The TIAA-CREF Retirement Healthcare Program. An essential tool to help you prepare for your retirement

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1 The TIAA-CREF Retirement Healthcare Program An essential tool to help you prepare for your retirement

2 Getting ready for your retirement When planning for retirement, most of us think about all the free time we ll have and what we might want to do with it. When you envision those years, you may be considering a range of ideas, such as: Where you might want to live Hobbies you want to take up Trips you want to take Focusing on whatever retirement goals you have is important, but equally important is having a plan and making sure that nothing stops you from reaching them. You know you need to save for the things you want to do, as well as your everyday living expenses but chances are, healthcare expenses will also be a major item in your budget during your retirement years. Medicare pays for certain health expenses in retirement, but there are also a number of things it doesn t cover that you will be responsible for, including deductibles, premiums, and many out-of-pocket medical expenses for you, your spouse and your dependents. The TIAA-CREF Retirement Healthcare Program (RHP) helps you plan for those expenses and also offers you other advantages. This brochure describes these advantages and covers the following: RHP benefit features Investment information Qualified expenses and premiums

3 An important new benefit The RHP is designed specifically to provide you with important benefits to help you prepare for the substantial cost of healthcare in retirement. And, there is nothing you need to do. When you are eligible, or you elect to contribute if permitted by your plan, you will be enrolled automatically in the RHP and any initial funds typically will be applied to an age-appropriate lifecycle mutual fund. You may then have the option of changing your investment choices and transferring funds among any of the available funds within the plan. Your benefits office provides details about the amount that will be contributed on your behalf and the plan s eligibility requirements. In addition to the benefit of the contributions that will be made for you, the RHP offers you: W W A tax-advantaged way for you to accumulate funds to pay for qualified medical expenses in retirement. Tax-free earnings. Tax-free reimbursements for qualified medical expenses. Summary information about your benefits As a participant in the RHP, the benefits available to you under the plan, as well as any limitations, are important. This brochure is designed to help you understand the types of benefits the RHP offers you. TIAA-CREF also provides your benefits office with a Summary Plan Description (SPD) that highlights important information about your benefits. The plan is administered by TIAA-CREF, in collaboration with ConnectYourCare, a leader in providing claims processing in retirement healthcare accounts, to provide you with a best-in-class experience when you are using the account in retirement. An RHP complements your retirement plan The RHP and your employer s retirement plan each offer you different benefits and tax advantages. For example, your employer s retirement plan enables you to put money away on a pretax basis. Pretax contributions may help you with your current taxes because they enable you to save more today and reduce your taxable income. However, in retirement, withdrawals from retirement accounts (including earnings) are generally taxed as ordinary income. An RHP offers tax-free growth and distributions Any earnings on your RHP account are tax free. And, you will not be taxed on distributions from your RHP account as long as they are used for qualified medical expenses. The benefit of tax-free growth Assumptions: One-time contribution: $100; Pretax rate of return: 6.00%; Marginal tax rate: 25%* Value of Account Balance $ W RHP Account W Account with taxable earnings Incremental value with tax-free earnings Years * Assumptions: This is a one-time contribution of $100 by someone who is in the 25% federal tax bracket and the effective annual rate of return is 6%, although your actual rate of return may be more or less than 6%. The chart does not reflect expenses, or state income taxes which, if shown, would result in lower returns. This 6% contribution rate actually equals a 4.5% contribution after taxes are taken out (the 4.5% contribution is equivalent to 75% of the 6% contribution, based on a 25% tax rate). This is a hypothetical example and not intended to represent the performance of any specific investment products. It may not be used to predict or project investment performance. Actual returns will vary and there are a number of factors you should consider that may cause your results to be different. Please consider your expected time horizon and income tax bracket when making an investment decision since this illustration may not reflect these factors. Also, please note that federal and/or state tax penalties may apply in cases of withdrawals prior to age 59 ½ or for nonqualified expenses. Getting ready for your ideal retirement 1

4 Median drug expenses throughout retirement for a married 65-year-old couple $300,000 90% 100% 75% 150,000 50% 50 0 $163,000 $227,000 $283,000 0 W Amount Saved % chance of having enough money to cover healthcare expenses in retirement A 65-year-old couple, both with median drug expenses, would need $163,000 in 2012 to have a 50% chance of having enough money to cover healthcare expenses in retirement. They would need $227,000 to have a 75% chance of covering their expenses, and $283,000 to have a 90% chance of covering those expenses. 1 2 Getting ready for your ideal retirement

