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IU Mandatory Base Retirement Plans FAQ

A. General Information

1. How do I enroll in a base retirement plan?

Eligible employees are automatically enrolled in either the IU Base Retirement Plan or Retirement & Savings Plan.

2. How often should I update my beneficiaries?

At least once a year, or after any significant life event. It is important to keep your beneficiary designations up to date because named beneficiaries on insurance policies and retirement plans usually supersede instructions in wills. By periodically reviewing your beneficiary designations for your IU-sponsored benefit plans, you can rest assured that your assets will be distributed according to your wishes. Follow the instructions here to learn how to update your beneficiaries.

3. What is a vesting requirement?

Vesting is a legal term that means to give or earn a right to a present or future payment, asset, or benefit. In the context of retirement plan benefits, once a participant is fully vested, they own the balance of their plan account, and the employer cannot forfeit or take it back for any reason.

IU Retirement Plan

New Participants in the Plan on or after September 1, 2010, are subject to a three-year cliff Vesting requirement. An Employee’s Contributions and earnings are fully Vested upon the earlier of : 1) completion of three years of IU employment as a Plan or Public Employees’ Retirement Fund (PERF) Participant; 2) death; 3) disability as defined by social security; or 4) attainment of age 65.

Retirement & Savings Plan
Participants in the Plan are subject to a three-year cliff Vesting requirement. A Participant’s Account is fully Vested upon: 1) completion of three years of IU employment; 2) Death; 3) Disability as defined by Social Security; or 4) attainment of age 65.

PERF
Participants must have at least 10 years of PERF creditable service to have a vested right to the pension benefit. A participant is always 100% vested in his or her annuity savings account.

4. I am an academic 10-pay employee who does not work during the summer or receive retirement benefits during the summer. How does vesting work for me?

We count academic years as a full year for 10-pay employees. If you are primarily a 10-pay and work three full academic years, you are 100% vested.

B. Investments & Fees

1. What types of investment choices are available under the plans?

IU Retirement Plan and Retirement & Savings Plan
Each plan offers a wide range of investment choices, including: 1) stock funds; 2) bond funds; 3) real estate funds; 4) guaranteed investment contracts; and 5) money market funds. TIAA and Fidelity both offer a self-directed brokerage window option. The brokerage window gives plan participants access to thousands of mutual funds outside of TIAA and Fidelity in which to invest. The initial minimum investment is $5,000 and subsequent minimum investments are $1,000. Annual account fees may apply.

PERF
PERF offers several investments options for participants to choose to invest money held in their annuity savings account. The default investment for all new participants is the PERF age appropriate target date retirement fund. For further information on the self-directed investment options, PERF's investment activities, and fund performance, visit the investments section of the PERF website.

2. How do I change my investment allocations?

Investment allocations and beneficiary designations must be made separately for each plan you are enrolled in. You may login to your plan account at any time to change your investment allocations, update your beneficiaries and more.

3. What is a Fidelity Investment Freedom Fund®?

Fidelity Investment Freedom Funds are lifecycle funds, offering the power of a diversified set of mutual funds in a single fund, with the added benefit of professional asset allocation.

Fidelity Investment Freedom Funds have an asset allocation mix among stocks, bonds, and short-term instruments that is more aggressive when an employee is younger and gets more conservative as the employee nears retirement age. An employee picks the Fidelity Investment Freedom Fund with a target retirement date closest to when the employee wants to retire and money managers at Fidelity Investments will do the rest.

4. What is a TIAA Lifecycle Fund®?

TIAA Lifecycle Funds provide a ready-made diversified portfolio using TIAA mutual funds with underlying investments that include stocks, bonds, and real estate investment trusts. TIAA Lifecycle Funds are available for target retirement years of 2010 through 2040 in five-year increments.

Each TIAA Lifecycle Fund starts with an asset allocation generally considered appropriate for investors at different stages of retirement planning. Then, the funds readjust periodically to maintain an appropriate asset allocation for the remaining time horizon as the employee nears retirement age.

With a TIAA Lifecycle Fund, the employee benefits from broad diversification and ongoing professional management, without the need to make investment, portfolio reallocation and readjusting decisions as the employee's time horizon changes.

5. What type of fees do the investment companies charge?

Most (but not all) of the authorized investment companies do not charge front end/sales load fees, account maintenance fees, cash-out fees, or transfer fees. However, each individual fund will have minimum management fees as specified in the fund’s prospectus.

  • Account Maintenance Fee: Annual fee for record keeping, reduced from account balance
  • Front End/Sales Load Fee: Commission charge at time of initial deposit.
  • Cash-Out or Transfer Fee: Commission charge at the time of withdrawal; may be waived for certain payout options, such as annuity payments and systematic withdrawals, and may be waived after obtaining a certain age.

Each investment company reports investment return figures, which reflect investment performance after administrative expenses are deducted. For former approved vendors who are no longer approved vendors, these administrative expenses may be as much as 1.25% for certain annuity or risk charges. Participants should contact the investment company for more information about fees.

6. What if I do not make any investment allocations?

If you do not make any investment allocations, you will be placed into a default investment mix that is age appropriate and contains a mixture of stocks and bonds.

C. Distributions & Withdrawals

1. When can I take a distribution from my IU-sponsored retirement plan?

A participant may only withdraw vested funds from his or her Plan account upon termination of employment with Indiana University. Distributions are allowed for former employees rehired into non-eligible positions if the rehired employee has at least a continuous 30-day break in service from the date of the employee’s last day of employment. 

2. Is there a minimum required distribution?

Federal law requires that distribution of a participant’s plan account, regardless of the form, must begin on or before April 1st of the calendar year following the calendar year in which the participant attains age 70 ½ or the calendar year in which the participant ends employment, whichever is later.

