University Human Resources
IU Replacement Retirement Plan
- IRS code Section 401(a) Defined Benefit Plan
- Indiana University makes all contributions to the Plan
- Benefits are based solely on the Plan’s benefit formulas
- Distributions upon termination of employment with Indiana University, assuming eligibility and vesting criteria have been met
To be eligible to participate in the Plan, an employee must satisfy the Participant List Requirement and IU Retirement Plan Requirement described below and not be a member of an excluded class of employees.
Participant List Requirement. An employee must be listed as an eligible participant in the IU Replacement Retirement Plan Eligible Participant List (Section H of the IU Replacement Retirement Plan Summary of Plan Provisions Document).
To be listed as an eligible participant in the Eligible Participant List, an employee must have satisfied one of the following criteria:
- Had an initial date of employment with Indiana University after July 14, 1988; or
- Had initiated participation in the IU Retirement Plan at the 15% contribution level after July 14, 1988
IU Retirement Plan Requirement. An employee must be an active participant in the IU Retirement Plan at that 15% contribution level.
To be eligible to participate in the IU Retirement Plan at the 15% contribution level, an employee must be a 100% full-time equivalent (FTE) academic or professional staff employee, (grade 16 and above), hired in an appointed position before January 1, 1989.
The following individuals are prohibited from participating in the Plan:
- Geological Survey Department employees
- Employees associated with an external agency agreement that does not accept early retirement plan participation
An employee is no longer eligible to participate in the Plan if:
- The employee terminates employment with Indiana University prior to being vested in his or her Plan benefit; or
- The employee no longer satisfies the eligibility requirements for participation in the IU Retirement Plan at the 15% contribution level.
In the event an individual becomes ineligible to participate in the Plan prior to becoming vested, the individual’s entire Plan benefit will be forfeited.
Indiana University will make all contributions required to fund the Plan. All contributions will be paid into the trust fund and will be held, managed, invested, and distributed in accordance with the provisions of Plan and trust agreement.
Indiana University makes all contributions to the Plan. Employees are not required, nor permitted, to make any contributions to the Plan.
Maximum Contribution Amount (IRC Section 415 Limit)
Federal law limits the total amount that a participant can accrue under the Plan when such benefit is expressed as an “annual benefit.” The annual benefit cannot exceed the lesser of $175,000 or 100 percent of the participant’s average compensation for his or her highest 3 years. (The IRS adjusts the contribution limit periodically for increases in the cost of living.)
The term “annual benefit” means a benefit payable annually in the form of a straight life annuity under a plan to which employees do no contribute and under which no rollover contributions are made.
Rollover contributions are not permitted to be made to the Plan. A “rollover contribution” is an employee directed transfer of retirement plan assets from a retirement plan of a prior employer or an IRA to the retirement plan of a current employer.
The Plan benefit replaces the “interim benefit” under the IU 18/20 Retirement Plan only. In addition to the Plan benefit, an employee may also be eligible for the “continued contribution benefit” under the IU 18/20 Retirement Plan. Continued contributions benefits are subject to the terms and conditions of the IU 18/20 Retirement Plan. Please reference the IU 18/20 Retirement Plan Summary for more information on continued contribution benefits.
An employee must satisfy all of the following age, service, and employment conditions in order to become vested in his or her Plan benefit:
- 18 years of participation in the IU Retirement Plan at the 15% contribution level;
- 20 years of continuous full-time service with Indiana University
- Attainment of age 64*
- Termination of employment with Indiana University
- Not reemployed by Indiana University after benefit payments have begun
*Faculty participants with a 10-pay academic year appointment will satisfy the attainment of age 64 requirement on:
- January 1st, if their 64th birthday falls during the following spring semester; or
- July 1st, if their 64th birthday falls during the following summer or fall semesters
A participant’s Plan benefit is forfeited when the participant terminates employment, becomes ineligible to participate in the Plan, or dies before becoming entitled to his or her full benefit under the Plan.
Forfeitures will be used to reduce Indiana University’s contribution to the Plan in the following Plan Year.
If a participant receiving benefit payments under the Plan is reemployed by Indiana University, that participant will forfeit any payments that otherwise would have been payable during the period of reemployment, effective as of the date of rehire.
A vested participant may elect to receive his or her Plan benefit in one of the following forms:
- Standard retirement benefit; or
- Optional retirement benefit
Standard Retirement Benefit
If elected, the standard retirement benefit is the annual benefit amount a vested participant will receive for life based on the following formula:
Final average salary x 36% = annual benefit amount
Optional Retirement Benefit
If elected, the optional retirement benefit is the annual benefit amount a vested participant will receive for 5 years or until death if earlier based on the following formula:
Final average salary x 100% = annual benefit amount
Final Average Salary
Final average salary means a vested participant’s average base salary for the five year period preceding the earlier of:
- The date the participant retired from Indiana University, or
- The date the participant attained age 65
Distribution of the Standard Retirement Benefit
If a vested participant elects to receive his or her Plan benefit as the standard retirement benefit, the Plan benefit will be distributed as a monthly amount payable for the vested participant’s life. The monthly amount is determined by dividing the participant’s annual benefit amount by 12.
Distribution of the Optional Retirement Benefit
If a vested participant elects to receive his or her Plan benefit as the optional retirement benefit, the Plan benefit will be distributed as a monthly amount payable until the earlier of:
- The participant’s death, or
- Completion of 60 monthly payments
In-service distributions, including hardship distributions, are not allowed to be made to a participant from the Plan.
Loans are not allowed to be made to a participant from the Plan.
Minimum Required Distributions
Federal law requires that distribution of a participant’s Plan benefit, regardless of the form, must begin on or before April 1st of the calendar year following the calendar year in which he or she attains age 70 ½ or the calendar year in which the participant retires, whichever is later.
If a participant dies before distribution of his or her Plan benefit commences, the participant’s Plan benefit will be forfeited.
If a participant dies after distribution of his or her Plan benefit has commenced, the remaining portion of the participant’s Plan benefit will be forfeited.
Taxes on Distributions
Plan distributions are generally subject to a 20% mandatory federal income tax withholding rate. This mandatory withholding will reduce the amount a participant actually receives upon withdrawing funds from the Plan. However, the amount withheld will be credited against any taxes the participant owes for the year when the participant files his or her annual tax return.
There are exceptions to the mandatory federal income tax withholding rule, including receiving the Plan distribution as a life-time annuity payment or directly rolling over the Plan distribution to an eligible retirement plan (e.g., an IRA).
Direct Rollover Distributions
A direct rollover of an eligible rollover distribution may be made at the participant's election. A direct rollover is a payment of an eligible rollover distribution from the Plan directly to another eligible retirement plan, such as a 401(a) plan, 403(b) plan, 401(k) plan, governmental 457(b) plan, or IRA. However, certain types of distributions, such as life-time annuity payments, are not eligible for direct rollover treatment.
Qualified Domestic Relations Orders (QDROs)
Indiana University may be required by law to recognize obligations a participant incurs as a result of a qualified domestic relations order (QDRO). A QDRO is a decree or order issued by a court that obligates the participant to pay child support or alimony, or otherwise allocates a portion of the participant's assets in the Plan to his or her spouse, former spouse, child, or other dependent (collectively known as "alternate payees").
A distribution authorized by a QDRO to an alternate payee will be permitted under the Plan, even if the affected participant is not currently eligible for a Plan distribution.
The IU Replacement Retirement Plan – Summary of Plan Provisions booklet contains a detailed description of the terms and conditions of the Plan. A copy of the booklet may be obtained from this website or by contacting the campus Human Resource office.
Please contact University Human Resource Services with any questions or comments regarding the Plan at:
University Human Resource Services
Attn: IU Replacement Retirement Plan
400 East 7th Street, Poplars E165
Bloomington, Indiana 47405-3085