Participant Rights and Responsibilities Upon Transfer or Termination
Section VII.
Retirement Plans
IU Supplemental Early Retirement Plan (IUSERP)
Plan Summary
The IU Supplemental Early Retirement Plan (IUSERP) is a defined contribution plan established in accordance with Internal Revenue Code Section 401(a). A defined contribution plan is a plan which provides for an individual account for each participant, and benefits are based solely on the value of the account.
Indiana University makes all contributions to participant accounts. Participants are not required, nor permitted, to make additional contributions to the IUSERP.
Subject to certain IRS limits, Indiana University contributes an amount equal to 2.4 percent of a participant’s actual base salary to the IUSERP for each year of eligible employment with Indiana University.
A participant is 100% vested in his or her IUSERP account accumulations upon attaining age 55 while in active employee status with Indiana University. Termination of employment for any reason prior to attainment of age 55, other than total disability or death (with 10 years of service), will result in the forfeiture of all accumulations in the participant’s IUSERP account.
The IUSERP is a participant directed plan. This means that each employee is responsible for directing the investment of his or her IUSERP account. A vested participant may only withdraw funds from his or her IUSERP account upon termination of employment with Indiana University.
Eligibility
To be eligible to receive a benefit from the IUSERP, an employee must satisfy the following conditions:
- Must be a full-time Academic or Professional Staff employee grade 16 or above;
- Must be a participant in the IU Retirement Plan at the 12% level (100% full-time equivalent Academic or Professional Staff employee grade 16 and above hired in an appointed eligible position between 01/01/1989 and 06/30/1999);
- Must attain age 55 while in an active employee status unless due to death (with 10 years of service) or total disability; and
- Must terminate employment with Indiana University.
Discontinuation of Active Participation
An employee is no longer eligible to participate in the IUSERP, if:
- The employee terminates employment with Indiana University prior to attainment of age 55 for any reason other than total disability or death (with 10 years of service);
- The employee is no longer a full-time Academic or Professional Staff employee grade 16 or above;
- The employee is no longer a participant in the IU Retirement Plan at the 12% level; or
- The employee attains age 55 while in an inactive employee status.
In the event a participant is no longer eligible to participate in the IUSERP, all accumulations in the employee’s IUSERP account will be forfeited.
Rights and Privileges After Termination of Employment
An eligible participant, who terminates employment with Indiana University after attaining age 55 while in active employee status, or dies (with 10 years of service), or is totally disabled, will become 100% vested in his or her IUSERP account.
Upon termination of employment, an eligible participant may choose to:
- Leave accumulations in the Plan account and continue to manage investments;
- Withdraw all or a portion of the Plan account accumulations (subject to income taxes); or
- Roll over all or a portion of Plan account accumulations to an eligible retirement plan (e.g., an individual retirement account (IRA)).
Plan Distributions and Withdrawals
A vested participant may withdraw funds from the IUSERP account upon termination of employment with Indiana University or leave the accumulations in the Plan account.
IUSERP distributions are generally subject to a 20 percent mandatory federal income tax withholding rate. This mandatory withholding will reduce the amount a participant actually receives upon withdrawing funds from the IUSERP. However, the amount withheld will be credited against any taxes the participant owes for the year when the participant files his or her annual tax return.
There are exceptions to the mandatory federal income tax withholding rule, including receiving the IUSERP distribution as a life-time annuity payment or directly rolling over the IUSERP distribution to an eligible retirement plan (e.g., an IRA).
In addition, IUSERP distributions made prior to attainment of age 59 1/2 are generally subject to a 10 percent early withdrawal penalty tax, even if the withdrawal was made after the participant terminated employment with Indiana University.
There are exceptions to the 10 percent early withdrawal penalty tax, including receiving the IUSERP distribution as a lifetime annuity payment, receiving the IUSERP distribution after terminating employment at age 55 or older, or receiving the IUSERP distribution after terminating employment due to a permanent disability.
Finally, federal law requires that a participant begin to receive at least a partial distribution of his or her IUSERP account on or before the “required beginning date.” The required beginning date is April 1st of the calendar year following the calendar year in which the participant attains age 701⁄2 or terminates employment with Indiana University, whichever is later. This rule is known as the minimum required distribution rule.
Upon termination of employment with Indiana University, a vested participant must:
- Handle withdrawals and rollovers directly with the investment company.
- Continue to direct the investment of the Plan account.
- Notify the investment company of any name and/or address change.
- Notify the investment company of any beneficiary change.
- Begin to receive minimum required distributions on or before the required beginning date.
Investment Companies
Indiana University has approved the following investment companies under the IUSERP:
Fidelity Investments
82 Devonshire Street
Boston, MA 02109
(800) 343-0860
www.fidelity.comTIAA-CREF
730 Third Avenue
New York, NY 10017
(800) 842-2776
www.tiaa-cref.org
