1 Agenda Rule of 75 Duke 403(b) Plans: What does it mean to me?Duke 403(b) Plans:Faculty & Staff and Savings for RetirementHow do these 403(b) plans work?Employees’ Retirement Plan (ERP)When can I access my pension plan?
2 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.
3 Ineligible for Retiree Health/Dental Insurance Offered COBRA coverageMust be participating in health and/or dental plan(s) at time of retirementExtends coverage for 18 monthsTotal premium plus 2%Billed monthly
5 Retirement Income Sources Your ContributionsDuke’s ContributionsSocial Security
6 Duke Retirement Plans Faculty and Staff Retirement Plan Monthly Paid Employees:403(b) Plan:Faculty and Staff Retirement PlanBiweekly Paid Employees:403(b) Plan:Savings for Retirement PlanDefined Benefit Plan:Employees’ Retirement Plan (ERP)
7 Duke Retirement PlansBoth 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.
8 What is the 403(b)? You contribute by payroll deduction Your contribution is tax-deferred (not tax-free)You choose where to invest your contributionsYour contributions + investment performance taxed when withdrawn (10% penalty if < age 59 ½)
9 Faculty & Staff Retirement Plan The 2012 formula for theDuke contribution is:8.9% of the first $55,000 of salary and % of annual salary in excess of $55,000, up to a statutory salary limit of $250,000Example with $60,000 salary in 2012:2012 Duke Contribution PercentMultiplied by Sample 2012 SalaryEQUALS: Annualized Duke Contribution8.9%$55,000$4,895.0013.2%$5,000$660.00Total in 2012$60,000$5,555.00
10 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.
11 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.
12 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 serviceAttainment of age 65 while employed by DukeHired after age 65Death while employed by DukeApproval for long term disability under the Duke LTD Plan
13 Which Investment Carrier? DecisionsHow Much?Which Investment Carrier?Which Funds?
14 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: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 2012If 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 to inquire about 15 year special election)
15 Which Investment Carrier Will You Choose? Fidelity
16 Investment DecisionsTo 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 FundsTier 3: Other FundsSince Duke offers over 300 funds to EE’s we have recently switched to a tiered investment structure to make your fund selection decision easier.Duke has an Investment Advisory Committee (IAC) comprised of senior level administrators and Financial consultants who will meet once a year to review the investment line up
17 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 bondsThe Target Funds include a diversified mix of stocks, bonds and short-term instruments that change automatically over timeThis tier geared toward EE’s who are not as knowledgeable about the market and investment decisions.Gives EE’s a hands-off approach to investing, make a single election and let it ride to retirement.Starts with more aggressive investments as you near retirement asset allocation changes to more conservative investments.
18 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.Tier 2 is aimed for EE’s who are somewhat knowledgeable about the market and want to have a little more control over their investments.13 Best in class funds are chosen from each vendor ranging from the aggressive to conservative, to give EE’s wide range of options
19 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.Tier 3 is geared toward the experienced investorThis includes the remaining 300 funds available to EE’s
20 Default Investment Option Where do your contributions go if you do not choose a retirement plan vendor?VanguardTarget Retirement Fund closest to your 65th birthdayWhere do your contributions go if you select a retirement plan vendor but do not select investment funds/investment options?
21 Things to Consider in Your Decision… How much will you need in retirement?Time horizonTolerance for riskDiversificationAsset Allocation
22 If You Leave Duke… Your vested* 403(b) funds can: Remain in plan until age 70 ½Be rolled over into your new employer’s 403(a), 403(b), 401(k), governmental 457 planBe rolled over into an IRABe 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.Keep them here at DukeTake with you to new ERMove to personal RAWithdraw as cash, amount will be taxed and include an additional 10% penalty for early withdrawal before age 59 1/2
23 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.TOBiweeklyMonthly
24 What is Employees’ Retirement Plan (ERP)? The benefit is definedDuke makes all contributionsYou are not required to make any contributions to the planYou are not required to participate in any retirement plan in order to be eligible for this pension
25 Eligibility You automatically become a plan member, if you: Have reached age 21, andHave 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.
26 ERP Formula 1.25% of average final compensation TIMES years of credited service up to 20 yearsPLUS1.66% of average final compensationyears of credited service over 20This calculation takes into consideration your average earnings (5 highest consecutive years of last 10 fiscal years), your age and years of credited service
27 Example – Employee Retiring at Age 65 ERP IncomeAverage final compensation - $27,08630 Years of credited service1.25% x 20 x $27,086 = $6,7721.66% x 10 x $27,086 = $4,496Annual benefit = $11,268Monthly benefit = $939Total Monthly Income $2,620Replacement Ratio 105%
28 Example – Employee Retiring at Age 62 ERP IncomeAnnual benefit at age = $11,268Less 3% reduction for each yearbetween age 62 & 65:9% x $11, = -$1,014Annual benefit = $10,254Monthly benefit = $855Total Monthly Income $2,162Replacement Ratio 86%
29 What are my payment options? Single Life AnnuityJoint and Survivor Annuity (50%, 75% or 100%)Level Income age 62 or 65If lump sum value is less than $10,000 you may be eligible for a lump sum paymentPayments under the Employees’ Retirement Plan are considered taxable incomeDiscrepancy in age between you beneficiary will make a difference in benefit
30 When can I start to receive a benefit? Normal RetirementAge 65 - full benefitEarly RetirementAge 45 or older and 15 years of credited servicereduced based on age at time benefit startsDeferred Retirement (working at Duke past age 65)Additional 10% for extra credited service over age 65
31 More on Early Retirement Benefits Early reduction factors are less for employees age 55 with at least 20 years of credited serviceEarly reduction examples:Age 20 Years 20 Years% %% %% %% %
32 Take action now!!!“Small amounts regularly saved is how the road to wealth is paved.” – Benjamin Franklin
33 Action Items Organize and plan your finance Start contributing towards your voluntary employer sponsored 403b retirement planMeet with a Financial AdvisorReview allocation every yearUse the investment carrier calculatorsLearn about the different investmentsUpdate your beneficiariesSave, save and save!!!!
34 More InformationFinancial Planning Tools on Benefits web site (www.hr.duke.edu/benefits/retirement - Click on “Retirement Manager”)Review/Change your contribution rateReview portions of your personal benefits statement on-lineSet up a one-on-one session with your retirement plan providerHuman Resources InformationCenter at
35 403b Investment Carriers Information FidelityContact: Chris Mann Local Phone: (800) National Phone: (800) Web Site:Contact: Hank ConwayLocal Phone: (919) National Phone: (800) Web Site:Contact: Tom Overcash Local Phone: (919) National Phone: (877) Web Site:National Phone: (800) Web Site: