Frequently Asked Questions

A. General Information

 1. What is a supplemental retirement plan?

A supplemental retirement plan is a tax-qualified plan sponsored by Indiana University that enables an employee to defer part of his or her salary on a pre-tax basis into the plan. A supplemental retirement plan takes advantage of federal and state tax regulations by deferring taxes on employee contributions and associated investment earnings until the funds are withdrawn.

This tax deferral provision offers two key advantages for employees:

  1. It allows employees to make higher contributions than would be possible if income taxes were immediately due. Retirement plan contributions are deducted from the employee's salary before income taxes are calculated.
  2. It provides an opportunity for the employee's plan account balance to grow quickly, as investment earnings are not taxed immediately. All of the investment earnings are left in the employee's account to generate additional earnings.

2. How do I enroll in a supplemental retirement plan?

To begin making contributions to the IU TDA Plan or IU 457(b) Retirement Plan:

  • Complete the appropriate Salary Deferral Agreement;
  • Establish a plan account by creating an online account through TIAA and/or Fidelity; and
  • Return the completed salary deferral agreement and account application to the IU Human Resources office no later than 30 days prior to the next pay date.

3. 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 to learn how to update your beneficiaries.

4. Are rollovers allowed to be made into my IU plan?

No, IU does not allow rollovers into any retirement plan.

5. Does IU offer a Roth?

No, IU does not have a Roth option.

6. I am dually employed with IUHP. What plan(s) can I contribute to?

We do not recommend contributing to IU’s Tax Deferred Account (TDA) plan because it is a 403(b) and aggregates with IUHP’s 401(k). Please consider contributing to the 457(b) plan instead.

B. Contributions

1. How much can I contribute to the plans?

Federal law limits the total amount of contributions that may be contributed to certain Indiana University retirement plans on behalf of an employee for any calendar year. The total amount contributed cannot exceed the lesser of 100 percent of the employee's compensation for the year or the "applicable dollar amount." (The IRS adjusts the contribution limit periodically for increases in the cost-of-living.) However, age 50 or older catch-up contributions will not be taken into account in applying the maximum contribution amount.

The maximum contribution amount limits the total amount of employer contributions and salary deferrals that can be made to the Plan, IU Retirement Plan, and the 403(b) plan portion (i.e., continued contributions) of the IU 18/20 Retirement Plan on behalf of an employee.

See the Retirement Plan Contribution Limits page for the current amounts.

2. What are catch-up contributions?

Participants within 15 years of normal retirement age are eligible to contribute additional amounts to certain retirement accounts.

IU Tax Deferred Account (TDA) Plan
Participants who are at least age 50 before the end of the calendar year are eligible to contribute up to an additional $6,000 per calendar year for 2018.

IU 457(b) Retirement Plan
Participants who are at least age 50 before the end of the calendar year are eligible to contribute up to an additional $6,000 per calendar year for 2018. Participants age 62, 63, and/or 64 may increase their salary deferral contribution limit to twice the salary deferral limit, or $36,000 for 2018, per year for one or more of the last 3 calendar years before attaining normal retirement age.

Limitations may apply. Review the IU 457(b) Retirement Plan – Plan Document (PDF) for terms and conditions. NOTE: A participant may not make both age 50 or older catch-up contributions and age 62, 63, or 64 catch-up contributions to the plan in the same year.

3. How much should I contribute to my supplemental retirement plan?

The need to save more money for retirement years has never been greater. The rising cost of living, including healthcare expenses and increasing life expectancy, has dramatically increased the amount of savings a person will need during retirement years. Whether retirement is 30 years away or only a few years away, significant progress can be made toward accumulating more money for retirement years by starting now. Contributing even small amounts to an IU-sponsored supplemental retirement plan can help boost retirement savings.

For help with maximizing your retirement savings and other financial goals, meet with a TIAA or Fidelity representative for a one-on-one, on-site investment counseling session.

4. 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. Contributions to IU-sponsored supplemental retirement plans are always 100% vested and no-forfeitable.

5. How often can I change my contribution amount?

Contribution amounts may by increased, decreased, or stopped at any time. To change your contribution amount:

  1. Login to the Employee Center through One.IU
  2. Select the “Benefits” tab
  3. Select the plan from the list of benefits
  4. Click “Edit” under Current Contributions
  5. Make applicable changes and select “Save”
  6. You will receive a confirmation e-mail once your changes have been made. Be sure to save this for your records.

Alternatively, you may submit a completed paper Salary Deferral Agreement to the IU Human Resources Office at least 30 days prior to the next pay date.

6. Will making contributions to supplemental retirement plans reduce my Social Security benefits?

No. Employment taxes are deducted from your compensation before contributions are made to the plan. Therefore, making contributions to the plan will not reduce your compensation for purposes for calculating Social Security benefits.

7. Will contributions made to supplemental retirement plans be taxed?

You will pay income tax on contributions and earnings only when they are distributed from the plan. Contributions are not be included in an employee's income reported to the federal, state, or local governments for income tax purposes when they are made to a plan. However, the employee and Indiana University must pay employment taxes (i.e., Social Security taxes) on contributions when they are made to the plan.

8. Can I make a lump sum payment to a supplemental retirement plan?

No. IU only allows deferred contributions directly from your paycheck.

9. If I am on unpaid leave of absence, can I make contributions to my supplemental plans?

No. Deferral cannot be made while on an unpaid leave of absence.

10. Can I make tax-free contributions to a supplemental retirement plan for the previous year?

IU only allows deferrals directly from a paycheck. We do not permit contributions to be made for the previous year.

C. Investments and Fees

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

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.

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.

D. Distributions & Withdrawls

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

Distributions may be taken from the IU Tax Deferred Account upon termination of employment with Indiana University or on or after attaining age 59½.

Distributions may be taken from the IU 457(b) Retirement Plan upon termination of employment only.

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?

Yes. Both plans allow employees to take a loan against their plan account. An employee may receive a loan from his or her plan account with a current approved vendor by contacting the investment company directly. Loans are subject to both federal tax code and investment company rules and regulations.

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.

9. Are distributions automatically sent to me when I terminate employment or retire?

No. You must contact the investment vendor directly to coordinate your distribution.

E. 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.