Frequently Asked Questions: Retirement

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Retirement Planning Guide

Eligibility

Who is eligible to participate in the Retirement Plan?

Any employee on the regular payroll who is scheduled to work half-time or more (17.5 or more hours per week) and is at least age 24 may participate in the University's Basic Retirement Plan and make contributions which will be matched by the University. Any employee who is at least half time or more may participate in the Supplemental Retirement Plan.


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When does eligibility end?

Benefits eligibility ends at separation of employment, retirement, change to a non benefits eligible job classification or reduction of scheduled hours below 17.5 hours per week. Eligibility also ends if your percent full time status drops to below half time (50%).


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Can the one year waiting period be waived?

The one year waiting period is waived if an individual provides the Benefits Division with documentation of employment in a benefits eligible position for at least one continuous year at a governmental or tax-exempt employer immediately prior to employment at Northwestern University.

Benefits eligible employees may make voluntary or supplemental Contributions (Contributions which are not matched my the University) at any time.


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Contributions

How much can I contribute to the Retirement Plan?

As of January 1, 2003 under IRS rules, you can generally contribute 100% of your Northwestern University salary up to $12,000, whichever is lower.

Calendar Year	Basic and Supplemental	Age 50 Catch Up	Combined
2003	100% of University earnings up to $12,000	$2,000	$14,000
2004	100% of University earnings up to $13,000	$3,000	$16,000
2005	100% of University earnings up to $14,000	$4,000	$18,000
2006	100% of University earnings up to $15,000	$5,000	$20,000
2007	100% of University earnings up to $15,000	$5,000	$20,500
2008	100% of University earnings up to $15,000	$5,000	$20,500

Employees who have attained 15 years or more years of qualifying University service may make additional contributions above the limits specified in the table above if they failed to maximize their 403(b) contributions earlier in their employment. Based on the amount of missed contributions, employees contribute an additional $3,000 a year, up to $15,000 over their lifetime (usually over a five year period). Annual catch-up salary deferrals are limited to the smallest of:

$3,000,
$15,500 minus your prior catch-up salary deferrals, or
($5,000 times your years of University service) minus all prior salary deferrals (including any 15 year catch-up deferrals) you made.

Matching University Contributions are directed to the applicable investment company on a monthly basis and are based upon job classification and whether you are a full-time or part-time employee. Full-time faculty are eligible to participate in Plan A. Part-time faculty and all staff are eligible to participate in Plan B. Following are the specific contribution amounts:

Current Calendar Year Retirement Plan Contribution Schedule


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Can I change the amount I contribute?

Yes, You may submit only up to two Retirement Plan Enrollment and Contribution Change Form (salary reduction agreement form) for a calendar year. For example, after signing and submitting an Agreement Form in January and then again in August, you cannot later in November increase or decrease the amount of voluntary (unmatched) Contributions during the year.

You may at any time, however, change the selection of funds for future Contributions by calling TIAA-CREF and/or Fidelity Investments. You may also change the allocation of your future Contributions between TIAA-CREF and Fidelity by contacting the Benefits Division.


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Are contributions taxed?

No, Retirement Plan Contributions are tax deferred - you do not pay taxes at the time they are contributed or onany earnings. Your Contributions and associated earnings are taxed only as the money is withdrawn as income.


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Can I transfer funds from my 401(k) plan to the University's plan?

Yes. Current tax law (EGGTRA tax reform legislation passed in 2001 and effective beginning January 1, 2002), permits an individual under Portability provisions to transfer funds from a 401(k) plan offered by a for-profit corporation to a 403(b) plan such as the plan offered by Northwestern University and vice versa. Individuals wishing to do so should contact their investment companies.


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Can I add contributions I make while I'm employed at NU to the 401(k) plan I had at a former employer?

No. Contributions made during NU employment must be allocated to a 403(b) plan.


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How much does the University contribute to the Plan on my behalf?

The University contributes two dollars for every one dollar an individual contributes to the retirement plan. Matching Contributions are based on an individual's age and job classification.

