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Home > Benefits > IU Supplemental Retirement Plans > Frequently Asked Questions

Frequently Asked Questions

Introduction and Enrollment

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tax regulations by deferring taxes on employee contributions and associated investment earnings until the funds are withdrawn.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:

  • 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.
  • 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.

What supplemental retirement plans are available at Indiana University?

Indiana University sponsors two supplemental retirement plans, the IU Tax Deferred Account and the IU Retirement Savings Plan. Both plans share many of the same characteristics.

Who should an employee contact to learn more about Indiana University sponsored supplemental retirement plans or to enroll in a plan?

An employee should contact a campus HR office to learn about Indiana University sponsored supplemental retirement plans or to enroll in a plan. Indiana University is here to help employees save more money for retirement. Don't Delay, Start Today!

How does an employee enroll in the IU TDA Plan?

Effective July 1, 2008, new full-time employees will be automatically enrolled in the IU TDA Plan. The default deferral rate will be 5 percent to TIAA-CREF Lifecycle Funds®. To begin making contributions to the IU TDA Plan, an existing employee must:

  • Complete the appropriate salary deferral agreement;
  • Establish a plan account at an authorized investment company by completing an investment company account application; and
  • Return a completed salary deferral agreement and account application to the campus human resources office no later than 30 days prior to the next pay date.

How does an employee enroll in the IU Retirement Savings Plan?

To begin making contributions to the IU Retirement Savings Plan, an eligible employee must:

  • Complete the appropriate salary deferral agreement;
  • Establish a plan account at an authorized investment company by completing an investment company account application; and
  • Return a completed salary deferral agreement and account application to the campus human resources office no later than 30 days prior to the next pay date.
Contributions

How much can an employee contribute to the plans?

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

Are contributions 100% vested and non-forfeitable?

Yes. Contributions made to the plans are always 100% vested and non-forfeitable. However, contributions are subject to investment gain and loss.

How often can an employee change the amount he or she contributes to a supplement retirement plan?

An employee may increase, decrease, or even stop contributions being made to the plan each payroll period. To increase, decrease, or stop contributions being made to a plan, an employee must complete and return a new salary deferral agreement (or a termination of salary deferral agreement) to a campus HR office at least 30 days prior to the next pay date.

Will making contributions to a supplemental retirement plan reduce an employee's Social Security benefits?

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

When will contributions made to a supplemental retirement plan be taxed?

An employee will pay income tax on contributions and earnings only when they are distributed from the plan.

Contributions will 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.

Will contributing small amounts to a supplemental retirement plan really help an employee increase his or her retirement savings?

Contributing even small amounts to a supplemental retirement plan can add up to a larger retirement savings over time.

Investment Choices and Fees

Who makes investment choices under the plans?

Each plan is a participant directed plan. This means that each employee is responsible for directing the investment of his or her plan account. An employee may direct the investment of his or her plan account among any investment funds provided under the plan. An employee may also transfer monies from one investment fund to another.

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-CREF 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-CREF 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.

Who are the authorized investment companies under the plans?

There are two authorized investment companies available under the IU Tax Deferred Account:

  • TIAA-CREF,
  • Fidelity Investments.

There are two authorized investment companies available under the IU Retirement Savings Plan:

  • TIAA-CREF, and
  • Fidelity Investments.

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.

What is a TIAA-CREF Lifecycle Fund®?

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

Each TIAA-CREF 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-CREF 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.

What types of fees do the investment companies charge?

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

  • Account Maintenance Fee means an annual fee for record keeping, reduced from account balance.
  • Front End / Sales Load Fee means a commission charge at time of initial deposit.
  • Cash-Out or Transfer Fee means a commission charge at 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 net 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.

Distributions

When can an employee take a distribution from an Indiana University sponsored supplemental retirement plan?

An employee can take a distribution from the IU Tax Deferred Account upon termination of employment with Indiana University or on or after attaining age 59½.

An employee can take a distribution from the IU Retirement Savings Plan upon termination of employment only.

Are "hardship distributions" allowed?

No. Neither plan allows an employee to take a hardship distribution.

May an employee take a loan against his or her 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.

What happens to an employee's plan account if the employee dies?

If an employee dies, his or her entire plan account balance will be distributed to the employee's "designated beneficiary." An employee can designate any person or entity as the designated beneficiary.

IU Retirement Savings Plan Booklet (PDF)

IU Tax Deferred Account Plan Booklet (PDF)

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Contact a campus Human Resources office

Contact the university-wide Human Resources office at
or 812-856-5191

Page updated: 26 June 2013
UNIVERSITY HUMAN RESOURCES
Contact Retirement: • 812-856-5191

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