From Human Resources
TIAA-CREF Participants Contract Changes: Questions
The following Questions & Answers are in response to several
questions that the Division of Human Resources has had since the July 1,
2000 implementation of a redesigned retirement plan called the Tax-Deferred
Retirement Plan (TDR). For TIAA-CREF participants who had been participating
in the Basic Tax-Deferred Annuity retirement plan prior to this changeover,
this meant that new TIAA-CREF contracts were issued. As this may have been
somewhat confusing, we've created these Qs & As to answer some of the
most frequently asked questions about the contract change. If you still
have questions after reading this, please contact Penn's Retirement Call
Center at 1-877-736-6738.
Q. What changes were made as of July 1, 2000?
A. As of July 1, 2000, the University rolled out the Tax-Deferred
Retirement Plan (TDR), which is a redesigned version of the previously existing
retirement plan for eligible full-time faculty and staff. Under the TDR,
the University now gives each eligible participant a Basic contribution
as a percentage of salary based on age, along with a matching contribution
on amounts contributed by the participant up to 5% of salary. The Basic
contribution is qualified under Section 401(a) of the IRS code, while the
employee and employer contributions to the Matching Plan are qualified under
Section 403(b) of the IRS code.
Q. How are retirement plan contributions to the Tax-Deferred
Retirement Plan through TIAA-CREF applied?
A. As of July 1, 2000, Tax-Deferred Retirement Plan contributions
are applied to TIAA-CREF Group Retirement Annuity (GRA) certificates instead
of the Retirement Annuity (RA) contracts used previously.
One GRA certificate will receive the Basic employer contribution. The
employee and Matching employer contributions will be applied to a separate
GRA certificate. For University participants who had existing RA contracts
and are currently using TIAA-CREF as their provider, the contribution allocation
instructions and beneficiary designations that governed your previous RA
contract are effective for your new GRAs.
Government regulations prevent retirement plan contributions qualified
under separate sections of the IRS code from being commingled in the same
contracts. Due to the plan change and employer contributions being qualified
under separate sections of the IRS code, all existing TIAA-CREF participants
had to receive new contracts.
Q. What happened to the RA contracts that Penn employees
had under the previous retirement plan?
A. No further contributions will go into the existing RA contracts.
However, these contracts will continue to earn the full amount of TIAA
dividend and participate in the investment performance of the TIAA-CREF
variable accounts. Participants will continue to receive quarterly reports
for these contracts and the same transferability rules still apply.
Q. Why did the University choose the GRA certificates
for employees instead of using new RA contracts for those participating
in the Tax-Deferred Retirement Plan?
A. One reason was ease of administration. The GRA certificates
made it easier to transfer employees to the Tax-Deferred Retirement Plan.
GRAs can be issued to employees with the use of internal information.
Essentially, this means that we used employee information that is already
on file instead of requiring employees to complete and return new applications,
which could have caused delays in processing.
Q. Are there other advantages of the GRA?
A. Balances in the GRA certificates are fully cashable and transferable.
Penn employees who terminate employment and participate in the TDR plan
have a 120-day period after terminating employment to take full or partial
cash withdrawal from their TIAA Traditional account, or transfer the full
or partial balance (subject to a 2.5% surrender charge). There are no time
restrictions or withdrawal charges on the TIAA Real Estate account or the
CREF accounts. TIAA Real Estate and CREF balances are always cashable upon
termination of service.
Q. What are the differences between the RA contract
and the GRA certificates?
A. You continue to have the same low expenses, investment options
and flexible distribution options in both contracts. The notable difference
is the full cash availability in the GRA certificate noted in the above
question. With that exception, the RA contracts and GRA certificates behave
in the same manner while you are still employed at the University.
Almanac, Vol. 47, No. 23, February 20, 2001
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