A.
In addition to wanting to encourage employees to save for retirement and
take control of their financial future, the College wishes to address the
following issues with the current plan:
·
The
current retirement commitment is inequitably distributed with contributions to
employees ranging from 7 – 17%.
·
The
current retirement plan is hard to understand because it is too complicated with
both a core contribution and a cash adjustment for some employees (faculty and
exempt staff).
·
The core
contribution is not competitive with peer institutions.
Note:
There have been no changes to the plan since January 1, 1989 when the
plan changed as a result of requirements mandated by Tax Reform of 1986. The new plan represents an increased
commitment on the part of the College toward employees’ retirement needs,
including, for example, costs associated with the costs of
healthcare.
Q. When will the new plan be
effective?
A. January 1, 2007.
Q. How will the College’s contribution
level change?
A. The current retirement plan formula is
equal to 7% of base salary up to one-half
of the Social
Security Wage base (SSWB), which in 2006 is $47,100. Contributions of 12.7% are made on any
base salary that is above one-half of the SSWB.
The revised
retirement plan contribution formula is 9% on compensation up to one-half of the
SSWB ($48,750 in 2007) plus 12% on compensation above one-half of the
SSWB. (There is an additional match component to
the plan described on the next page.)
Annualized examples, based on 2006
SSWB:
Salary
$30,000
$2,100
$2,700
$600
$40,000
$2,800
$3,600
$800
$50,000
$3,665
$4,587
$922
$60,000
$4,935
$5,787
$852
$70,000
$6,205
$6,987
$782
$80,000
$7,475
$8,187
$712
$90,000
$8,745
$9,387
$642
$100,000
$10,015
$11,787
$572
$120,000
$12,555
$12,987
$432
$130,000
$13,825
$14,187
$362
$140,000
$15,095
$15,387
$292
$150,000
$16,365
$16,587
$222
Q. Why don’t all employees get the same
percent contribution regardless of salary?
A. This additional contribution above
one-half of the SSWB makes up for the regressive nature of the Social Security
benefit for higher paid employees.
Because Social Security provides more of a replacement ratio for those
who earn below the SSWB, retirement plans take into account the goal of the
retirement benefit, e.g., aiming for approximately 67% income replacement in
retirement. The additional 12%
contribution on earnings above one-half of the SSWB helps the College to achieve
a relatively consistent replacement ratio for all of its employees.
Q. What else does the new plan design
provide?
A. The new plan design has several new
features:
·
Under the
revised plan, new employees will be eligible for the College contribution
immediately. It is more generous
and is a better tool to attract and retain key employees. Currently, new hires must wait 12 months
before becoming eligible to participate in the retirement plan. Under the new plan design, starting on
January 1, 2007, the waiting period will be eliminated and new hires will be
eligible to begin participation immediately.
·
Retirement plan
contributions by the College will be more equitably distributed with
contributions ranging from 9 – 11.3%.
·
The core
contribution will be more competitive with peer
institutions.
·
The match
component of the plan will provide employees with an incentive to save. Under the new plan, employees will have
the option of making voluntary contributions from their salary and have a
portion of it matched by the College.
·
Additional
eligible compensation, such as overtime, bonuses, stipends and salary from
teaching summer courses, is factored into the total
contributions.
Q. What happens to those who currently
receive a cash adjustment?
A. The annualized cash adjustment in effect
7/1/2006 will be added to the base salary of those employees receiving it on
January 1, 2007 when the plan changes. (The cash adjustment appears on
employees’ pay stubs as “ca adj.”)
Contributions to TIAA-CREF thereafter will be based on the higher salary,
as well as any other eligible compensation.
Q. How does the match
work?
A. The College will match amounts of 1% or more,
up to 3% of your salary in additional contributions. For those who already contribute to
existing tax-deferred annuities (TDAs) through
Employee Voluntary Contribution College Match
1%
1/3 of 1%
2%
2/3 of 1%
3%
1
The employee contribution will be made to
the employee’s own tax-deferred annuity (TDA), either with TIAA-CREF’s Group
Supplemental Retirement Annuity (GSRA) or to the Supplemental Retirement Annuity
(SRA) (for those with older supplemental accounts) or to Fidelity or
Calvert. The employer contribution will be made to
the employee’s own TIAA-CREF Regular Retirement Account. Employees are fully and immediately
vested in the benefits arising from contributions made under the Plan, meaning
that the employee owns the contributions and they are non-forfeitable.
In summary, as a
result of the new match component of the plan, employees who take full advantage
of the match will be able to receive an additional 1% contribution from the
College to their Regular Retirement Accounts.
Additional
information about the match component will be provided at Financial Education
Seminars that will be provided by TIAA-CREF in
November.
Q. If I contribute 1.5% to a tax-deferred
annuity, how much will the College contribute?
A. The College will contribute 1/3 of
1%.
Q. If I have a tax-deferred annuity with
Fidelity or Calvert, will I get the match?
A. Yes. The College’s match will go into your
TIAA-CREF Regular Retirement Account, while your contributions go to Fidelity
or Calvert.