5 Benefits of the TIAA-CREF RHP RHP Account An RHP account is a tax-advantaged vehicle you can use to pay for healthcare-related expenses in retirement. When you retire, you can use funds from your account to reimburse your qualified out-of-pocket medical expenses as defined by the IRS. Common qualified medical expenses include co-pays, deductibles, prescription drugs, retiree insurance premiums, etc. Your RHP is not an insurance plan, and you do not pay a premium. Typically, your account is funded with contributions from your employer. Employer contributions, investment earnings, and claims reimbursements are tax free. Benefits of plan participation Some of the benefits of participating in the RHP include: Tax savings: You pay no tax on your employer s contributions, the account s earnings or claims reimbursements from your RHP account as long as you use funds from your account to pay for qualified medical expenses You can choose how your account is invested Depending upon your program s rules, your spouse and qualified dependents may also be covered even if you die Your unused account balance carries over from year to year You can accumulate funds in your account for future use, such as during retirement Spouse and dependent coverage If your plan permits, you may also use your RHP account to pay for qualified medical expenses incurred by a spouse or other dependents. Please refer to your institution s Summary Plan Description (SPD) to see if your plan permits reimbursement for your dependents expenses. RHP advantages Like most people, you re probably struggling to cope with the increasing cost of healthcare. An RHP is one of the best ways to cover your future out-of-pocket healthcare costs for several reasons: Tax savings (both federal income tax and FICA taxes) No annual use-it-or-lose-it requirement No annual contribution limits Can be used to cover retiree medical insurance premiums before and after age 65, including Medicare supplement and Medicare Part D premiums Does not require coverage under a high-deductible health plan (HDHP), which is required by a health savings account (HSA) 1 Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News EBRI Issue Brief (Employee Benefit Research Institute, October 2012). Getting ready for your ideal retirement 3

6 Common funding sources Employer contributions to the RHP are completely tax free. If your plan permits, any contributions you make to the RHP will be on an after-tax basis. All earnings within the RHP will not be taxed and your reimbursements will not be taxed as long as you use funds from your account to pay for qualified medical expenses. Taxable income 2 RHP W 7.65% FICA W 25.00% Federal Income Tax W You keep % W You keep 67.35% RHP employer contributions are tax free for you. Contributions to tax-deferred programs, such as your IRA, 457, 401(k), or 403(b) plans, are subject to FICA tax, and federal and state income tax is only postponed until you make withdrawals. Participation Eligibility for participation is determined by your employer s plan rules. See your plan s Summary Plan Description (SPD). Once you are enrolled in the RHP, your initial contribution will be directed to an age-based lifecycle fund. Your plan may allow you to change your allocation of future deposits or transfer existing funds among the available investment options. Investments Lifecycle and money market mutual funds are the standard investments for the TIAA-CREF RHP. Employers have the option of adding an expanded menu of investment options. See your SPD for details. Initial contributions are allocated to the target date Lifecycle Fund closest to your projected retirement date at age Lifecycle funds give you a low-cost, easy way to manage your investments through your working years and into retirement. Lifecycle funds are developed with a series of target retirement dates designed to closely match your retirement year. For example, a Lifecycle 2040 Fund is for an investor planning to retire in or around These funds are professionally managed and automatically adjust over time relieving you of the need to make complicated investment, portfolio allocation and rebalancing decisions every year. As with all mutual funds, the principal value in a Lifecycle Fund is not guaranteed. Also, please note that the target date of the Lifecycle Fund is an approximate date when investors may plan to begin withdrawing from the fund. However, there is no need to withdraw the funds at that target date. If your plan offers additional investment options, you have the option of a single-decision approach of the lifecycle fund or, if you prefer a more hands-on approach, you can build a portfolio for your RHP, using the investments available under your plan. Online access You can access your account online at tiaa-cref.org, where you can: Change your allocation for future deposits Transfer assets among the available mutual funds, and Update your personal account information You will also be able to access your RHP account claims administration portal, where you will have access to a variety of tools and services to better manage your healthcare expenses. Quick tip: Elect edelivery as your preference for communication delivery. You ll be notified via as soon as your account statements are available for online viewing. (To elect edelivery, just log in to tiaa-cref.org, click on Profile & Settings and select Contact Information and edelivery Preferences.) 2 This example is for illustrative purposes only and will vary based on your personal tax situation. You should consult a professional tax or legal advisor regarding your personal tax situation. 3 Approximately 7 to 10 years following a Lifecycle Fund s target date, the fund may merge into the Lifecycle Retirement Income Fund or other similar fund. Lifecycle Funds share the risks associated with the types of securities held by each of the underlying funds in which they invest. In addition to the fees and expenses associated with the Lifecycle Funds, there is exposure to the fees and expenses associated with the underlying mutual funds as well. 4 Getting ready for your ideal retirement

