Understanding Your Duke Benefits
Mar 28, 2015
Understanding Your Duke Benefits
Agenda
Rule of 75
• What does it mean to me?
Duke 403(b) Plans: Faculty & Staff and Savings for Retirement
• How do these 403(b) plans work?
Employees’ Retirement Plan (ERP)
• When can I access my pension plan?
Rule of 75Must meet the ‘Rule of 75’ (age
plus years of service add up to 75) in order to retire with full benefits (Being able to continue your health and dental benefits with Duke paying a portion of the premium, if eligible)
Early Retirement refers to having access to your pension plan (ERP) early. It is totally separate from meeting the Rule of 75.
Ineligible for Retiree Health/Dental Insurance
Offered COBRA coverage • Must be participating in health and/or dental
plan(s) at time of retirement
• Extends coverage for 18 months
• Total premium plus 2%
• Billed monthly
When I retire I would like to…
Retirement Income Sources
Your Contributions
Social Security
Duke’s Contributions
Duke Retirement Plans
Monthly Paid Employees:
403(b) Plan:
Faculty and Staff Retirement Plan
Biweekly Paid Employees:
403(b) Plan:
Savings for Retirement Plan
Defined Benefit Plan:
Employees’ Retirement Plan (ERP)
Duke Retirement Plans
Both Biweekly and Monthly employees receive a university sponsored benefit towards their retirement regardless of participation in the 403(b) plan.
Your contributions are voluntary, however Duke still recommends contributing at least 3% of your monthly salary to help you to reach at least 75% of your pre-retirement income when your retire.
What is the 403(b)?
You contribute by payroll deduction
Your contribution is tax-deferred (not tax-free)
You choose where to invest your contributions
Your contributions + investment performance taxed when withdrawn (10% penalty if < age 59 ½)
Faculty & Staff Retirement Plan
The 2012 formula for the Duke contribution is:
8.9% of the first $55,000 of salary and 13.2% of annual salary in excess of $55,000,
up to a statutory salary limit of $250,000
Example with $60,000 salary in 2012:2012 Duke
Contribution PercentMultiplied by Sample
2012 SalaryEQUALS: Annualized
Duke Contribution
8.9% $55,000 $4,895.00
13.2% $5,000 $660.00
Total in 2012 $60,000 $5,555.00
What is Vesting?
Vesting refers to the point at which participants own the university contribution and it cannot be applied to employee contributions.
Once you are vested, you are always vested.
Employees hired before Jan. 1, 2012
Employee is 100% vested in both employee voluntary contribution and Duke contribution.
If the employee is subsequently rehired by Duke, they will continue to be 100% vested.
Employees hired after Jan. 1, 2012
Employee is 100% vested in their employee voluntary contribution.
Employee will be 100% vested in Duke’s contribution upon:• Completion of three years of service• Attainment of age 65 while employed by
Duke• Hired after age 65• Death while employed by Duke• Approval for long term disability under the
Duke LTD Plan
Decisions
How Much?
Which Investme
nt Carrier?
Which Funds?
How much are you going to contribute?• Consider the pre-tax status of your contributions (affects take-
home pay by approximately 2/3 of contribution amount)• To obtain a more accurate calculation, try the Take-Home Pay Calculator:
http://www.hr.duke.edu/compensation/takehome/index.php
• Minimum contribution per pay period $12.50 (biweekly) or $25.00 (monthly). Maximum contribution is 80% per pay period.
• Maximum IRS Limit $17,000 for 2012, plus annual catch-up amount, if eligible:– Over age of 50 you may contribute an additional $5,500 into your 403(b)
account for 2012
– If you have more than 15 years of service you may be eligible to contribute an additional $3,000 into your 403(b) account for 2012 (Contact Benefits at 684-5600 to inquire about 15 year special election)
Fidelity
Which Investment Carrier Will You Choose?
Investment Decisions
To make it easier to navigate your choices, investments will be grouped into three tiers.
Tier 1: Asset Allocation Funds for a ready made portfolio.
Tier 2: Core Funds
Tier 3: Other Funds
Asset Allocation Fund (Tier 1)
The Asset Allocation Funds offer a way to make a single choice for your retirement needs based on your expected years to retirement. • The Balanced Fund offers a fixed exposure to stocks
and bonds• The Target Funds include a diversified mix of stocks,
bonds and short-term instruments that change automatically over time
Core Funds (Tier 2)
These funds represent the primary asset classes and have been chosen based on their suitability for inclusion in a customized retirement portfolio.
This option may be good if you are more comfortable diversifying your own investments.
Other Funds (Tier 3)
Other Funds include all investment options available through Duke’s retirement plan that are not already listed under Tier 1 or Tier 2.
These funds will not be monitored regularly by the IAC, so you will be responsible for monitoring the holdings and performance of these funds to ensure they remain in line with your investment strategy.
