Retirement Plan Choice - Tier II - Spring 2021 - SURS
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Retirement Plan Choice – Tier II
Spring 2021
Important
This presentation is for SURS
members who are in Tier II.
Tier II members are participants with SURS, or
another eligible Illinois public retirement system, who
began participation (certified) on or after 01/01/11.
2
About SURS
• State Universities Retirement System
• Defined Benefit (established 1941)
• Defined Contribution (added 1998)
• Tier II (added 2011)
• 401(a) Qualified Plan
• Non-ERISA
• Employee Retirement Income Securities Act
• Governed by Illinois Compiled Statutes
3
What We Do
• Retirement
• Disability
• Disability Retirement
• Refunds
• Death Benefits
• Survivor Benefits
• Service Credit Purchases
4
Important Basics
• Plan choice is one-time, lifetime decision
• Irrevocable election – cannot change at anytime
• You have 6 months from your participation date to make
a plan choice election
• If no election after 6 months, you will default to Traditional Pension
Plan
• SURS encourages you to make an active election
• State matching contributions for the Retirement Savings
Plan do not begin until the first full payroll after receipt
of your Choice Election
• You do not pay into Social Security for your SURS-covered
employment
5
What To Think About First
How long will you be employed?
– Know the vesting requirements for each plan
Will your future earnings rise?
– Learn about the maximum pensionable earnings limit
Will you rely on these benefits to meet basic income needs?
– Understand the lifetime income options under each plan
How will your retirement benefit be determined?
– Do you prefer a guaranteed predetermined retirement formula or one that depends on your
account balance?
Is someone depending on you for benefits?
– All three plans provide survivor benefits. In one plan survivor benefits are included
automatically. The other two plans provide survivor benefits at a cost.
Are you confident in your plans for this retirement benefit?
– If you leave earlier than expected, what options will you have with each plan?
6
Plan Types
Defined Benefit Defined Contribution
Retirement Savings Plan
Traditional & Portable
(RSP)
• Employer (State of Illinois) • Employer contributes with each
promises to pay the member a payroll
specific lifetime monthly benefit • Flexibility to choose where to invest
beginning at retirement your money within the SURS
• Employer bears the investment investment options (both hands –off
risk and hands-on options available)
• Benefit is calculated using a • Member accepts risk and rewards of
specified formula based on age, investing in the market
earnings, and years of service • Benefit is determined based on
account value or the amount of
money secured at retirement
7
Benefit Plans
• Defined benefit plan
• Lifetime monthly benefit
Traditional • Built-in survivor benefits
• If no survivor at retirement, survivor refund payable
• Defined benefit plan
• Optional forms of annuity
Portable • Enhanced lump sum distribution
• Survivor benefits optional at a cost
• Defined contribution plan
• Lump sum, lifetime income or hybrid-like benefit
RSP options
• Flexible target date portfolio with secure income feature
(default) or choose from SURS core fund lineup
8
Contributions
Traditional Portable RSP
Plan Type Defined Benefit Defined Benefit Defined Contribution
Your 8% of maximum pensionable earnings required
Contribution Full-time community college employees (except City Colleges of Chicago) pay an
additional 0.5% of earnings to fund a health insurance plan devised for
community college retirees.
6.5% Retirement 6.5% Retirement
Your 0.5% Automatic Annual 8% Retirement
0.5% Automatic Annual
Contribution
Increase (AAI) Increase (AAI)
Breakdown
1.0% Survivors 1.0% Portability
Guarantee of fixed Guarantee of fixed monthly
Employer 7.6% Retirement*
monthly retirement retirement benefit for life or
Contribution benefit for life enhanced lump sum
(effective 07/01/21)
*Employer contributions for RSP begin with the first full payroll period after
SURS receives your retirement choice election form
9Earnings Limits
Traditional Portable RSP
• Set by state law • Set by state law • Set each year by IRS
401(a)-17 limit
Maximum • FY2021: $115,928.92 • FY2021: $115,928.92
Pensionable • FY2022: $116,740.42 • FY2021: $285,000
• FY2022: $116,740.42
Earnings • FY2022: $290,000
Or • Increased each year by • Increased each year by
IRS Limit half of the Consumer half of the Consumer
Price Index-Urban Price Index-Urban
(CPI-U) (CPI-U)
For computing SURS benefits, pensionable earnings include: gross salary, overtime,
summer teaching pay, or other eligible pay for work performed. Contributions will not be
deducted from earnings that exceed above limits in a fiscal year. Any earnings exceeding
the above limits will not be included in benefit calculations.