Go to Contribution Schedule


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What is meant by the term, tax-deferred?

The term "tax-deferred" refers to payroll deductions which are not subject to federal or state taxes at the time of the deduction. Taxation of the income is delayed or "deferred" until the money is withdrawn from a retirement plan account at the time of retirement.


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Can I make after-tax Contributions?

No. The University's retirement plan does not provide for Contributions to be made on an after-tax basis.


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How can I participate in the plan and select the new 1% contribution option?

This option applies to staff and part-time faculty.

Complete a Retirement Plan Enrollment and Contribution Change form selecting the 1% option and specifying the date you wish this option to begin and the date it should end. Submit the completed form to the Benefit Division. Your enrollment will not be complete until you establish an investment company account with TIAA-CREF and/or Fidelity Investments.

The 1% option is an alternative contribution rate and is not in addition to 2%, 3.5% or 5%.

If you chose at a later date to increase your contribution above the 1% rate, you may elect the contribution rate based on your age. For example, if you are age 55, you may elect to contribute at the contribution rate of 5%, not 3.5% or 2%.


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Enrollment and Effective Dates

When can I begin participation in the University's Retirement Plan?

Participation in the Retirement Plan requires the completion of the online enrollment process at hire and during Open Enrollment and afterward the submittal of a completed Retirement Plan Enrollment and Contribution Change Form as well the eatablishment of an investment company account which may be done online. Contributions will not commence until the enrollment process is completed.

Supplemental (Voluntary) Contributions
You can participate in the Retirement Plan immediately after starting employment by making voluntary (unmatched) contributions. The effective date for the participation of a bi-weekly employee (paid every two weeks) will be the first of the month following the month in which completed applications are received. For employees paid on a monthly basis, the effective date will be the first of the month following the month completed applications are received

Should you decide not to enroll in the Plan at hire, you may join the Plan at any time simply by contacting the Benefits Division and completing the necessary application forms. The effective date will be the first of the month following month the Benefits Division receives an enrollment form.

Basic Contributions
You can start making basic (matched) contributions and receive the University's two for one matching contribution the month following the month of accruing one year of service and attaining age 24. Enrollment is not automatic, you must complete the necessary enrollment process. The effective date will be the first of the month following the month an employee reaches age 24 and one year of service. For example, an employee becomes eligible on June 4th, the effective date will be July 1st with payroll deductions taken from the July paycheck(s).

Contributions made by Staff participants increase to the next higher level in the month following the month in which an employee attains age 40 or 50 years of age.


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How do I enroll in the Retirement Plan?

Review Retirement Plan literature including the University's descriptive summary of the plan along with brochures and other materials published by TIAA-CREF and Fidelity Investments.
Determine your retirement income goals - How much you feel you will need as income once you retire. Translate this figure to the amount you will need to contribute today in order to accumulate the necessary funds for the future.
Determine your investment philosophy - Are you an aggressive or conservative investor? This will assist you in determining which investment funds you will select for your Contributions.
You can alternatively determine how much you feel you can realistically afford to allocate to the Retirement Plan. Such an amount may not provide the funds you will need for retirement.
You enroll in the Retirement Plan by completing: Retirement Enrollment and Contribution Change Form ( PDF) . This form authorizes the University to commence payroll deductions and to specify to which investment company the deduction should be deposited. At hire and during Open Enrollment, you may enroll online using HRIS Self Service.
Establish an account with TIAA-CREF and/or Fidelity which authorizes the investment companies to direct your Contributions to the investment funds you select.


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Where do I obtain enrollment forms?

Enrollment forms may be obtained by download or from the Benefits Division (720 University Place, Evanston Campus) or from the Chicago Campus Human Resources department (Abbott Hall, 710 N Lake Shore Drive, Chicago Campus) or by E-mail request benefits@northwestern.edu.


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When can I enroll in the Retirement Plan?

