deferred retirement option program (DROP) for the IBC model plan program I need a financial plan for life after DROP AXA Equitable is proud to support the IBC s Florida Education Initiative www.themodelplan.com
life after DROP Are you ready for life after DROP? Now that your participation in the Florida Retirement System s Deferred Retirement Option Program (DROP) is ending, it s time to decide how to take your DROP payment. How you handle your payment is very important your decision can have a significant impact on your finances, now and over the long term. We have prepared this brochure to help provide the knowledge you need so you can ask the right questions before taking action. Your DROP Payment Can Be Substantial As a DROP participant, you ve been simultaneously receiving a salary and retirement income. But while your salary has been paid directly to you, your retirement benefits have not they ve been accumulating in the Florida Retirement System (FRS) Trust Fund. Your retirement payments in the Trust Fund have earned tax-deferred interest compounded monthly at an effective annual rate of 6.5% (if your DROP participation began before July 1, 2011). In addition, your actual retirement benefit has also gotten a cost-of-living adjustment (COLA) increase each July 1st. The increase is prorated if you ve been retired less than a year. Add all of this together, and you may find yourself with a sizable account balance at the end of your DROP participation. AXA Equitable Selected by Florida s Independent Benefits Council (IBC) AXA Equitable Life Insurance Company is one of five approved providers for the IBC Model Plan Program. The IBC is a not-for-profit organization created by four of Florida s leading education groups. It has developed model 403(b) and 457(b) plans specifically for Florida s public schools, and AXA Equitable has designed an annuity investment product specifically for employees in Florida school districts that offer the IBC s plans. life after DROP 1
DROP payment options When you leave DROP, you need to decide how to take your DROP payment as a lump sum, a rollover to another eligible retirement plan or an IRA, or a combination of them. Lump-sum Payment While it may be tempting to take a lump-sum payment, consider these consequences: 100% of your DROP payout is taxable in the year in which the payout is made. Your employer is required by federal law to withhold 20% of your distribution for payment of income tax and you may have to pay the IRS even more than the amount already withheld, depending on your income tax bracket. If you take the lump-sum before the year you turn 55 (or 50 if you re a public safety officer retiree), you may owe an additional 10% federal excise tax penalty on your lump-sum distribution. Rolling Over Your DROP Assets If you roll over your DROP assets to an eligible retirement plan, including a 403(b) TSA or 457(b) plan in which you participate, you can: Continue to earn any tax-deferred investment returns on your DROP assets until you begin required minimum distributions (generally starting April of the year following the year in which you turn 70½) or choose to make a partial withdrawal. You have several rollover choices for your DROP assets. If you are a current or former participant in a 403(b) TSA or governmental 457(b) plan, you may be able to roll your DROP assets right into your 403(b) or 457(b) plan account. For example, if you have an EQUI-VEST variable annuity account through a 403(b) or 457(b) plan, you could roll over your DROP payment into that account, if it accepts rollovers. Other rollover choices include the FRS Investment Plan; other 403(b), governmental 457(b), 401(a), or 401(k) plans that accept rollovers; or an individual retirement arrangement (IRA) that provides tax-deferral of earnings. 1 (A Roth IRA is not an eligible rollover option.) 1 Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to attaining age 59½, may be subject to an additional 10% federal excise tax penalty. 2 DROP payment options
Note, too, that charges, risks, expenses, and investment objectives vary depending on the funding option and investment choices within each option. That s why it is so important to review all your rollover choices before making a decision. Variable annuity and mutual fund investors should consider the charges, risks, expenses, and investment objectives of these products before investing. For a prospectus containing this and other information, please ask your financial professional. Read it and consider the information carefully before you invest or send money. What Choice Is Best for You? Your best choice depends on your individual circumstances and needs, for example: Do you plan to continue working after DROP? Do you have a spouse or partner who will continue to work? What are your current assets and liabilities? Do you wish to leave a financial legacy to your children, grandchildren, and/or others who are important to you? Your decision should also reflect how much money you ll need to support yourself in retirement and how that relates to your current sources of retirement income such as personal savings, pension payments, Social Security (if eligible), and other annuity payments. Equally important, you need to factor in financial challenges you may face in retirement due to longevity, inflation, and economic downturns. Keep in mind: Life expectancy rates are increasing; outliving your assets may be a serious concern. You ll want to explore ways to generate income at retirement that will last throughout your retirement. Even a low inflation rate can have a significant effect on your retirement income. Consider that at just 2.5% inflation, an item that costs $100 today would cost $145 in 15 years. You ll want to have a contingency plan to help shield you from market volatility. DROP payment options 3
your next step Deciding what to do with your DROP assets is not a simple decision. Neither is choosing suitable investments for a rollover strategy. That s why it is important to consult with a financial professional who can help you view these decisions within the context of your individual circumstances. And that s why you should speak with a financial professional at AXA Advisors, LLC. Financial professionals at AXA Advisors in Florida are trained to help DROP participants choose the most appropriate options. We bring you the advantages of local service and support, combined with the strength of a global financial power AXA Advisors and AXA Equitable Life Insurance Company are part of the global AXA Group. AXA Group is one of the world s largest and most respected financial services organizations. 1 AXA Advisors also has a strong presence in education and governmental institutions, serving nearly 17,000 school systems, colleges, universities, hospitals, municipalities, and 501(c)(3) nonprofit organizations across the country. 2 So we re very familiar with the issues that state employees including teachers face. Call Us We Can Help Call us and get the guidance you may need to help you plan for the future, and make the right DROP decisions, based on your individual needs, retirement goals, and risk tolerance. We can also provide you with access to a range of products, services, and support to help you maintain a comfortable life during your retirement years. 1 AXA Group refers to AXA, a French holding company for an international group of insurance and financial services companies, together with its direct and indirect consolidated subsidiaries. AXA Advisors, LLC, and AXA Equitable Life Insurance Company are indirect, wholly owned subsidiaries of AXA. AXA Equitable has sole responsibility for its life insurance and annuity obligations. 2 Data as of June 30, 2011. 4 your next step
The information provided in this brochure is not intended as legal or tax advice. It is based on our general understanding of the subject matter addressed and is for informational purposes only. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed, and you should seek advice from an independent tax advisor based on your particular circumstances. The Florida Retirement System s Deferred Retirement Option Program (DROP) is governed by the state of Florida. Any changes to Florida s DROP, including the interest rate, require state legislation. If discrepancies arise between this brochure and DROP information provided by the state of Florida the information provided by the state will govern. Securities are offered through AXA Advisors, LLC, member FINRA, SIPC. Fixed annuities are offered through AXA Network, LLC. Variable annuities are issued by AXA Equitable Life Insurance Company (AXA Equitable), NY, NY, and distributed by AXA Advisors. AXA Advisors, AXA Network and AXA Equitable are affiliated companies and do not provide legal or tax advice. Please consult your legal and tax advisors regarding your particular circumstances. AXA Advisors, AXA Network and AXA Equitable are solely responsible for their own obligations. 2011 AXA Equitable Life Insurance Company. All rights reserved. 1290 Avenue of the Americas, New York, NY 10104, (212) 314-4600. Visit our website at www.axa-equitable.com GE-64198 (10/11) Cat. # 148376 (10/11)