THIS HANDOUT IS DESIGNED FOR ALL OUR CTC SITE DIRECTORS AND BENEFITS SPECIALISTS
IT CAN BE PRINTED AND COPIED FOR ALL TERMINATING AND RETIRING CTC EMPLOYEES
Central Texas College Pension Plans
P O Box 1800; Killeen , TX 76540
Web Page: http://www.ctcd.edu/pension/ctc_pension.htm
Information for Terminating and Retiring “QPP” and “SPP” Members
Updated October 2007
Central Texas College maintains two in-house pension plans:
(1) The CTC Employees' Pension Plan and Trust (“ QPP ”) - for eligible full-time employees (with
some exceptions, and
(2) The CTC Employees' Supplemental Plan and Trust (“ SPP ”) - for eligible part-time employees
(with some exceptions).
“QPP” and “SPP” are both IRS Section 401(a) qualified Defined Contribution Pension Plans. These plans are separate from any participation in the Teachers' Retirement System of Texas (“TRS”) or the Texas Optional Retirement Plan (“ORP”). Central Texas College is the administrator of both “QPP” and “SPP”, however we have engaged AIG Retirement Services to be our cash custodian and to maintain our account software, therefore your money is held in trust by AIG, and your distribution check will be coming from AIG.
If you are thinking about terminating or retiring, here are some things for you to think about before you make your final decisions.
1. ELIGIBILITY FOR DISTRIBUTIONS : Federal laws require that a person must be officially terminated/retired (both full-time and part-time) from their employer ( Central Texas College ) before they can request a distribution from their “QPP” and/or “SPP” account. In addition, they must be in inactive, terminated and/or retired status (both full-time and part-time) at the time that they apply for and receive their pension distribution. Active employees (whether full-time or part-time) cannot apply for or receive a pension distribution.
2. AFTER-TAX VS PRE-TAX DOLLARS : All of your employ EE contributions in your “QPP” and/or “SPP” account are AFTER-TAX (the tax has already been paid). All of the employ ER contributions, and all of the accumulated earnings, are PRE-TAX or “tax deferred” (the tax has not yet been paid).
3. 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 in Section 5.
4. ACCOUNT BALANCE UNDER $5,000 : If your account balance is under $5,000, we are required to distribute the balance to you as soon as practical. If your account balance is over $5,000, you can leave your money in the plan, where it will continue to participate in normal gains and losses (depending on your asset allocation and market fluctuations). You can continue to reallocate your funds, but you will not be able to contribute more funds. You will continue to get your quarterly statements, as before. When you reach the age of 70 ½, you will have to begin taking required minimum distributions annually, just as you would with an IRA. If you wish to leave your funds in the plan, but avoid any possible market fluctuations, you could reallocate your account into a conservative portfolio which would be low-risk --- but you may want to talk to your investment professional or our AIG financial representative before you make any reallocation decisions.
5. DISTRIBUTION OPTIONS ARE AS FOLLOWS :
• You may leave your funds in “QPP” and/or “SPP” (if the balance is over $5,000).
• You can take a full or partial cash distribution.
• You can rollover your funds to another plan or financial instrument (see the qualified rollover instruments below in Section 6).
• You can establish monthly or yearly “periodic distributions”.
6. ROLLOVER OPTIONS : Your funds can be directly rolled over into any of the following plans/vehicles (if they accept “roll-ins”):
- A Traditional Retirement IRA (not a Roth IRA and 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)
Note: Most of these rollover instruments will only accept pre-tax dollars (not after-tax dollars).
7. SPLIT DISTRIBUTIONS: If you wish, you may treat your after-tax dollars and your pre-tax dollars separately when planning your rollover. For example:
• You can roll your entire balance (both the after-tax dollars and the pre-tax dollars) into one of the plans/vehicles above (providing that the vehicle you choose accepts both types of dollars).
• You can take your after-tax dollars as a direct cash distribution to you, while rolling your pre-tax dollars into one of the vehicles above (thereby continuing their tax deferred status). AIG calls that a “ split distribution ”.
You can establish a Traditional Retirement IRA at any bank or credit union in just a few minutes, at no charge. You can also use a financial advisor to set up your IRA, or to help you make arrangements for other types of plans/vehicles. Our AIG financial advisor can also help you set up rollover instruments.
8. DISTRIBUTION FORMS : There are three types of distribution request forms used by AIG, depending on your circumstances:
1. If you decide to take your money as a direct cash distribution, please use the AIG-Valic “ Distribution Request Form ”.
2. If you decide to take your distribution as a rollover to another investment plan/vehicle, please use the AIG-Valic “ Rollover/Transfer Out Form ”.
3. If you are over the age of 70 ½, AIG-Valic requires that your distribution be processed using their AIG-Valic “ Required Minimum Distribution Form ”.