You can enroll in the Retirement Plan at any time. If the one year eligibility waiting period cannot be waived, we recommend that you enroll in the Plan at the time of hire so as to accrue the tax savings and begin accumulating assets which will continue to grow based on the performance of the investment funds you select.

Similarly, we recommend that you begin making matched contributions when first eligible so as to receive the 2 for 1 match from the University.

You should enroll in the Retirement Plan when you are first eligible. If you are unable to participate in the matched plan due to day to day expenses, we recommend that you contribute an amount which is financially feasible to your own personal circumstances.


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Can I invest in any of the Fidelity funds?

Yes. Northwestern University does not restrict your allocation of funds to Fidelity Investments. You may allocate your voluntary, matched and University Contributions to any funds offered by Fidelity Investments to non profit employers such as NU.


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Why should I participate in the Retirement Plan?

There are many reasons for participating in the University's Retirement Plan including the fact that it is currently estimated that the Contributions you are making to Social Security will provide for only a small portion of the income you will need after you retire. The University's Retirement Plan is an excellent means of setting aside money you will need in the future. Other reasons include the fact that Contributions you make to the Retirement Plan are not subject to federal or state income taxes at the time they are deducted from your paycheck. Contributions and earnings are taxed at the time of withdrawal.

The money you invest in the Retirement Plan can add up to substantial amounts over time and you will benefit from the compounding of interest and dividends.


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Where can I invest my Retirement Plan Contributions?

You can direct contributions to two investment companies, TIAA-CREF and/or Fidelity Investments These two investment companies offer a full range of diversified aggressive to conservative investment funds.

Voluntary (unmatched) or Supplemental contributions may be directed by employees enrolling in the plan for the first time to the Group Supplemental Retirement Annuity (GSRA) contract offered by TIAA-CREF. Voluntary Contributions may also be directed to any Fidelity mutual fund.

Basic (matched) contributions may be allocated by employees enrolling in the plan for the first time to the TIAA-CREF Group Regular Retirement Annuity (GRA) contract or to any Fidelity fund.

Employees who do not select an investment fund(s) will have contributions allocated to the investment company's age applicable lifecyle fund.


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General Information

What are the differences between the Basic and Supplemental Plans?

The Basic Plan provides for an individual to make contributions which are matched by the University. For every one dollar an individual contributes to the Basic Plan, the University contributes two dollars.

The Supplemental Plan provides for an individual to make contributions over and above those contributions which are matched by the University. An individual may make supplemental contributions up to IRS limits.


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What is TIAA-CREF?

The term TIAA refers to the Teachers Insurance Annuity Association, an insurance company founded in 1918 by the Carnegie Foundation for the Advancement of Teaching.

The term CREF refers to College Retirement Equities Fund first set up in 1952 and now registered with the SEC as an open-end, diversified management company under the federal Investment Company Act of 1940.

TIAA-CREF is the nationwide retirement and financial services system for people who work at colleges, universities, independent schools, and other nonprofit education and research institutions throughout the United States. A nonprofit organization, TIAA-CREF is really two companies working together as one.


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What is RA, SRA, GRA, GSRA?

The term RA refers to Regular Retirement Annuity contracts offered by TIAA-CREF. A Retirement Annuity (RA) is used to fund your main or "Basic" plan with contributions made by your employer and/or yourself once you've met some basic eligibility requirements (e.g., your length of service). Monies invested in the RA TIAA Traditional fund may be withdrawn over a ten year period.

The term GRA refers to a Group Retirement Annuity contract which enables TIAA Traditional fund monies to be withdrawn over a five year period. Employees enrolling in the Basic plan for the first time must allocate contributions to the GRA contract.

The term SRA refers to Supplemental Retirement Annuity contracts also offered by TIAA-CREF. With a Supplemental Retirement Annuity (SRA), you can set aside extra money from your own salary on a pre-tax basis. That is, the money you put into an SRA isn't counted as taxable income in that year, though you'll have to pay tax on it when you withdraw it or convert it to annuity income at a later date.