7 Accessing funds in retirement When you become eligible and you wish to access funds in your account, you will have several options to consider. Healthcare Payment Card The VISA Healthcare Payment Card will allow you to access funds immediately at the point of service at qualified (or approved) merchants. 4 Out-of-Pocket You may pay for your healthcare expenses out-of-pocket and submit receipts to be reimbursed. Click to Pay You can set up recurring payees online in order to pay health expenses on a periodic basis. Manual claims may be submitted online, via fax, or through the US Postal Service. ConnectYourCare: Accessing your account online The online participant portal puts account information and health education tools at your fingertips. On this site you can: Get your account balance View payment card charges Enter a new claim View claims or submit receipts for purchases requiring substantiation View claim status Access communication center messages View reimbursement schedule Find answers to frequently asked questions Use consumer tools Use your payment card at approved merchants Your healthcare payment card can be used nationwide at qualified merchants. Qualified merchants are those designated as healthcare merchants based on their Merchant Category Code (MCC). Examples include doctors offices, pharmacies, vision centers and hospitals. Specific information about where your healthcare payment card is accepted for payment is available on the ConnectYourCare website at cyc2/store.html. Paying for qualified expenses The card should only be used to pay for medical expenses that are eligible under your plan, and you should always save your receipts. You will not be able to use your card at locations that are not approved healthcare merchants. For purchases at those locations, you can pay with other means, and then submit a request for reimbursement through your secure online account at tiaa-cref.org. Questions? Call W WSelect option 1 to speak with a TIAA-CREF representative regarding your account balance, asset allocations, or claims activation. W W Select option 2 to speak with a ConnectYourCare representative for questions related to claims processing, using your healthcare payment card, or eligible expenses. Health education tools You will have access to valuable WebMD tools, including: WebMD Hospital Advisor SM Hospital information and rankings for specific procedures WebMD Medication Advisor SM Information on less expensive prescription options WebMD Treatment Cost Advisor SM Cost estimates on 350 of the most common medical conditions, tests, and procedures WebMD Health Topics SM A to Z medical encyclopedia listing of over 1,500 ailments with information, treatment options, prevention, and more WebMD HealthQuotient SM State-of-the-art assessment tool that scores participants health status, calculates risk levels, and provides recommendations for health improvement and behavior change Symptom Checker Information about what medical symptoms could indicate and helpful facts for you to know before a doctor s visit Survivor benefit If spousal and dependent coverage is available under your plan, even if you pass away, your spouse and eligible dependents may be eligible to continue receiving reimbursement for their qualified medical expenses. However, if there are no eligible dependents, any unused benefits will be forfeited. 4 Remember to save your itemized receipts; IRS rules require them as verification. Getting ready for your ideal retirement 5

8 Qualified Expenses & Premiums The following list of qualified expenses and premiums is not complete, but it does contain many examples of the types of expenses and premiums eligible for reimbursement from your RHP account. The most common include co-pays, coinsurance, deductibles, retiree insurance premiums (including Medicare Part B and Part D and Medicare supplement plans), and tax-qualified long-term care insurance premiums (subject to IRS limits). Internal Revenue Code 213(d) defines qualified expenses, in part, as medical care amounts paid for insurance or for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body Expenses solely for cosmetic reasons, such as facelifts, hair transplants, hair removal (electrolysis), generally are not considered expenses for medical care. Expenses that are merely beneficial to your general health, such as vacations, are also not considered to be medical care expenses. General Expenses Acupuncture Alcoholism and drug treatment center costs Birth control pills Chiropractic Christian Science Contact lenses, solutions, etc. Co-pays Coinsurance Deductibles Dental Eyeglasses Fertility treatments Gynecology/Obstetrics Hearing aids & batteries Immunizations Laser eye surgery Lifetime care at medical facility Medical supplies and equipment Naturopathic Organ transplants Orthodontia Osteopathy Physical therapy Prescription medicines Preventive care Psychiatric Retirement home (costs allocable to medical care) Stop smoking programs Transportation (subject to IRS limits) Vaccines Vasectomy Vision Wheelchair Over The Counter (OTC) Medicines and drugs (prescription required): Acne medications Allergy medicines Antacids Aspirin Cold medicines Cough suppressants Dietary supplements Eye products (e.g., Visine ) First aid creams/liquids Herbal medicines Nicotine gum/patches Pain relievers Sinus medications Sleeping aids St. John s Wort Weight loss drugs Non-medicine items (No prescription required): Bandages Crutches Insulin Diagnostic devices (e.g., blood sugar kits) Items not eligible: Cosmetics; face creams Medicated shampoos Toothbrushes (including electronic) Vitamins (most cases) Insurance Premiums Medical Dental Vision Long-term care (tax-qualified; subject to IRS limits) Medicare Part B Medicare Part D Medicare supplement plans Medicare Medicare Co-pays Coinsurance Deductibles Home healthcare Hospice care Hospital stay Outpatient hospital services Skilled nursing facility stay 6 Getting ready for your ideal retirement

