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 $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 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. You will still be eligible for free access to our AIG-Valic financial advisor, as long as you have funds in the plan. 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 allocate your entire balance to the Valic Fixed Account, which pays a guaranteed fixed amount of interest --- but be sure to talk to your investment professional or our in-house AIG-Valic financial advisor before you make any reallocation decisions.

DISTRIBUTION OPTIONS ARE AS FOLLOWS:  

1. You may leave your funds in QPP and/or SPP (if the balance is over $5,000).
2. You can take a full or partial cash distribution.
3. You can rollover your funds to another plan or financial instrument.
4. You can establish a periodic distribution plan. 

ROLLOVER OPTIONS: Your funds can be directly rolled over into any of the following plans/vehicles:

1. A Traditional Retirement IRA (not a Roth IRA and not a tax-deductible IRA)
2. Another 401(a) plan
3. A 403(a) or 403(b) plan
4. A 401(k) plan
5. A 457 plan
6. A TSP (Thrift Savings Plan)

You may treat your after-tax dollars and your pre-tax dollars separately when planning your rollover, if you wish. 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 --- some plans only accept pre-tax 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.

DISTRIBUTION FORMS:  There are three types of distribution request forms used by VALIC/AIG Retirement, depending on your circumstances:

1. If you decide to take your money as a direct cash distribution, please use the "AIG CTC QPP Request for Cash Distribution" or the "AIG CTC SPP Request for Cash Distribution" form (you can print it out in Section 4 below).

2. If you decide to take your distribution as a rollover to another investment plan/vehicle, please use the "AIG CTC QPP Request for Pension Rollover" or the "AIG CTC SPP Request for Pension Rollover" form (you can print it out in Section 4 below).

3. If you are over the age of 70 ½, AIG requires that all of your distributions (whether cash distributions or rollovers) be processed using their AIG “Required Minimum Distribution Form” (this form is not yet available on this web page, so please give us a call at 254-526-1416 or email us at Pension.Plan@ctcd.edu and we will send you the form).

These forms can be obtained in the following ways:  

(1) Print the forms from this web page (see Section 4 below), or

(2) Email us at Pension.Plan@ctcd.edu and we will send you the forms.

Why do we like for you to print your forms from our web page? That's because VALIC/AIG Retirement 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, that will insure that you have the most recent, most useful form.

NOTE ABOUT WHERE TO MAIL YOUR DISTRIBUTION FORMS:  The standard VALIC/AIG forms instruct you to send the forms to VALIC/AIG for processing. However, if you send your forms directly to VALIC/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 VALIC/AIG for final distribution.   VALIC/AIG will not accept faxed forms or emailed forms, because they require original signatures, so please send the original forms to us at the following address: 

  Central Texas College Pension Plan

   P O Box 1800

   Killeen , TX 76540-1800  

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. This requirement is so important that we are required to “document” that you are officially terminated/retired, and attach that documentation to your paperwork, before we can approve your distribution request form and forward it to AIG-Valic 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 the college 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 the documentary proof, showing your official termination date, attach it to your distribution request form documents, and forward the original form to VALIC/AIG for processing. We send batches of distribution request forms to VALIC/AIG every week, usually on Thursdays. By the following Tuesday, VALIC/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 always 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 VALIC/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.

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.

OVER 70 ½ YEARS OF AGE:  If you decide to leave your 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 the estimated life expectancy of yourself and your spouse. Please use an VALIC/AIG “Required Minimum Distribution” form to initiate your distribution.

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.  

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.

IF YOU NEED ASSISTANCE:   Distribution decisions can be complicated. We will be glad to work with you to give you all the information that we can to help you make your decision. Just call us at 254-526-1416, or call the VALIC/AIG Retirement Client Care Center at 1-800-448-2542.