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Agenda Rule of 75 Duke 403(b) Plans:

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Presentation on theme: "Agenda Rule of 75 Duke 403(b) Plans:"— Presentation transcript:

0 Understanding Your Duke Benefits

1 Agenda Rule of 75 Duke 403(b) Plans:
What does it mean to me? Duke 403(b) Plans: Faculty & Staff and Savings for Retirement How do these 403(b) plans work? Employees’ Retirement Plan (ERP) When can I access my pension plan?

2 Rule of 75 Must 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 coverage Must be participating in health and/or dental plan(s) at time of retirement Extends coverage for 18 months Total premium plus 2% Billed monthly

4 When I retire I would like to…

5 Retirement Income Sources
Your Contributions Duke’s Contributions Social Security

6 Duke Retirement Plans Faculty and Staff Retirement Plan
Monthly Paid Employees: 403(b) Plan: Faculty and Staff Retirement Plan Biweekly Paid Employees: 403(b) Plan: Savings for Retirement Plan Defined Benefit Plan: Employees’ Retirement Plan (ERP)

7 Duke Retirement Plans Both 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(not tax-free) You choose where to invest your contributions Your contributions + investment performance taxed when withdrawn (10% penalty if < age 59 ½)

9 Faculty & Staff Retirement Plan
The 2012 formula for the Duke 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 $250,000 Example with $60,000 salary in 2012: 2012 Duke Contribution Percent Multiplied by Sample 2012 Salary EQUALS: Annualized Duke Contribution 8.9% $55,000 $4,895.00 13.2% $5,000 $660.00 Total 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 service Attainment of age 65 while employed by Duke Hired after age 65 Death while employed by Duke Approval for long term disability under the Duke LTD Plan

13 Which Investment Carrier?
Decisions How 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 2012 If 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?

16 Investment Decisions To 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 Funds Tier 3: Other Funds Since 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 bonds The Target Funds include a diversified mix of stocks, bonds and short-term instruments that change automatically over time This 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 investor This 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? Vanguard Target Retirement Fund closest to your 65th birthday Where 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 horizon Tolerance for risk Diversification Asset Allocation

22 If You Leave Duke… Your vested* 403(b) funds can:
Remain in plan until age 70 ½ Be rolled over into your new employer’s 403(a), 403(b), 401(k), governmental 457 plan Be rolled over into an IRA Be 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 Duke Take with you to new ER Move to personal RA Withdraw 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. TO Biweekly Monthly

24 What is Employees’ Retirement Plan (ERP)?
The benefit is defined Duke makes all contributions You are not required to make any contributions to the plan You 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, and Have 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 years PLUS 1.66% of average final compensation years of credited service over 20 This 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 Income Average final compensation - $27,086 30 Years of credited service 1.25% x 20 x $27,086 = $6,772 1.66% x 10 x $27,086 = $4,496 Annual benefit = $11,268 Monthly benefit = $939 Total Monthly Income $2,620 Replacement Ratio 105%

28 Example – Employee Retiring at Age 62
ERP Income Annual benefit at age = $11,268 Less 3% reduction for each year between age 62 & 65: 9% x $11, = -$1,014 Annual benefit = $10,254 Monthly benefit = $855 Total Monthly Income $2,162 Replacement Ratio 86%

29 What are my payment options?
Single Life Annuity Joint and Survivor Annuity (50%, 75% or 100%) Level Income age 62 or 65 If lump sum value is less than $10,000 you may be eligible for a lump sum payment Payments under the Employees’ Retirement Plan are considered taxable income Discrepancy in age between you beneficiary will make a difference in benefit

30 When can I start to receive a benefit?
Normal Retirement Age 65 - full benefit Early Retirement Age 45 or older and 15 years of credited service reduced based on age at time benefit starts Deferred 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 service Early 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 plan Meet with a Financial Advisor Review allocation every year Use the investment carrier calculators Learn about the different investments Update your beneficiaries Save, save and save!!!!

34 More Information Financial Planning Tools on Benefits web site ( - Click on “Retirement Manager”) Review/Change your contribution rate Review portions of your personal benefits statement on-line Set up a one-on-one session with your retirement plan provider Human Resources Information Center at

35 403b Investment Carriers Information
Fidelity Contact: Chris Mann Local Phone: (800) National Phone: (800) Web Site: Contact: Hank Conway Local Phone: (919) National Phone: (800) Web Site: Contact: Tom Overcash Local Phone: (919) National Phone: (877) Web Site: National Phone: (800) Web Site:

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