These forms can be obtained in the following ways:
(1) Come by the CTC Pension Plan Administration Office in Building 103, Room 133 on Central Campus, or
(2) Print the forms from our web page at www.ctcd.edu/pension/ctc_pension.htm, or
(3) Print the forms from the AIG web site at www.aigvalic.com/ctc (under “e-Print”), or
(4) email us at Pension.Plan@ctcd.edu, or
(5) call us at 254-526-1416, or
(6) Call the AIG-Valic Client Care Center at 1-888-568-2542.
Why do we like for you to print your forms from our web page? That's because AIG occasionally revises or updates those forms, and we post those revised or updated forms on our web page. If you print your forms from the web page, you will insure that you have the most recent, most useful form.
NOTE ABOUT WHERE TO MAIL YOUR DISTRIBUTION FORMS : The standard AIG forms instruct you to send the forms to AIG for processing. However, if you send your forms directly to AIG, they will have to re-route them to us for plan administrator approval, which is required by our plan rules. Therefore, it is much more efficient if you just mail the forms directly to us at the address below. After we perform our required procedures on them, we will forward them to AIG for final distribution.
Send forms to:
Central Texas College Pension Plan
P O Box 1800
Killeen , TX 76540-1800
9. STEPS IN DISTRIBUTION PROCESS – HOW LONG DOES IT TAKE?
ELIGIBILITY FOR DISTRIBUTIONS: As mentioned above, federal laws require that a person must be officially terminated/retired (both full-time and part-time) from their employer ( Central Texas College ) before they can request a distribution from their “QPP” and/or “SPP” account. In addition, they must be in inactive, terminated and/or retired status (both full-time and part-time) at the time that they apply for and receive their pension distribution. Active employees (whether full-time or part-time) cannot apply for or receive a pension distribution.
This requirement is so important that we are required to “document” that you are officially terminated or retired, and attach that documentation to your paperwork, before we can approve your distribution request form and forward it to AIG for processing. How do we obtain the “documentation” that we must attach? That process starts with your department or site, which must officially terminate you. Your department or site 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 in order to do their jobs. 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. It 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, and the college does not owe you any more pay, the CTC Human Resources Department uses that “Terminating PSF” to officially terminate you. All of the procedures required to officially terminate an employee usually take from 30 to 45 days. In the meantime, we have usually received your distribution request form, but we must hold it until we see that Human Resources has officially terminated you. While we are waiting, we will check every day to see if you have been officially terminated. As soon as you have been officially terminated, we will print out a copy of your HR screen showing your official termination date, attach it to your distribution request form documents, and forward the original form to AIG for processing. We send batches of distribution request forms to AIG every week, usually on Thursdays. By the following Tuesday, AIG will have the forms. Within 10 business days after they receive the forms, your distribution check should be in the mail.
In short, 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 sent to AIG and deposited into your pension account. Therefore, it is a good idea to touch base with your department or your site, and make sure that they have prepared and forwarded the necessary “Terminating PSF”, so that you can get your pension distribution as quickly as possible.
10. OVER 70 ½ YEARS OF AGE : If you still have funds in “QPP” or “SPP” when you reach the age of 70 ½, the IRS will require that you begin taking annual “Required Minimum Distributions” (just like you would with an IRA or other tax-deferred instruments). The amount of each annual distribution will depend upon a table published by the IRS, and the distribution factor will be based on your age and estimated life expectancy. You would still need to use an AIG “Required Minimum Distribution” form to initiate your distribution in the manner that you desire.
11. 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.
12. TYPES OF PENSION PLANS : There are two basic types of employer-sponsored pension plans. Understanding the difference between these two types of plans may help you understand your options under our two plans.
• A “ Defined Benefit Plan ”: A “Defined Benefit Plan” plan is an “old-fashioned” type of plan in which an individual must meet certain age and years-of-service requirements in order to be eligible to “retire”, at which point the employer will begin to pay the retiree a monthly benefit payment. TRS is a “Defined Benefit Plan”.
• A “ Defined Contribution Plan ”: “QPP” and “SPP” are both “Defined Contribution Plans”. This type of plan does not have most of the typical age and years-of-service requirements that the “old-fashioned” type of plan has. Instead, when individuals leaves the employer, they are simply entitled to their vested balance in their pension account. They may withdraw their balance in several ways, but there is no automatic monthly benefit payment.
13. OUR WEB PAGE: Visit our web page at http://www.ctcd.edu/pension/ctc_pension.htm for more information and forms. We update the web site often.
14. IF YOU'RE CLOSE TO RETIRING OR TERMINATING: If you need further assistance with your retirement or termination planning and arrangements, just call Ms. Hayes at 254-526-1807 or Ms. Alvarez at 254-526-1416 and we'll help you through it. You can also email us at RoseAnn.Hayes@ctcd.edu or Sandra.Alvarez@ctcd.edu. Also, be sure to call Ms. Helbing in HR Employee Benefits at 254-526-1305 for help with your TRS, ORP, insurance, and other benefit issues.