June 2013 David M. Morrell VDC Plan Administrator. New York State Voluntary Defined Contribution Plan

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1 June 2013 David M. Morrell VDC Plan Administrator New York State Voluntary Defined Contribution Plan

2 Agenda Legislative overview New York State Voluntary Defined Contribution Plan Empire Center Report SUNY Optional Retirement Program (ORP) Voluntary Plan Contribution Rates Vesting Loans Death Benefits Income Distribution Options Enrollment Employer Actions Required and Next Steps Resources for additional information

3 Legislative Overview On March 16, 2012, Governor Andrew Cuomo signed into law Chapter 18 of the Laws of 2012, which amends portions of the Retirement and Social Security Law, Education Law and the Administrative Code of the City of New York. This legislation affects the contributions and benefits of employees who join a New York State public retirement system on or after April 1, 2012.

4 New York State Voluntary Defined Contribution Plan (VDC) Beginning July 1, 2013, the New York State Voluntary Defined Contribution plan (VDC) option will be made available to all unrepresented (nonunion) employees of NYS public employers who are paid at a rate of $75,000 or more on an annual basis as an alternative to the ERS/TRS defined benefit plan systems. The SUNY Optional Retirement Program was selected as the ideal vehicle to accomplish this, and Education Law was modified accordingly to permit this newly eligible class of non-suny public employees. Vesting, vendors, and plan rules will follow existing SUNY Plan Document and policies. Transferring State employees whose immediately preceding employment was with another department, division, or agency of the State are not eligible for the Defined Contribution option and must remain with their current retirement systems.

5 Empire Center Report In February 2012, the Empire Center for New York State Public Policy issued a report entitled: Optimal Option: SUNY s Personal Retirement Plan As a Model for Pension Reform. This report provided a detailed outline of the SUNY ORP, and suggested using it as a model for pension reform in New York State. This report ultimately proved instrumental in the selection of the SUNY ORP as the vehicle used to accommodate the State s new Voluntary DC Plan. Links to the full report and to subsequent videos of a related Policy Forum panel discussion can be found in the Additional Resources section of the NYS VDC web site located at:

6 SUNY Optional Retirement Program (ORP) The SUNY Optional Retirement Program (ORP) was established in 1964 as an alternative to the New York State Employees Retirement System (ERS) and the New York State Teachers Retirement System (TRS). Beginning in 1990, the ORP became qualified under Section 401(a) of the Internal Revenue Code. Since that time, SUNY s contributions have been made under Section 401(a) and employee contributions have been picked-up under Section 414(h)(2) of the Code. The plan year for the ORP is the calendar year. The SUNY ORP is the largest defined contribution public retirement plan in the country, with over 50,000 participants and more than $15 billion in assets under management.

7 VDC Authorized Investment Providers: Participants in the VDC may invest with any one or a combination of the currently authorized Investment Providers within the plan. TIAA-CREF ING MetLife VALIC TIAA-CREF currently serves as the Third Party Administrator for the VDC, providing plan level operational support, common remitter services to the other Authorized Investment Providers, and compliance monitoring and fiduciary support services.

8 Defined Contribution Retirement Plan The NYS VDC is a Defined Contribution plan. Defined contribution plans are retirement savings vehicles that provide benefits "defined" by employer and employee contributions to the plan and the investment earnings on those contributions. All contributions and the subsequent earnings are credited to individual accounts for each plan participant. The amount owed to participants upon retirement is based solely on the account balance at the time of withdrawal. Participants bear responsibility for managing the investments of their accounts throughout their careers, thus each participant needs to select written available choices from the authorized investment providers and maintain an appropriate asset allocation to suit their individual preferences from among the investment options available within the plan. Professional guidance and support is available through all VDC Authorized Investment Providers to assist plan participants with investment allocation decision-making, wealth acquisition, and fund distribution options.

9 Voluntary Defined Contribution Plan Rates Employee contribution rates in a given calendar year will be based upon their earnings in the second calendar year preceding the current calendar year, as follows: Wages of more than $55,000 to $75, % More than $75,000 to $100, % Wages of $100,000 or more % An Employer contribution of 8% of compensable salary will be made to participants accounts for the duration of their employment. Allowable contribution limits will follow the definitions contained within 390 of Education Law, 131 of Retirement and Social Security Law, and 415 and 401(a)(17) IRS annual contribution limits.

10 Vesting There is a 366-day vesting period, after completion of which the participant has full and immediate vesting in all retirement and death benefits provided by the retirement annuities purchased through the employee and the employer contributions. This vesting period is waived for employees who enter service with employer-funded retirement contracts from any of the Authorized Investment Providers or have 366 days of prior service. Employer contributions are not deposited into contracts until completion of the vesting period; they are held by the employer. A participant who does not complete the vesting period is entitled to a refund of his or her own contributions, plus interest, upon request.