Q. How much can I put into a tax-deferred
annuity?
A. Employees are
generally able to contribute up to $15,000 to the plan in 2006 ($20,000 for
those ages 50 and over). The
current federal regulations provide for $500 incremental increases each year
beginning in 2007.
Q. How can I expect my money to
grow?
A. In the
examples below, we assume an employee began participating in the plan at age 30
and worked 35 years until age 65. For the three salary scenarios listed below,
we have projected the total accumulation at age 65. The examples assume that the
employee makes voluntary contributions of 3% each year for the entire time
(which would entitle them to a full employer match), the rate of return is 7%,
and salary increases are 3% each year.
Please note that this
accumulation is based on the College contributions to the employee’s Regular
Retirement Account and the match piece by both the employee and the
College. Additional contributions
by the employee to their tax-deferred annuity would provide additional
accumulation.
Salary
|
Total accumulation at
age 65 without employee and matching employer contributions
|
Total accumulation at
age 65 with employee and matching employer contributions
|
|
$35,000 |
$624,424 |
$927,946 |
|
$65,000 |
$1,302,591 |
$1,832,846 |
|
$85,000 |
$1,792,057 |
$2,485,467 |
Q. If I don’t want to take advantage of the
new voluntary match component of the plan and/or start a tax-deferred annuity,
do I need to do anything?
A. No. The new enhanced College retirement plan
contribution will start 1/1/2007, regardless of your choice to participate or
not in the match component of the plan.
If you decide at a later date that you want to enroll in a tax-deferred
annuity plan and take advantage of the College match, you may do that in any
month by submitting an enrollment application and a Salary Reduction Agreement
by the 15th of any month to be effective for the first of the
following month. Information and
enrollment packets are available in The Human Resources
Office.
Q. How can I learn more about the new
retirement plan and how I can maximize my retirement
investment?
A. TIAA-CREF and the College will be
providing the following Financial Education Seminars and opportunities for
Individual Counseling at the College in the coming weeks.
FINANCIAL
EDUCATION SEMINARS: (No
reservation required.)
DATES
TIMES
LOCATION
Wednesday, November 1,
2006 12:30- 2:30
Thursday, November 2,
2006 2:00 – 4:00
Library Lecture Room, Margaret Clapp
Library
Monday, November 6, 2006 12:30 – 2:30 Academic Council RoomThursday, November 16, 2006 10:00 – 12:00 Collins Cinema IMPORTANT: Action is required on your part by December 1, 2006 in order to participate in the new employer matching plan as of 1/1/2007. All current Salary Reduction Agreements will end 12/31/06. As a result of the plan change, all employees who are currently contributing to a tax-deferred annuity will be required to complete and submit a new Salary Reduction Agreement by 12/1/2006 to be effective on 1/1/2007. In any subsequent month, Salary Reduction Agreements and Enrollment Applications, if applicable, need to be received by The Human Resources Office by the 15th of the month in order to be effective on the first of the following month.
Attend one of the seminars listed above in order to gather the information you need in order to make your decision about participation in the match component of the new plan. This is especially important for employees who have never had a tax-deferred annuity through the College.
PERSONAL FINANCIAL
COUNSELING SESSIONS:
TIAA-CREF
consultants will also be available to answer questions about the changes as well
as discuss meeting your financial goals
with products, such as mutual funds
and annuity accounts, or other financial matters – all to help you make financial
decisions that are right for you.
DATES TIMES LOCATIONMonday, November 6, 2006 9 – 3:30 Human Resources Office Conference Room Wednesday, November 8, 2006 9 – 3:30 Human Resources Office Conference Room Thursday, November 9, 2006 9 – 3:30 Human Resources Office Conference Room Seminars do not require reservation. You must, however, make an appointment for the individual counseling sessions. Please call Ann Lynne Kotfica at x2212 if you wish to schedule an appointment.
For more
information on your retirement plan, investment education, retirement planning
tools and more, please go to www.tiaa-cref.org/wellesleycollege. From there you can also link to
TIAA-CREF’s website to make changes to your account online, check account
performance and sign up for e-delivery of statements, transaction confirmations,
prospectuses and other communications.
The site offers interactive calculators including a retirement goal
calculator, retirement illustration calculator, target value calculator,
performance and market information, and more. And now is a good time to make
sure your beneficiary designations are up-to-date. You can check those on-line, and change
them right on-line, as well (or if you prefer, you can print the form from the
forms facility and send it in).
SPEAK WITH A
TIAA-CREF CONSULTANT
If you have
questions about your retirement plan or want help in making decisions, you can
speak with a TIAA-CREF Consultant.
Please call 800-842-2776, Monday to Friday from 8 a.m. to 10 p.m. and
Saturday from 9 a.m. to 6 p.m. (ET).
HR
WEBSITE
Visit the HR
website at www.wellesley.edu/HR under
What’s New for a calculator
provided by the Controller for determining the pay impact on your
deductions. Detailed instructions
for using this tool are provided.