Life Events and Your Accounts
During an approved Sabbatical Leave, contributions will continue to the Retirement Plan based on your full budgeted salary.
If you take an approved Leave Without Salary, contributions will be made to the plan but will be based on your reduced salary. If you take a 100% time leave, contributions resume on the first paycheck following your return.
On your last day of employment, the University stops additional contributions to the retirement plan. At that time, you will have a number of decisions to make about your retirement account.
The options available depend on the company. You may:
- Leave your money in the plan: You can take a monthly income or lump-sum payment at a later date.
- Roll over your account to an Individual Retirement Account (IRA) or other qualified plan: A rollover is complex and may be available only in certain situations. Rollovers are not subject to tax withholding; however, amounts will be taxable when paid out to you. Consult your tax professional for more information.
- Decide based on the investment options: If you have a plan invested with:
- TIAA-CREF: TIAA annuities provide for lump-sum distributions within 120 days of termination subject to a 2.5% surrender charge.
- Securian Retirement Services: You may access 20% from your Minnesota Life General Account Limited accumulation value each year. In addition, up to 100% may be withdrawn within 120 days of attaining a "benchmark age" (55, 60, 65, etc.) or terminating employment. Any lump-sum distribution from the plan would be subject to federal and state income tax. A 20% federal tax will be withheld automatically. If you are under age 59½, you may also be subject to a 10% additional tax on early distributions.
If you are actively employed at the University, you may withdraw any or all of your Faculty Retirement Plan 401(a) account as of the first of the month following your 62nd birthday as of January 1, 2015. There are no limits on the amount of each withdrawal or the number of withdrawals that may be made each year. Withdrawals from the plan are, however, subject to an automatic 20% federal income tax withholding unless used to purchase an annuity or transferred directly to an IRA or other qualified plan.
The Tax Reform Act of 1986 imposes minimum distribution requirements for Faculty Retirement Plan participants effective the calendar year following the year in which you attain age 70½, or the year you retire, if later. If you are interested in retirement information, contact Employee Benefits by calling 4-UOHR (612-624-8647 or 800-756-2363) or emailing email@example.com.
At or after retirement, you may choose one or more of the following payment options:
- Non-systematic withdrawals of specific dollar amounts or percent of account balance may be made at any time. Such withdrawals are subject to automatic 20% federal income tax withholding.
- Systematic withdrawal offers flexibility in receiving income. You may receive a flat dollar amount, a percentage of your account value, or a specific number of accumulated units/shares. You may receive payments monthly, quarterly, semi-annually, or annually. Either the amount or frequency of payments may be changed. (Subject to automatic 20% federal income tax withholding if payments are scheduled for less than 10 years.)
- Purchase a Lifetime Annuity. An annuity is a contractual agreement with an insurance company in which the company promises to pay you a specific periodic income for a specific duration. Once purchased, an annuity contract is irrevocable and cannot be altered or cancelled.
- Roll over all or a part of your accumulated value into an Individual Retirement Account (IRA), subject to both University and federal regulations. Amounts rolled over directly to an IRA (not paid to you) will not have the 20% federal withholding subtracted automatically. Since your contributions to the retirement plan were made with "before tax" dollars, your income would be subject to federal and state income tax when you receive it.
- You may receive the income in the form of a fixed annuity (fixed payment) or as a combination of fixed and variable annuities (payments vary with investment performance).
- In all cases the annuity will provide you an income for your lifetime, but you may wish to elect a joint and survivor annuity which would guarantee an income for your lifetime and that of your beneficiary.
- Or, you may want a life annuity with a guaranteed period. In the event of death during a guaranteed period, payments would be made to the named beneficiary for the balance of such guaranteed period. For example, if a 60-month guarantee were elected and death occurred after 14 retirement payments were made, the beneficiary would receive payments for 46 months or the equivalent value.
- You don't need to make decisions concerning the form of retirement annuity until shortly before your actual retirement date. But for your retirement planning, it is important to consider that a joint and survivor option or a guaranteed period will reduce the amount of your monthly retirement income because you are paying for a guarantee.
In addition, withdrawals made before age 59½ may be subject to a 10% additional tax on "early distributions." You are encouraged to consult a tax professional regarding the taxability of Faculty Retirement Plan withdrawals.
If you should become totally disabled, the Waiver of Contribution benefit applies. This means that all or part of your and the University's contributions to the Retirement Plan are made for you. The benefit begins after three months of disability and continues as long as you remain disabled.
If a faculty or staff member invested in the Faculty Retirement Plan dies before retirement without a beneficiary designation, the full cash value of annuity accumulations and separate accounts will be paid to their beneficiary in a single sum or under one of the settlement options included in the investment companies' contracts. The options available include funds left on deposit, installments paid over a period of years, and life annuities with different guaranteed periods.
Death proceeds will be paid out automatically under the plan's succession clause. These are paid equally to the survivors in the following sequence:
- To the surviving spouse
- To children. If an employee's child dies before the employee, their own children will receive their parent's share.
- To parents
- To brothers and sisters
- The executor or administrator of the estate
If you want to choose another beneficiary, contact Employee Benefits by calling 4-UOHR (612-624-8647 or 800-756-2363) or emailing firstname.lastname@example.org to receive a beneficiary designation form.