11 Loans Loans are available from participants contracts prior to separation from service. Participants may borrow up to 50% of the accumulated value of their contracts, subject to Internal Revenue Service regulations, rules promulgated by the Investment Providers, and applicable program guidelines. Current IRS regulations set a maximum aggregate loan balance of $50,000. Employees may request loans directly from the applicable Investment Provider(s).

12 Death Benefits If an employee dies before the funds in the contracts have been annuitized, any unannuitized balance is available to the employee s beneficiary in a lump sum, unless he/she has chosen another payment option for his/her beneficiary. If an employee dies after all funds have been annuitized, any additional payments will be determined by the annuity option the employee selected at retirement. There is no death benefit for non-vested contracts. For participants with more than 90 days service, if the value of that portion of the death benefit attributable to the employer's contributions is less than 1/2 of the final salary, a survivor's benefit to bring this benefit up to 1/2 of the final salary (but not less than $2,000 nor more than $10,000) may be payable under NYS Survivor Benefit Law.

13 Income Distribution Options Employees have a variety of different options for accessing their funds including lifetime annuities, systematic and periodic cash withdrawals, and lump sum payments. Investment Provider(s) will assist participants with selecting the distribution option(s) that best meet their needs. Cash distributions are generally subject to ordinary Federal Income taxes and may be subject to an additional IRS 10% tax penalty for withdrawals made before age 59 ½. Distributions are generally exempt from NYS taxes. Distributions can begin any time following termination from public employment, but under Federal tax law, must begin by April 1 st of the calendar year following the latter of: the calendar year in which the participant reaches age 70 ½, or the calendar year in which the participant terminates employment.

14 Enrollment Multi-Vendor Coordinator System (MVC) To enroll, employees will complete three steps. Entry point for enrollment is the new VDC Program Retirement Plan website at 1. Retirement Program Election (RPE) Registration for creating secure ID and password. Submit employee history information. HR will receive notification to approve employee eligibility. 2. Enrollment Employee will use this link to select the Investment Provider and complete enrollment. 3. Investment Provider Enrollment Employee must open an account with each investment provider by visiting the provider s website..

15 Employer Actions Required and Next Steps NYS Public Employers with agency employees eligible to participate in the NYS Voluntary Defined Contribution Plan will need to take certain actions: Identify and provide contact information for designated liaisons to work with SUNY on the implementation of this program using the NYS Voluntary Defined Contribution Plan Contact Designation Form available on the VDC web site. Work with SUNY and TIAA-CREF to make necessary system changes to facilitate online enrollment, data exchange, and contribution remittance. Notify, educate, and assist eligible participants with plan enrollment.

16 TIAA-CREF Serves as Third Party Administrator for VDC As third-party administrator TIAA-CREF will: Operate the recordkeeping system for common remitter services Manage reporting Help you onboard your agency Provide employee communications about the program Collaborate with you on the day-to-day operations of the program Coordinate data transition to all investment providers Manage the employee enrollment system TIAA-CREF is also an investment provider under the program

17 Key activities to prepare your agency for Implementation: Start working to onboard your agency by beginning discussions with TIAA-CREF If applicable, contact your payroll provider to determine the data file type* You will need to create a remittance file and send to TIAA-CREF* Establish an escrow account and the escrow process* Prepare to communicate to eligible new employees * OSC will handle these processes for State agencies

18 Key Activities for Ongoing Administration of the VDC Determine eligibility Communicate the Program to all eligible employees and provide enrolling instructions Add eligible employees to the remittance file * Determine vesting Perform contribution administration * Perform funding administration * Submit periodic payroll & reporting data files * Manage the escrow account and process * You may also have contact with all investment providers under the Program which are: TIAA-CREF, VALIC, ING and MetLife. * OSC will handle these processes for State agencies

19 TIAA-CREF Administrator Web Center Each agency should request access to The Administrator Web Center. The request form is located at: Return completed application(s) using one of these methods: Fax: Mail: TIAA-CREF, P.O. Box 1259 Charlotte, NC If you need assistance in completing the form, please call the New York State Voluntary Defined Contribution Program telephone center for Plan Administrators of NY Public Agencies at

20 Resources for Additional Information NYS Voluntary Defined Contribution Web site: VDC Plan Administrator David M. Morrell: (518) or Gina Blume: (518) or TIAA-CREF VDC Plan Administrator Telephone Center (8 AM 6 PM, M-F): Administrator Web Center Access Request:

21 Questions?