The following questions and answers have been developed to acquaint you with the basic provisions of the retirement programs provided by the Pennsylvania State Employees' Retirement System (SERS) and the Teachers Insurance and Annuity Association/College Retirement Equities Fund (TIAA-CREF). This information should assist you in determining which program better suits your individual needs. All questions and answers should be read in the order presented. Otherwise, incorrect or incomplete conclusions may be reached.
SERS participants contribute 6.25% of gross salary each pay.
TIAA-CREF participants contribute 5% of gross salary each pay.
The maximum annual salary that is subject to retirement plan contributions is established by the IRS and regularly adjusted. The limit in 2008 is $230,000.
The amount the University contributes on behalf of SERS members is determined each year by the Retirement Board. The contribution rate does not affect the amount of SERS pension benefit (see question #12). The amount the University contributes on behalf of TIAA-CREF participants is currently 9.29% of annual salary.
Contributions are not subject to current Federal income tax. They are treated as a tax shelter. All contributions and earnings become subject to Federal income tax when they are distributed.
SERS and TIAA-CREF do not have administrative charges.
SERS pays 4.00% interest compounded annually on contributions. The TIAA interest rate is adjusted annually. In 2008 it is 5.25%. A decision should not be based on interest rate alone.
SERS will make a lump sum distribution of your contributions, plus interest provided that you have less than 5 years of creditable service in SERS and that you are not being employed by any agency which participates in SERS.
TIAA-CREF participants may withdraw or roll over the amounts invested in any of the CREF accounts and the TIAA Real Estate account. Money invested in the TIAA traditional annuity can be withdrawn or rolled over only if the account balance (contributions plus interest) is less than $2,000. Amounts $2,000 and above may be withdrawn over a 10-year period. Alternatively, you may leave your accumulated Penn State retirement plan assets on deposit with TIAA-CREF.
Yes. TIAA-CREF has immediate vesting rights and the annuity payments may commence at any age provided once you have terminated your employment with Penn State.
SERS vesting requires 5 or more years of credited service. If you have met the 5-year vesting requirement, you will receive an SERS retirement annuity. The annuity can begin at age 60 or at any time after which you would have had 35 years of service in SERS. If you do not qualify under these provisions, early retirement provisions will apply.
No. Neither SERS nor TIAA-CREF permit such contributions.
You may receive a retirement annuity from SERS any time after completing 5 or more years of service or after age 60 with at least three years of service. However, if a member retires prior to age 60, the annuity is reduced due to an actuarial age factor (unless the member has 35 or more years of service)
TIAA-CREF participants may receive a retirement annuity commencing at any age and with no minimum amount of service requirement. In general, the later retirement payments begin, the greater the account will be, therefore, larger annuity payments should result.
There are two types of annuities, fixed and variable. The income from a fixed annuity once determined generally remains constant. The income from a variable annuity generally changes on a yearly basis. SERS provides only a fixed annuity; TIAA provides both fixed and variable annuities.
The College Retirement Equities Fund (CREF) of TIAA-CREF offers a variable annuity program. A participant in TIAA-CREF may elect to allocate all or part of the contributions to CREF. Those contributions purchase units (like share of ownership) in CREF's stock account, money market, bond, social choice, global equities fund, growth account, equity index account and TIAA real estate account. Both before and after retirement, the value of each CREF unit varies upwards or downwards depending upon the performance of the funds.
You may allocate the contributions to your retirement plan, both yours and Penn State's, to any or all of the TIAA-CREF accounts. You may change your allocation at any time and also may move funds from one TIAA-CREF investment option to the other.
Legislative action is required to increase SERS annuity payments. The most recent increase occurred in 2002.
TIAA fixed annuities pay a guaranteed amount of income plus dividends as declared by the TIAA Board of Trustees. While the TIAA dividends will fluctuate, the guaranteed income of a TIAA traditional fixed annuity will never go down.
The formula to determine retirement income from the State Employees' Retirement System is as follows:
The retirement formula assumes that an individual has reached normal retirement age, which is defined as either of the following:
The amount of retirement income from TIAA-CREF depends on your age at retirement and the amount of money that has accumulated in your account and the annuity option chosen.
An SERS member may transfer his or her account if he or she is employed by another agency which participates in the SERS program. TIAA-CREF participants may continue their participation if employed by another participating TIAA-CREF institution.
SERS provides a disability retirement annuity to members have at least five years of credited service at the time they become disabled. An annuity equal to at least one-third of average salary (highest 3 years of earnings) applies in most cases.
While the TIAA-CREF retirement plan has no disability provision, a voluntary long term disability program is available to all regular full-time faculty and staff. Details of the plan are available on the Employee Benefits Division web site or by contacting the Employee Benefits Division at benefits@psu.edu or by phone at (814) 865-1473.
The beneficiary of a deceased SERS member who had less than 5 years of credited service at the time of his or her death, receives a refund of the member's contributions and interest. If the member had 5 or more years of credited servicet, the value of the account is determined by the SERS retirement formula.
Beneficiaries of a Penn State employee who dies prior to receiving retirement benefits from TIAA-CREF, receive the value of the participant's accounts (including the University contributions) on the date of the participant's death.
SERS permits a member to purchase credit for the following:
Additionally, SERS members may combine their credited PA state service with service in a PA public school.
TIAA-CREF permits a participant to make additional voluntary tax-deferred payments to his or her retirement plan at any time.
TIAA-CREF participants may borrow against the assets of their retirement plan. Details of the loan program and your loan options are available from TIAA-CREF at 800-842-2776. SERS has no provision for loans.
SERS provides the opportunity to purchase service to increase your pension and a fixed benefit based on formula. TIAA-CREF offers immediate vesting, flexibility and, in many cases, the ability to transfer the account from one institution to another. Both systems provide excellent retirement benefits.
You have 30 days from the effective date of your appointment to make a choice between SERS or TIAA-CREF. If you do not make your decision within that time period, state regulations require that you automatically be enrolled in SERS.
It is important to note that your choice of a retirement plan is irrevocable.
Additional information is available from the TIAA-CREF and SERS web sites.
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