IU Base Retirement Plans Frequently Asked Questions

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; 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 their 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.

5. If my position is reclassified (voluntarily or involuntarily) or I change positions through a Reduction in Force or Corrective Action, can I stay in the same base retirement plan?

If your position change or reclassification causes you to move from Academic/Professional Staff to Support/Service Staff or Part-Time with Retirement, or vice versa, you cannot stay in the same base retirement plan. You are automatically enrolled in the retirement plan that you are eligible for, based on your position’s classification. For Support/Service Staff and Part-Time with Retirement employees, that is the Retirement & Savings Plan. For Academic and Professional Staff, that is the IU Retirement Plan. Your balance will stay in the previous plan, but you will not receive contributions to that plan going forward. Vesting will not start over if you move between plans.

B. Investments & Fees

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

IU Retirement Plan and Retirement & Savings Plan
Indiana University partners with Fidelity Investments to offer investment services for the IU retirement savings plan options. IU’s investment menu is designed to make it easier for you to build a diversified, lower-cost investment mix that matches your personal tolerance for risk. Investments are grouped into four tiers: Target Date Funds, Passively Managed Funds, Actively Managed Funds, and a self-directed brokerage account. You can create a tailored retirement strategy by investing in one or more options from any of the tiers. Explore IU’s investment menu.

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

3. What is a Vanguard Institutional Target Retirement Date Fund?

Vanguard Target Retirement Funds offer a diversified portfolio within a single fund that adjusts its underlying asset mix over time. The funds provide broad diversification while incrementally decreasing exposure to equities and increasing exposure to bonds as each fund’s target retirement date approaches. The funds continue to adjust for approximately seven years after that date until their allocations match that of the Target Retirement Income Fund. Investors in the funds should be able to tolerate the risks that come from the volatility of the stock and bond markets.

An employee picks the Vanguard Target Retirement Fund with a target retirement date closest to when the employee wants to retire and money managers at Fidelity Investments will do the rest. Learn more about each target date fund by clicking on the ticker symbol of the appropriate fund on the Investment Options page.

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

The following are common fees and expenses assessed by Fidelity. Information on a fund's current and historical investment performance, as well as a breakdown of the fees assessed by Fidelity for their funds, may be found in each fund’s prospectus. A fund prospectus may be requested by calling 800-343-0860 or by logging in to Fidelity NetBenefits.

  • Annual Recordkeeping Fee: Annual fee for recordkeeping, flat-dollar amount billed quarterly and automatically deducted from your account(s).
  • Investment Management Fees: Fees for the fund(s) a participant has elected to invest in.
  • Transaction Fees: Fees for loan initiation and maintenance or for full distributions
  • BrokerageLink® Fees: Commission charges (view the Commission Schedule (PDF))

At this time, no new fees will be imposed on any legacy TIAA annuity accounts. However, TIAA will continue to assess an asset-based fee that covers the investment management and administrative recordkeeping costs of these assets.

Participants should contact their investment company directly for more information about fees.

5. What if I do not make any investment elections?

If you do not make any investment elections, your funds will be placed into the plan’s default investment option – a Vanguard Institutional Target Retirement Date Fund based on the year you turn age 65.

C. Distributions & Withdrawals

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

A participant may only withdraw vested funds from their IU base retirement 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 required minimum distribution?

Federal law requires participants to begin receiving at least a partial distribution of tax-deferred retirement account funds by April 1 of the calendar year following the year he/she reaches age 72, or upon retirement/separation, whichever is later. Failure to withdraw the required minimum distribution annually by the applicable deadline can result in substantial tax penalties.

3. What forms of distribution are available?

A participant may choose to receive a distribution of their 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 their 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 lifetime 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 IU-sponsored base retirement 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?

As of January 1, 2021, participants who are at least 59½ years of age, and are age and service eligible for normal retirement, may take a distribution from their Defined Contribution (DC) account without separating service.

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 their 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 their 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 their 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 participants to begin receiving at least a partial distribution of tax-deferred retirement account funds by April 1 of the calendar year following the year he/she reaches age 72, or upon retirement/separation, whichever is later. Failure to withdraw the required minimum distribution annually by the applicable deadline can result in substantial tax penalties.