Default Investment Option
Where do your contributions go if you do not choose a retirement plan vendor?• Vanguard• Target Retirement Fund closest to your 65th birthday
Where do your contributions go if you select a retirement plan vendor but do not select investment funds/investment options?• Target Retirement Fund closest to your 65th birthday
Things to Consider in Your Decision…
How much will you need in retirement?
Time horizon
Tolerance for risk
Diversification
Asset Allocation
If You Leave Duke…
Your vested* 403(b) funds can: Remain in plan until age 70 ½
Be rolled over into your new employer’s 403(a), 403(b), 401(k), governmental 457 plan
Be rolled over into an IRA
Be withdrawn as cash (IRS penalties apply)*You are always 100% vested in your employee contributions, however your 403(b) employer contributions may be subject to vesting.
Did you transfer from one payroll to another?
Have you ever transferred from one payroll to another at Duke?
You may be entitled to a benefit under the Employees’ Retirement Plan (ERP) for employees paid biweekly.
If you are entitled to a benefit, this frozen benefit is calculated using your years of service and compensation while you were paid biweekly.
This frozen benefit will appear on your annual benefits statement.
TOBiweekly
Monthly
What is Employees’ Retirement Plan (ERP)?
The benefit is defined
Duke makes all contributions
You are not required to make any contributions to the plan
You are not required to participate in any retirement plan in order to be eligible for this pension
Eligibility
You automatically become a plan member, if you:
•Have reached age 21, and
•Have worked at least 1,000 hours during your first year of employment or in any future fiscal year. (July 1 to June 30)
You are entitled to a benefit from the Plan after 5 years continuous service. This is called vesting.
ERP Formula
1.25% of average final compensation
TIMES
years of credited service up to 20 years
PLUS
1.66% of average final compensation
TIMES
years of credited service over 20
This calculation takes into consideration your average earnings (5 highest consecutive years of last 10 fiscal years), your age and years of credited service
ERP Income
Average final compensation - $27,086
30 Years of credited service
1.25% x 20 x $27,086 = $6,772
1.66% x 10 x $27,086 = $4,496
Annual benefit = $11,268
Monthly benefit = $939
Total Monthly Income $2,620
Replacement Ratio 105%
Example – Employee Retiring at Age 65
Age 65 ERP$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$1,322
$939
$359
3% Optional Sav-ings
Duke ERP
Social Security
ERP Income
Annual benefit at age 65 = $11,268
Less 3% reduction for each year between age 62 & 65:
9% x $11,268 = -$1,014
Annual benefit = $10,254
Monthly benefit = $855
Total Monthly Income $2,162
Replacement Ratio 86%
Example – Employee Retiring at Age 62
Age 62 ERP$0
$500
$1,000
$1,500
$2,000
$2,500
$986
$855
$321
3% Optional Sav-ings
Duke ERP
Social Security
What are my payment options?
Single Life Annuity
Joint and Survivor Annuity (50%, 75% or 100%)
Level Income age 62 or 65
If lump sum value is less than $10,000 you may be eligible for a lump sum payment
Payments under the Employees’ Retirement Plan are considered taxable income
Discrepancy in age between you beneficiary will make a difference in benefit
When can I start to receive a benefit?
Normal Retirement• Age 65 - full benefit
Early Retirement• Age 45 or older and 15 years of credited
service–reduced based on age at time benefit starts
Deferred Retirement (working at Duke past age 65)• Additional 10% for extra credited service over
age 65
More on Early Retirement Benefits
Early reduction factors are less for employees age 55 with at least 20 years of credited service
Early reduction examples:
Age 20 Years 20 Years55 70% 45.2%58 79% 56.2%60 85% 65.6%62 91% 91%
Take action now!!!
“Small amounts regularly saved is how the road to wealth is paved.” – Benjamin Franklin
Action Items
Organize and plan your financeStart contributing towards your voluntary employer sponsored 403b retirement plan
Meet with a Financial AdvisorReview allocation every yearUse the investment carrier calculators
Learn about the different investments
Update your beneficiariesSave, save and save!!!!
More Information
Financial Planning Tools on Benefits web site (www.hr.duke.edu/benefits/retirement - Click on “Retirement Manager”) • Review/Change your contribution rate• Review portions of your personal benefits statement on-line
• Set up a one-on-one session with your retirement plan provider
Human Resources Information
Center at 684-5600
403b Investment Carriers Information
Fidelity
Contact: Chris MannLocal Phone: (800) 642-7131National Phone: (800) 343-0860Web Site: www.fidelity.com
Contact: Hank ConwayLocal Phone: (919) 687-5200National Phone: (800) 842-2776Web Site: www.tiaacref.org
Contact: Tom OvercashLocal Phone: (919) 401-3252National Phone: (877) 375-2424Web Site: www.valic.com
National Phone: (800) 523-1188Web Site: www.vanguard.com