Minnesota State Colleges & Universities Planning for Retirement IRAP and TRA Thursday - March 12, 2015, 12 noon 1:00 pm MnSCU Joe Trcka, Benefits Specialist TIAA CREF William Thorne, Director-Field Consulting Group TRA Jeff Altringer, Retirement Services Director TRA Richard McLeod, Retirement Services Supervisor The Minnesota State Colleges and Universities system is an Equal Opportunity employer and educator.
Today s Agenda Minnesota State Colleges & Universities Retirement Plans Employee Election Process Plan Details: Individual Retirement Account Plan (IRAP) Plan Details: Teachers Retirement Association (TRA)
Who Is Eligible For The MNSCU Retirement Plan? Unclassified Faculty/Staff who are employed for 25% time or more during an academic year. Once you qualify for the Plan, future employment is covered and earnings are subject to retirement withholding. 3
Teachers Retirement Association (TRA) TRA - Defined Benefit Retirement Plan Faculty/Staff have up to one year after initial eligibility to choose the Teachers Retirement Association (TRA) plan as their main retirement program. Note: Individuals who have had any prior Defined Benefit Plan service (e.g. TRA, MSRS, PERA, etc.) in the state of Minnesota will be entered into TRA rather than IRAP. They will have up to one year after initial eligibility to choose IRAP. 4
Notification Form Completed Upon Hire 5
Option To Elect TRA One-time, irrevocable election TRA coverage begins accruing prospectively from the time of application. Contributions made to IRAP will remain. 6
Teachers Retirement Association (TRA) MSCF, IFO, & MSUAASF If you become Tenured or gain Permanent/Unlimited Status and participate in IRAP 7
You Will Have Another Opportunity To Elect TRA. You will have one year after achieving tenure to make the transfer. The transfer can be expensive; it is a lump-sum payment of the full actuarial cost for the TRA lifetime annuity. You may use other retirement accounts (IRAP, SRP, & TSA) to make the purchase. Your transfer of retirement plan must be retroactive to include all prior service. TRA will contact you at the time you become eligible. 8
Defined Benefit v. Defined Contribution Defined Benefit Plans - TRA Benefit is a percentage of salary based on years of service; the State Board of Investment controls the investments Vesting 3yrs Full Time Equiv. Portability combined service with any public employer in MN Risk TRA bears investment risk Payout options lifetime pension or refund with interest Early retirement eligible at age 55 In General low risk and lifetime pension Defined Contribution Plans - IRAP Benefit is based on Employer and Employee contributions to an account where participant controls the investing choices Vesting immediate Portability stays with the Employee Risk Employee bears investment risk Payout options various options Early retirement affects accumulation In General portability and investment control 9
10 Individual Retirement Account Plan (IRAP)
Understanding Your Defined Contribution Retirement Plan You are automatically enrolled upon hire Contributions: 4.5% = Employee 6.0% = Employer Contributions are allocated to the appropriate age based Vanguard Target Retirement Fund as a default, until you change the allocation. Your estate is the designated beneficiary, until you change. If you remain in IRAP it is important to update your investment allocation and beneficiary designation 11
Features of IRAP Diversified savings and investment vehicles Preretirement death benefits Numerous Flexible payout options TIAA-CREF services 12
Updating Your IRAP Account www.tiaa-cref.org/mnscu To update your asset allocation and change your beneficiary designation, select Log In from the Home Page of the web portal. 13
Updating Your IRAP Account Once at the Login for Secure Online Access page, you can register for online access with TIAA-CREF as a Participant. 14
Access To Investment Choices Within the customized web site: www.tiaa-cref.org/mnscu The Plans and Investments page enables you to: Access Fact Sheet information on each fund Access Plan Performance Cards for each MNSCU Retirement Plan Access Prospectuses for each investment option in the Plans 15
Your Minnesota State Colleges and Universities Retirement Plan Investment Menu Investment Options Tier I Investment Options Tier II Asset Class Fund Asset Class Fund Target Date Vanguard Target Retirement Income Target Date Vanguard Target Retirement 2010 Target Date Vanguard Target Retirement 2015 Target Date Vanguard Target Retirement 2020 Target Date Vanguard Target Retirement 2025 Target Date Vanguard Target Retirement 2030 Target Date Vanguard Target Retirement 2035 Target Date Vanguard Target Retirement 2040 Fixed Income Index Balanced Index Large Index Mid-Small Index International Index Money Market Active Stable Value Active Fixed Income Active Vanguard Total Bond Market Inst Vanguard Balanced Index Inst Vanguard Inst Index Inst Plus Vanguard Extended Market Index Inst Vanguard FTSE All-World ex US Index Inst Vanguard Prime Money Market Inst Wells Fargo Stable Return Fund M PIMCO Total Return Adm Target Date Vanguard Target Retirement 2045 Target Date Vanguard Target Retirement 2050 Target Date Vanguard Target Retirement 2055 Investment Options Tier III (Lifetime Income) Asset Class Fund Stable Value TIAA Traditional Money Market CREF Money Market SRI Balanced CREF Social Choice Large Blend CREF Stock Real Estate TIAA Real Estate Large Value Active Large Growth Active Small Growth Active Small Value Active International Active T. Rowe Price Inst Large Cap Value T. Rowe Price Inst Large Cap Growth Lord Abbett Developing Growth I DFA U.S. Targeted Value I American Funds EuroPacific Growth R4 The TIAA Traditional Annuity is a guaranteed insurance contract and not an investment for Federal Securities Law purposes. The CREF Money Market Account is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Investing involves risk, including possible loss of principal. Wells Fargo Stable Value is not available in the Tax-Sheltered Annuity (TSA) Plan. 16
Strategies For Creating Your Portfolio One-Step Investing Strategy Tier 1: Target Date Retirement Funds Hands-free approach With Vanguard Target Date Funds, the allocation mix adjusts automatically over the years as the target retirement year approaches. 17 As with all mutual funds, the principal value of a target date fund is not guaranteed. Also, please note that the target date represents an approximate date when investors may plan to begin withdrawing from the fund. After the target date has been reached, some of these funds may be merged into a fund with a more stable asset allocation.