The term GSRA refers to Group Supplemental Retirement Annuity contracts. Employees enrolling in the Supplemental plan for the first time must allocate contributions to the GSRA.

For more information, call TIAA-CREF at 1 800 842-2733, extension 5509, and ask for copies of the booklets Retirement Annuities and Supplemental Retirement Annuities.

For further information.


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What is a defined contribution plan?

A Defined Contribution (DC) plan is a type of retirement plan where the employer and employee "contribute" to the plan a certain specified percentage of employee compensation each year. These Contributions are held in an employee's account and invested by the employee. At retirement, the pension benefit payable to the employee is dependent upon the employee's account, investment earnings, and timing of the retirement or withdrawal.


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What are the differences between a defined contribution and defined benefit plan?

Defined benefit pension (DB) plans provide guaranteed income security to workers for their retirement; no matter what happens in the stock market, how long an employee lives after retirement, or whether he or she becomes disabled.

A DB plan defines the employee's pension benefit in terms of an annual or monthly benefit payable for life. The pension benefit is usually calculated by a formula which multiplies final average compensation by a certain percentage for each year of service. For example, a 25-year employee who earns $40,000 per year and receives a credit of 2 percent for each year of service would receive a straight, lifetime benefit of $20,000 per year ($40,000 x 25 years x 2 percent).

Conversely, in a Defined Contribution (DC) plan, the employer and employee "contribute" to the plan a certain specified percentage of employee compensation each year. These Contributions are held in an employee's account and invested by the employee. At retirement, the pension benefit payable to the employee is dependent upon the employee's account, investment earnings, and timing of the retirement or withdrawal. The benefit may be more or less than the DB plan.

In a DC plan, pension benefits are based on the assets available in an employee's individual account at retirement. The employer and employee's annual contribution are usually stated as a percentage of the employee's compensation. Each employee has a separate account and generally directs the investments. Upon retirement, the employee receives the dollar amount in his/her account in a lump sum, monthly payments, or through the employee's choice of whatever payment plans may be offered by the Plan. There is no guarantee of a specified monthly payment.

A major advantage of a DC plan is that when an employee separates from service, the account value is portable. This generally is not the case with a DB plan.


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What happens to Retirement Plan funds after I leave the University?

The money you contribute to the Retirement Plan belongs to you and is immediately vested. When you leave the University, you take the amount you have accumulated with you. You will continue to earn interest and applicable dividends on such funds until you begin receiving annuity income at retirement or withdraw funds at an earlier date.


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What are the differences between Fidelity Investments and TIAA-CREF?

Fidelity Investments was founded in 1946 by Edward C. Johnson, II, a Boston businessman who believed that individuals could be better served financially by pooling their investments under a a professional investment manager.

It is a privately owned, Boston based investment company offering participants a wide range of conservative to aggressive mutual funds. It offers investment opportunities to employees of academic institutions, hospitals, other health care employers, foundations, and other tax-exempt organizations as well as for-profit employers.

TIAA and CREF are companion organizations that provide investment opportunities to employees of academic institutions and certain other tax-exempt educational and research organizations. The Teachers Insurance and Annuity Association (TIAA) was founded as an insurance company in 1918 by the Carnegie Foundation for the Advancement of Teaching. The College Retirement Equities Fund (CREF) was established in 1952 to provide the variable component of the fixed and variable annuity program offered by TIAA-CREF.


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What is an annuity?

An annuity provides regular payments or income over a predetermined number of years enabling you to receive all of the principal (Contributions) and earnings. When the specified period is over, payments stop. A lifetime annuity pays you income for the rest of your life. A fixed period annuity, such as for 10 or 20 years, guarantees income for the selected number of years. If you die prior to the end of the annuity period, your beneficiary will receive continued income to the end of the guarantee period.


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What are your sole, primary and contingent beneficiaries?