9 Important ConnectYourCare makes it easy to access your account for qualified health-related expenses, but it is very important to keep your receipts! There are two ways to pay for healthcare: 1 Use Your Healthcare Payment Card: This is the simplest way to pay for healthcare expenses at qualified (or approved) merchants. Pay using your VISA healthcare payment card and keep your itemized receipt as documentation, as you may be required to substantiate the expense. Then, log on to your online account to see if documentation is needed. If so, you are able to upload scanned receipts directly into the system, or print the claim submission form and submit your itemized receipt as documentation. Tip: Set up direct deposit online to receive quicker reimbursements. 2 Pay Out of Pocket and Request Reimbursement: Pay using your own personal credit card, cash, or check and keep your itemized receipt as documentation. Then, log on to your online account to file for reimbursement. Print the claim submission form and submit documentation. You can receive reimbursement funds via check or direct deposit. Please note the following: 1. Qualified expenses and premiums you submit for reimbursement must be incurred after you become a claims-eligible participant. 2. Qualified insurance premiums are reimbursable beginning with the month in which you become a claims-eligible participant. 3. Systematic reimbursements for recurring qualified insurance premiums may be set up online after logging in to your account. Note: Regarding Over-the-Counter (OTC) drugs and medicines: To be eligible for reimbursement, federal healthcare reform requires that OTC medicines and drugs (except insulin) purchased on or after January 1, 2011 be prescribed by a medical professional or accompanied by a note from a medical practitioner recommending the item or service to treat a specific medical condition. Thus, OTC medicines and drugs such as aspirin, antihistamines, and cough syrup must be prescribed. The prescription requirement applies only to medicines and drugs, not to other types of OTC items such as bandages and crutches. Getting ready for your ideal retirement 7

10 Definition of dependents In general, dependents must satisfy the definition of Qualifying Child or Qualifying Relative as of the end of the calendar year in which expenses were incurred to be eligible for benefits. These requirements are summarized here. Qualifying child: A qualifying child is a person who: 1. Is the participant s son or daughter, stepchild, or foster child; Internal Revenue Code includes others as well; and 2. At the end of the calendar year in which expenses were incurred will be under age 27 or who is permanently and totally disabled; and 3. Is a citizen, national, or resident of the U.S. or a resident of Canada or Mexico. Other individuals are subject to additional requirements. Qualifying child of divorced or separated parents: A participant s child is treated as the dependent of both parents for the purposes of health plan coverage if during the calendar year in which expenses were incurred: 1. The participant s child is in the custody of the participant or their other parent for more than half the year; and 2. The participant s child receives over half of his or her support during the year from the participant or their other parent. Qualifying relative: A qualifying relative is a person who: 1. Is the participant s son or daughter, stepchild, foster child, or other relative as defined by the IRS. That could include one s father, mother, brother, sister, niece, nephew, aunt, uncle or any other person (other than the participant s spouse) who lived with the participant all year as a member of the household if such relationship did not violate local law; and 2. Will not be a qualifying dependent of any other person as of the last day of the calendar year in which expenses were incurred; and 3. Received over half of his or her support for the calendar year from the participant; and 4. Has a gross income for the year of less than $3,900 (for 2013); and 5. Is a citizen, national, or resident of the U.S. or is a resident of Canada or Mexico. 8 Getting ready for your ideal retirement

11 Want more information? Call Select option 1 to speak with a TIAA-CREF representative regarding your account balance, asset allocations, or claims activation. W W Select option 2 to speak with a ConnectYourCare representative for questions related to claims processing, using your healthcare payment card, or eligible expenses.

12 Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not bank deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value. TIAA-CREF products may be subject to market and other risk factors. See the applicable product literature, or visit tiaa-cref.org for details. The tax information contained herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. It was written to support the promotion of the products and services addressed herein. Taxpayers should seek advice based on their own particular circumstances from an independent tax or legal advisor. You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call or go to for a current prospectus that contains this and other information. Please read the prospectus carefully before investing. Interests in any retiree healthcare plan discussed herein are offered solely by the employer. Teachers Insurance and Annuity Association (TIAA) will provide services to the plan. TIAA-CREF Individual & Institutional Services, LLC serves as a broker-dealer with respect to underlying mutual funds only, and does not offer, market or sell interests in such plans or otherwise provide broker-dealer services with respect to the interests in such plans Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF), 730 Third Avenue, New York, NY C _ A13943 (08/13)