Strategies For Creating Your Portfolio (Continued) Build Your Own Portfolio Strategy Tier 2: Passive and Active Investment Strategies Preselected mutual funds that have performed consistently against their benchmarks and peer groups. Passively managed funds use a style in which the fund s portfolio mirrors a market index. Active funds use a style in which the fund s manager(s) attempt to outperform a given market index through various investment strategies. Tier 3: Lifetime Income Investment Strategies Annuity accounts that have performed consistently against their benchmarks and peer groups and provide opportunity for diversification in the accumulation phase.* Provides for a wide range of distribution options in retirement. Tier 4: Brokerage Window * Please note: Past performance does not guarantee future results. There are risks associated with investing in securities, including loss of principal. Diversification does not protect against loss. 18
Take Action Today! Visit www.tiaa-cref.org/mnscu for more detailed information regarding the Plans managed by TIAA-CREF Phone Assistance: Call the MNSCU Retirement Service Center: 800 682-8969 Monday-Friday, 8 a.m. to 5 p.m. (CT) In-Person Assistance from TIAA-CREF: Call 800 732-8353 Monday to Friday 7 a.m. to 7 p.m. (CT) to sign up for an individual appointment for personalized advice. 19
Important Information For Investors TIAA-CREF Individual & Institutional Services, LLC, provides advisory services and distributes securities products. You should consider the investment objectives, risks, charges and expenses carefully before investing. This seminar must be preceded or accompanied by a current prospectus. Please call 877 518-9161 or access our website at www.tiaa-cref.org for a prospectus that contains this and other information. Please read the prospectus carefully before investing. 20
Teachers Retirement Association (TRA) 21
What Is A Defined Benefit Plan? Provides a lifetime guaranteed and predictable retirement benefit aka: traditional pension Benefit is an income replacement percentage; formula is based on your years of service, high-5 salary, and age 22
Advantages Of A Defined Benefit Plan (TRA) Investment risk assumed by TRA Predictable lifetime monthly retirement payments you won t outlive your benefit! Pre-retirement disability and survivor coverage Coordination of benefit with other Minnesota public employers (Combined Service Annuity) Three years (full-time equivalent) vesting 23
TRA Contribution Rates: Set By State Statute Contributions Employee 7.50% Employer 7.50% 24
Investment Of Contributions Assets managed by the State Board of Investment Employee and employer contributions and investment returns fund member benefits No individual account administrative fees Benefit is guaranteed regardless of stock market performance. You can retire when it is right for you not when the stock market dictates you can. 25
Benefit Payment Options Lifetime member benefit At retirement, you choose your level of beneficiary coverage Lifetime beneficiary payments (Survivorship) Term Certain Refund of your contributions plus interest 26
TRA Benefit Formula % Multiplier based upon High-5 Reduction Average Factor x x = Annual based upon Annual Lifetime Benefit (Life No Refund) Example at Age 66 (full retirement age) 33 years x 1.9% (62.7%) x $65,000 = $40,755 annually ($3,396 monthly)
Benefit Estimates www.minnesotatra.org Newly-Eligible MNSCU Staff link (under Hot Links ) Benefit estimate calculator A few simple questions Compare with IRAP benefit estimate provided by TIAA-CREF 28
Pre-retirement Protection Once vested, a TRA lifetime benefit is available: If you become disabled To your survivor if you die before retirement Benefits grow in value with each additional year of service and salary to provide lifetime security for you and your survivors. 29
Options If Leaving MNSCU Refund Employee contributions + 4% interest Eligible for cash or rollover to qualified plans Deferred retirement, if vested Leave contributions with TRA Earned benefit increases by 2.0% compounded annually Apply for retirement benefits at a later date 30
Why Choose TRA? You have the increasingly rare opportunity to participate in a traditional pension! Predictable, lifetime payments when you retire Avoid stock market volatility Low investment administrative fees Disability and survivor benefits Portability: combined service with other MN public pensions 31
Well Balanced Retirement! 32
Be Well Informed the Clock is Ticking! Read your materials and ask questions! Compare benefit estimates, evaluate plan features, and make an informed decision. Remember, as new MnSCU hires, you have a one-year window to elect TRA. 33
Contact Information Teachers Retirement Association 651-296-2409 800-657-3669 MinnesotaTRA.org info@minnesotatra.org Facebook.com/MinnesotaTRA Twitter.com/MinnesotaTRA Four convenient locations: St. Paul, St. Cloud, Mankato and Detroit Lakes 34
Thank you for attending! Any questions? 35