From Human Resources

TIAA-CREF Participants ­ Contract Changes: Questions & Answers

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