It is essential that you specify who should receive your accumulated retirement plan funds in the event of your death. Should you specify one individual as your beneficiary, such an individual will be your sole beneficiary. If you specify more than one individual, these individuals will be your primary beneficiaries. Should your specified primary beneficiaries not survive your death, the value of your retirement plan funds will be distributed to your named contingent beneficiaries. You may change your designated beneficiaries at any time by contacting either TIAA-CREF or Fidelity.


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Can I change beneficiary designations at any time?

Yes. You may change beneficiary designations at any time by contacting the Fidelity Investments and TIAA-CREF directly.


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When can I withdraw money from the Retirement Plan?

The IRS takes the position that the money you contribute to the Retirement Plan is to be used as income after you retire. While the IRS encourages your participation by allowing you to make Contributions and receive associated earnings on a taxed-deferred basis, there are restrictions on when you may access accumulated funds.

Basic - Matched Contributions
If you have participated in the Retirement Plan for less than five years or if accumulated funds are less than $4,000, you may withdraw (Repurchase) the entire amount of basic (matched) Contributions upon separation or retirement. If you have participated in the Retirement Plan for more than five years or if accumulated funds are more than $4,000, you can withdraw basic (matched) Contributions only upon

separation or retirement from the University, or
for reasons of financial hardship.

The basis for withdrawing funds due to financial hardship must comply with IRS regulations defining financial hardship. This includes purchase of a primary residence, prevention of eviction or foreclosure on an individual's primary residence, medical expenses as defined under the Internal Revenue Code, and tuition and related educational expenses. An application for financial hardship distributions must be approved by the University.

Supplemental Funds
You can withdraw voluntary (unmatched) or Supplemental contributions only on the basis of an IRS defined "triggering event" such as attaining age 59 1/2, disability, death, separation of employment or on the basis of financial hardship. Monies received on the basis of financial hardship are subject to University approval and a 10% IRS penalty if withdrawn prior to age 59 1/2. Financial hardship must meet an IRS qualifing reason which includes the downpayment on a home, prevention of eviction from a principal residence, dependent tuition expenses and medical expenses in excess of 7.5% of adjusted gross income.

You also have the option of receiving Retirement Plan funds in the form of monthly annuity income after you retire.

PLEASE NOTE: Should you have an interest in withdrawing Retirement Plan funds, you are advised to contact a competent tax-adviser or financial planner in order to know the tax implications of such withdrawal.


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Can I transfer money from TIAA-CREF to Fidelity and vice versa?

Yes, the University's Retirement Plan provides for the transfer of accumulated funds in the following manner:

For basic (matched) Contributions allocated to TIAA-CREF Regular Retirement Annuity (RA) contracts, you can transfer CREF funds to Fidelity and/or TIAA at any time. The funds are transferred immediately. You can also transfer TIAA funds to CREF and/or Fidelity at any time though such funds will be transferred over a ten year period. Monies allocated to Fidelity can be transferred to TIAA-CREF at any time. The transfer will occur immediately. There is a $1,000 minimum for CREF transfers or the entire account must be transferred if less than $1,000. There is a $10,000 minimum for TIAA transfers. If the amount of accumulated funds is less than $10,000, the entire amount will be transferred over the 10 year period. If the amount is $2,000 or less, the transfer of the entire amount will occur immediately. There is no transfer minimum for the transfer of Fidelity funds to TIAA-CREF.

For voluntary (unmatched) Contributions to either TIAA-CREF SRA contracts and/or Fidelity, you can transfer TIAA, CREF and Fidelity funds at any time. The transfer will occur immediately. There is a $1,000 minimum for TIAA-CREF transfers or the entire amount if less. There is a $250 minimum for the transfer from one Fidelity fund to another.

Should you have an interest in transferring funds, all you need to do is to contact the investment company to which you want the funds transferred. Transfer applications do not require University approval.


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Can I borrow against my Retirement Plan funds?

Yes, (effective January 1, 1999) you may borrow against RA, GRA, GSRA and SRA and both Basic (matched) and Supplemental (unmatched) Fidelity Contributions.


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