3. What forms of distribution are available?

A participant may choose to receive a distribution of his or her Plan account in any one of the following forms or combination of forms:

  • Single sum distribution of cash
  • Annuity
  • Installment
  • Any legally permissible form of distribution permitted by an authorized investment company

4. Are distributions taxable?

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).

5. Are direct rollover distributions allowed?

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.

6. Are “hardship distributions” allowed?

No. Hardship distributions are not allowed to be taken from any IU-sponsored retirement plan.

7. May I take a loan against my plan account?

No. Loans are not allowed to be made to a participant from the plans.

8. What happens to my account after I pass away?

If you pass away, your account balance will be distributed to your designated beneficiary(ies). You may designate any person or entity as a designated beneficiary.

D. Leaving the University

1. What am I required to do if I terminate employment with Indiana University?

A participant is not required to cash-out or transfer his or her Plan account upon termination of employment. Upon termination of employment, a participant may:

    • Leave accumulations in the Plan account and continue to manage investments;
    • Withdraw all or a portion of Plan account accumulations (subject to income taxes and/or penalty taxes); or
    • Roll over all or a portion of Plan account accumulations to an eligible retirement plan (e.g., an IRA).

After terminating employment with Indiana University, most transactions related to a participant's Plan account are handled directly by the participant with the applicable investment company.

E. PERF

1. Are in-service distributions allowed?

Age 70 Benefits (“Millie Morgan”): If a participant has attained age 70 and has been credited with 20 or more years of PERF creditable service, the participant may begin receiving PERF pension while continuing to work at Indiana University.  

Non-Covered Employees: Participants that had PERF and are no long in a PERF- covered position, may be eligible to begin pension benefits. The participant must meet eligibility rules (i.e. Age 65 with 10 years of service, age 60 with 15 years of service, or meet the rule of 85). Please contact askHR for additional information.

2. What are the general distribution provisions?

Generally, a participant must terminate employment with Indiana University and all other State employers who are participating employers in PERF in order to be eligible to receive distribution of plan benefits. A participant's distribution options will differ depending on the following participant circumstances:

  • The participant terminates employment and does not qualify for a pension benefit ("cash-out provision");
  • The participant terminates employment with 5 or more years of PERF creditable service and is disabled ("disability provision"); or
  • The participant terminates employment and qualifies for a full or reduced pension benefit ("retirement provision").

3. What is the PERF cash-out provision?

If a participant terminates employment with Indiana University and is no longer employed in a PERF-covered position, the participant may receive a cash-out of the balance of his or her annuity savings account upon satisfying the following conditions:

  • The participant terminates employment with Indiana University; and
  • The participant is not rehired by Indiana University or any other employer who participates in PERF within 30 days (regardless if the participant's new position is a PERF-covered position or not).

The annuity savings account cash-out consists of the 3% mandatory contributions made by Indiana University to the participant's account and all accumulated earnings credited to the account. Money contributed to PERF on the participant's behalf to fund the pension benefit does not belong to the participant until he or she becomes eligible to receive the pension benefit from PERF. Therefore, the pension benefit cannot be cashed-out to the participant.

A participant does not have to take a cash-out of his or her annuity savings account upon termination of employment with Indiana University, even if the participant qualifies for a cash-out. The participant may leave the accumulations in his or her annuity savings account and continue to manage the investment of the account with PERF.  

If a participant has 10 years or more of PERF creditable service, the participant should consider leaving his or her annuity savings account with PERF until the participant reaches the required age to be eligible to receive a pension benefit.   At that time, the participant may choose to receive the annuity savings account as either monthly income that is added to the pension benefit, leave it at PERF, or make partial or lump-sum withdrawal.

4. Does PERF offer a disability provision?

A participant is eligible to apply for disability benefits from PERF upon satisfying the following conditions:

  • The participant has accrued five or more years of PERF creditable service before: a) the participant terminates employment; b) employer-provided income protection benefits expire; c) leave under the Family Medical Leave Act (FMLA) expires; or d) worker's compensation benefits expire;
  • The participant is determined to be disabled by the Social Security Administration; and
  • The participant was receiving salary, or employer provided income protection benefits, or was on leave under FMLA as of the disability onset date established by the Social Security Administration.

A participant will be entitled to receive PERF disability benefits for as long as he or she continues to be eligible for Social Security disability benefits.

5. What are the requirements to receive the pension benefit?

To be eligible receive a full (unreduced) pension benefit, a participant must satisfy the following conditions:

  • The participant terminates employment or is in a “non-covered” position with IU (IU Retirement Plan);
  • The participant must satisfy one of the following age and service conditions:
    1. Attainment of age 65 with 10 or more years of PERF creditable service (or at least 5 years creditable service before becoming eligible for the IU Retirement Plan;
    2. Attainment of age 60 with 15 or more years of PERF creditable service; or at least 10 years PERF covered service before switching to IU Retirement Plan.
    3. Attainment of age 55 with the participant's age and total number of years of PERF creditable service equaling 85 or more.

To receive a reduced pension, a participant must satisfy the following conditions:

  • The participant terminates employment with Indiana University;
    1. The participant is not rehired by Indiana University or any other employer who participates in PERF in a PERF-covered position within 30 days of the date payment of PERF benefits began; and
    2. The participant has attained at least age 50 or older with 15 or more years of PERF creditable service

6. Are hardship distributions or loans allowed?

Hardship distributions and loans are not allowed to be made to a participant from PERF.

7. Is there a minimum required distribution provision?

Federal law requires that a participant begin to receive a distribution of his or her PERF Annuity Savings Account (ASA) on or before the "required beginning date." The required beginning date is April 1 st of the calendar year following the calendar year in which the participant attains age 70½ or terminates employment, whichever is later.