(Information for Terminating and Retiring Pension Members)
If you are terminated or retired from CTC, or if you are just thinking about terminating or retiring from CTC, here is some information you need to consider when planning your pension distribution:
AFTER-TAX VS PRE-TAX: All of your employee contributions in your “QPP” and/or “SPP” account are AFTER-TAX (the tax has already been paid). All of the employer contributions, and all of the accumulated earnings, are PRE-TAX or “tax deferred” (the tax has not yet been paid).
UNDER AGE 55: If you are under the age of 55 years when you terminate/retire, and you decide to take all of your funds as a “cash distribution”, the IRS will impose a 10% “Early Withdrawal Penalty” on the pre-tax portion of your distribution. In order to avoid that penalty, you can rollover the pre-tax portion to one of the retirement vehicles listed below.
BALANCE UNDER $1,000: If your account balance is under $1,000, we are required to distribute the balance to you as soon as practical after you terminate or retire. If you do not take distribution of your funds within a reasonable time, an involuntary distribution may be made.
DISTRIBUTION OPTIONS ARE AS FOLLOWS:
- You may leave your funds in QPP and/or SPP (if the balance is over $1,000).
- You can take a full or partial cash distribution.
- You can rollover your funds to another plan or financial instrument.
- You can establish a periodic distribution plan (contact our recordkeeper for more information).
ROLLOVER OPTIONS: Your funds can be directly rolled over into any of the following plans/vehicles:
- A Traditional Retirement IRA (not a tax-deductible IRA)
- Another 401(a) plan
- A 403(a) or 403(b) plan
- A 401(k) plan
- A 457 plan
- A TSP (Thrift Savings Plan)
- A Roth IRA (please consult your tax advisor regarding special considerations for Roth IRAs)
STEPS IN THE DISTRIBUTION PROCESS – HOW LONG DOES IT TAKE?
Federal laws require that a person must be officially terminated/retired (both full-time and part-time) from their employer in order to request and receive a pension distribution.
You must be listed as "terminated" in the TIAA-Cref system, with a CTC "term date", in order for TIAA-Cref to process your distribution. How does that termination process start? That process starts with the employee. The employee must officially notify their department or site that they wish to be terminated. The department or site might require a letter of resignation. When your department or site has all the notification that they need, they will have you sign a “Terminating Personnel Status Form (“PSF”)”. When that “Terminating PSF” is completed and signed by you, it is sent to CTC Main Campus, where it passes through several departments that need that information. For example, it goes through the Payroll Department, and that alerts Payroll that your final paycheck (and possibly a vacation payoff) must be taken care of (you must have received every paycheck, including any vacation payoff, in order to be officially terminated). The termination process also goes through the Benefits Department, which must check on the status of your various benefits, such as insurance, etc. Once every department is finished with their wrap-up procedures, and you have been issued your final paycheck, the CTC Employment Services Department uses that “Terminating PSF” to officially terminate you. All of the procedures required to officially terminate an employee usually take from 30 to 60 days, depending on your site location.
HOW DO YOU CHECK TO MAKE SURE YOU HAVE BEEN OFFICIALLY TERMINATED FROM CTC?
- You can call the CTC Employment Services Department at 254-526-1124 or 1-800-792-3348 Ext 1124.
- You can call your site and request that they contact CTC Employment Services to see if your termination process has been completed.
The distribution process moves very quickly, ONCE YOU HAVE BEEN OFFICIALLY TRANSFERRED TO TERMINATED STATUS. If there is a delay in the process, it is usually due to the time it takes to get you officially terminated by the college. If your department or your site does not terminate you by completing the necessary “Terminating PSF”, the process will be delayed. If there are errors on your “Terminating PSF” which require a re-do, the process will be delayed. If you still have an outstanding paycheck or “vacation payoff”, the process will be delayed until those checks have been processed through our Payroll system, and any resulting pension deposits have been deposited into your pension account. Therefore, check to make sure that you have been officially terminated, before you submit your distribution request forms to TIAA-Cref. Remember, the termination process will probably take from 30 to 60 days (depending on your location). Do not submit your distribution forms to TIAA-Cref until you have confirmed that you have been officially terminated. If you submit your distribution forms before you are officially terminated, TIAA-Cref will not be able to process the forms, and they will be returned to you.
TRANSFER FROM FULL-TIME TO PART-TIME OR FROM PART-TIME TO FULL-TIME: If your employment status changes from full-time to part-time (or from part-time to full-time), that change of status does not qualify as a termination/retirement for pension plan purposes. It is considered a change of status. In either case, the individual is still a current and active employee, and is therefore not eligible to apply for or receive a distribution of their pension plan funds. That rule applies to both "QPP" and "SPP" pension funds. In order for a termination/retirement to generate a pension distribution, it must be a bona-fide termination/retirement from both full-time and part-time employment with the employer, and there must not be any intention or agreement to return to employment with the employer after a pension distribution has been made.
BONA-FIDE RETIREMENT OR TERMINATION: In order for a termination or retirement to generate a pension distribution, it must be a bona-fide termination or retirement from both full-time and part-time employment with the employer, and there must not be any discussion, intention or agreement to return to employment with the employer after a pension distribution has been made. Pre-existing "return to work" agreements are strictly prohibited and can possibly result in serious consequences, and can result in a "fraudulent termination" or "fraudulent retirement" and the cancellation of retirement benefits. See IRC Section 1.409A-1(h)(1)(i) and (ii) for further information.
RETURNING TO WORK: If you have previously worked for Central Texas College, and return to work here, when you return you may be eligible to participate in "QPP" or "SPP" again, depending on your new position, and depending on whether you met your eligibility requirements during your previous employment with the college.
VESTING: In many pension plans, there is a “vesting requirement” connected to the “Employer Contributions”. That is the case with “QPP”. In “QPP”, you are always 100% vested in your own “Employee Contributions”, however you must meet a six-year “vesting schedule” in order to be 100% vested in the “Employer Contributions”. Your first year, you are 0% vested in the “Employer Contributions”. The second year, you are 20% vested. Then 40%, 60%, 80%, and finally, after six years, you are 100% vested in the “QPP” “Employer Contributions”.
“SPP” does not contain a “vesting requirement”. Therefore, in SPP, you are always 100% vested in both your “Employee Contributions” and your “Employer Contributions” from your very first day in the plan.
OBTAIN DISTRIBUTION: In order to obtain a QPP or SPP distribution, please log onto your account at http://www.tiaa-cref.org/ctcd and select “I want to…Find a form…” and select the proper form for your distribution. If you need assistance identifying the proper form, if you need help with the form, or if you’d like to obtain a paper copy of the form, call TIAA-Cref at 800-842-2252.
Central Texas College no longer keeps distribution forms because TIAA-Cref prefers that their forms be completed online…or be obtained directly from TIAA-Cref.
NOTE re Plan Administrator Signature on TIAA-Cref Distribution Forms: Most of the TIAA-Cref distribution forms have a space for "Plan Administrator's Signature". This does not apply to forms from CTC plan members, however. If you are a CTC employee (or former employee), you do not have to obtain a "Plan Administrator's Signature" on your distribution forms. Simply write "Not Required" in the space provided, and mail in your form to TIAA-Cref.