelity mutual funds you may choose from if you do not want a Freedom Index Fund Class W. To find out more about your fund choices with Fidelity Investments: Visit: Call Fidelity at: Meet with an investment professional at the Fidelity Ann Arbor office by calling for an appointment at: Fidelity Freedom Index 2010 Fund: Class W Fidelity Freedom Index 2015 Fund: Class W Fidelity Freedom Index 2020 Fund: Class W Fidelity Freedom Index 2025 Fund: Class W Fidelity Freedom Index 2030 Fund: Class W Fidelity Freedom Index 2035 Fund: Class W Fidelity Freedom Index 2040 Fund: Class W Fidelity Freedom Index 2045 Fund: Class W Fidelity Freedom Index 2050 Fund: Class W UNIVERSITY OF MICHIGAN RETIREMENT SAVINGS PLAN 15

18 Eligible Compensation Eligible compensation defined Not everything you receive in a paycheck can be put into the retirement plan. Compensation must meet federal requirements in order to be tax-deferred into an employer s retirement plan. It must be earned compensation that is paid to you as a University of Michigan employee for services performed, subject to federal income tax withholding through the university, and reported on a W-2 issued by the university. Federal income tax withholding Certain forms of compensation may be subject to federal income tax but cannot have withholding taken by the university. In these cases, you may not make a tax-deferred contribution to the retirement plan because the university cannot provide a tax-deferred benefit on compensation that is not subject to tax withholding. A fellowship is an example of compensation not subject to tax withholding through the university. No after-tax payments; it must be taken tax-deferred from your paycheck Retirement contributions can only come from earned eligible compensated that is taken from your paycheck on a tax-deferred basis. In addition, you cannot write a check to the University of Michigan to have it sent to TIAA-CREF or Fidelity. Ineligible examples Examples of compensation and payments not eligible to be tax-deferred under the University of Michigan Retirement Plan include: Fellowship, scholarship, and stipends Flex credits for opting out of benefit plans After-tax payments Allowances for housing, uniforms, and travel Royalty payments Long-Term Disability plan benefit payments Worker s Compensation Visit the Payroll Office website for a complete list of the types of compensation that are eligible and ineligible for the Retirement Plan at: and select: Earnings/Time Reporting Codes Eligible examples Examples of compensation that are eligible to be tax-deferred under the University of Michigan Retirement Plan include: Base salary and wages Overtime Shift differential Administrative differential Incentive payments (Risk Pay) under the Medical Service Plan Longevity pay Summer salary for University-year appointees 16 YOUR BENEFITS

19 How to Enroll 1. Complete and return the Salary or Annuity Option Plan Agreement Use this form to authorize the payroll contribution, your choice of investment company (TIAA-CREF and/or Fidelity), and to indicate if you wish to make an additional, nonmatching contribution to the plan. Basic Retirement Plan Indicate how much of your 5% contribution and the U-M 10% match (when you are eligible; see page 4) you want to send to TIAA-CREF and/or Fidelity each month. You may change this allocation at any time. You may allocate 100% to just one company: 100% TIAA-CREF -or- 100% Fidelity You may choose any combination of the two, for example: 50% TIAA-CREF & 50% Fidelity Supplemental Retirement Account (SRA) You can save more for retirement beyond the 5% Basic Plan contribution. Simply list a whole dollar amount to be contributed from each regularly scheduled paycheck in this section. This amount is not matched by U-M. 2. Select your investment funds and designate your beneficiary directly with TIAA-CREF and/or Fidelity There are no paper account applications to open your account with TIAA-CREF or Fidelity. Once your properly completed Salary or Annuity Option Plan 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 mail you a packet with information on how to designate your beneficiary. The investment fund will automatically be a TIAA-CREF Lifecycle Index or Fidelity Freedom Index Fund, based on your date of birth. You may change this at any time. Enrollment deadlines You may enroll or make changes anytime; the retirement plan is not limited to an annual open enrollment. Enrollments received after DECEMBER 1 are effective the following January; retroactive contributions that cross a calendar tax year cannot be provided in accordance with IRS regulations. Make your other benefit selections Your retirement enrollment cannot be processed until after you have enrolled in medical, dental, life, etc. Your retirement enrollment will be delayed if your other benefit elections have not been submitted and processed. Complete all your benefit elections to enroll or waive coverage as soon as possible to avoid delays. Calculate your SRA contribution limit: benefits.umich/plans/retire/taxdefer Learn more about the U-M Retirement Plan: benefits.umich.edu//plans/retire/index.html View deadlines for a specific paycheck: benefits.umich.edu/plans/retire/retdeadlines.html Return the Salary or Annuity Option Plan Agreement to the Benefits Office FAX to: UNIVERSITY OF MICHIGAN RETIREMENT SAVINGS PLAN 17

20 Enrolling with TIAA-CREF and Fidelity Investments What forms do I complete 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 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 age-appropriate 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. What is a Lifecycle Index or Freedom Index fund? A TIAA-CREF Lifecycle Index or Fidelity Investments 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 fund will adjust its holdings periodically to maintain an asset allocation appropriate for its target retirement date to maximize returns and minimize risks. Your date of birth will be included in the enrollment notice sent to your chosen investment company. This will determine into which specific Lifecycle Index or Freedom Index fund 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 well-diversified 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. Fidelity: TIAA-CREF: You may also create your TIAA-CREF account online at: by entering in all caps UMBASIC to enroll in the Basic Plan, UMSRA to enroll in the SRA, and BASICSRA to enroll in both. 18 YOUR BENEFITS

21 Designate your beneficiary 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 your retirement savings plan accounts. You must complete a separate beneficiary designation for each plan in which you are enrolled. Isn t My Beneficiary Automatically the One I Listed for Life Insurance? No. Life insurance and the retirement savings plan are two 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 Retirement Plan? For both TIAA-CREF and Fidelity 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) Doesn t the Enrollment Process Declare My Beneficiary? No. You must designate a beneficiary with TIAA-CREF and/or Fidelity Investments. TIAA-CREF To designate or change your beneficiary, visit the TIAA-CREF website at: Or 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 To designate or change your beneficiary, for the U-M Retirement Savings Plan, complete and submit to Fidelity Investments the 403(b)/401(a) Beneficiary Designation form at: benefits.umich.edu/forms/fidelity_beneficiary_form.pdf A different form is needed to update or declare your beneficiary for the 457(b) Plan. Or contact a Fidelity Retirement Services Specialist by calling , Monday through Friday, 8:00 a.m. to midnight Eastern time. For more information about designating your beneficiary, visit: benefits.umich.edu/events/beneficiary.html UNIVERSITY OF MICHIGAN RETIREMENT SAVINGS PLAN 19