10Retirement
Eligibility
Traditional Portable RSP
Retirement • Age 67 with 10 or • Age 67 with 10 or • Age 62 with 5 or more
Vesting more years of service more years of service years of service
(no age reduction) (no age reduction)
• Age 55 with 8 or more
• Age 62 with 10 or • Age 62 with 10 or years of service
more years of service more years of service
(with age reduction) (with age reduction)
• Any age with 30 or
more years of service
11Refund
Traditional Portable RSP
Less Than • Your contributions • Your contributions • Your contributions
5 Years • Up to 4.5% interest • All interest earned • Associated investment
earned • No employer return
• No employer contributions • No employer
contributions contributions
5 Years or • Your contributions • Your contributions • Your contributions
More • Up to 4.5% interest • All interest earned • Employer contributions
earned • Employer match of • Total investment return
• No employer $1 for $1
contributions
Important Note: Taking a refund will forfeit any/all retirement benefits, including insurance
12Service Credit
• Earned service
• Unused, unpaid sick leave
• Purchases
• Reciprocal service
• Service with another Illinois public retirement system
13Earned Service Credit
• Service year is September 1-August 31
Days/Months Worked Service Earned
15 or more calendar days 1 month
1-2 months .25 year
3-5 months .50 year
6-7 months .75 year
8 months or more 1 full year
• Only 1 year of service is allowed per service year
14Sick Leave Service Credit
• Unused/unpaid sick leave reported to
SURS by employer upon termination of
employment
Full Work Days Additional Service Credit
20-59 days .25 year
60-119 days .50 year
120-179 days .75 year
180 days or more 1 full year
• Must retire within 60 days of termination
15Part-time Employee
• Employer verifies all academic contracts
at the time of retirement
• Any changes could affect your eligibility for
retirement
• Retirement eligibility determined by service credit
and age
• Employer reports the part-time
percentage to SURS on payrolls
• If 50% time or less for more than 3 years,
service credit may be adjusted for calculation
of the benefit
16Service Credit Purchases
Types of purchases
• Repayment of Refund
• Prior Service
• Other Public Employment (OPE)
• Does not apply toward vesting
• Military
• Leave of Absence
17Purchases
General Information
• All purchase types must be verified
• Contact SURS to initiate process
• Not required to make the purchase
• Payments must be made prior to
retirement date
• RSP members must be actively employed
in the SURS system
• Except repayment of a refund
• Cost increases each month by interest
18Reciprocal Service
• SURS has a reciprocal agreement with other Illinois public
retirement systems
• Can provide a retirement benefit from a public pension system
for which you might not normally be eligible
• May enhance the retirement benefit from one or more of the
retirement systems involved
• Minimum requirements for reciprocal retirement benefit:
• At least 1 year of pension credit in each of the retirement
systems, and
• Age and combined service credit must meet the longest
minimum vesting requirement in each system
19Reciprocal Systems
CEABF County Employees’ Annuity & Benefit Fund of Cook County
CTPF Chicago Teachers’ Pension Fund
FPEABF Forest Preserve District Employees’ Annuity & Benefit Fund of Cook County
IMRF Illinois Municipal Retirement Fund
JRS/GARS* Judges’ & General Assembly Retirement Systems
LABF Laborers’ Annuity & Benefit Fund
MEABF Municipal Employees’ Annuity & Benefit Fund
MWRD Metropolitan Water Reclamation District
PEABF Park Employees’ Annuity & Benefit Fund of Chicago
SRS State Employees’ Retirement System
SURS State Universities Retirement System
TRS Teachers’ Retirement System (of Illinois)
*These systems are not included in the Tier assignment
20Retirement Benefit
Defined Benefit Plans
Traditional Portable
Retirement • Lifetime monthly annuity based • Lifetime monthly annuity based
Benefit on years of service and on years of service and earnings
earnings • Automatic annual increases
• Automatic annual increases apply
apply • Optional lump sum in lieu of
monthly annuity (includes
employer contribution)
Retirement Years of Service Years of Service
Benefit X 2.2% X 2.2%
Calculation X Final Average Earnings X Final Average Earnings
= Lifetime Monthly Retirement = Lifetime Monthly Retirement
Benefit* Benefit*
*less age reduction, *less age reduction,
if applicable if applicable
21Retirement Formulas
Traditional & Portable
• General Formula
• Years of service* x 2.2% x Final Average Earnings (FAE)
• Less age reduction, if applicable
• Minimum & Guarantee (PA89-616)
• Years of service* x $25
• Police & Firefighter
• Special formula for individuals certified as police officer
*Years of service for benefit calculation may be adjusted due to part-time employment
22Retirement Annuity
Traditional & Portable
General Formula
1. 2.2% x years of service=percentage
2. Percentage x Final Average Earnings (FAE)
• Final Average Earnings:
• Average of Highest 8 years within the last
10 years worked, or
• Average of the last 96 months worked, if
applicable
3. Less age reduction, if applicable
Note: Maximum benefit allowable is 80% of the FAE
23General Formula
Example
• 28 years service credit
• Final Average Earnings= $48,350
Calculation of Benefit:
28 yrs x 2.2% = 61.6%
Annual Benefit: 61.6% x $48,350 = $29,783
Monthly Benefit: $29,783 ÷ 12 = $2,481*
*Assumes no age reduction applicable
24Age Reduction
Tier II
If under age 67, annuity reduced by ½ of 1% for
each month under age 67.
Age 67 $2,481 No reduction
Age 66 $2,332 6% reduction
Age 65 $2,183 12% reduction
Age 64-1/2 $2,108 15% reduction
Age 63 $1,885 24% reduction
Age 62 $1,736 30% reduction
25RSP Investment Options
Two different paths for retirement savings
SURS Lifetime Income Strategy (default option):
• Target date portfolio that automatically adjusts as you age
• As you near retirement, money is automatically moved into a secure
income portfolio that will provide guaranteed monthly retirement
income that you cannot outlive
• Can be used as a target date fund with secure income feature turned off
• Provides a lifetime income option that includes access to health
insurance without giving up access to your entire account balance
SURS Core Investment Options
• Select from SURS best-in-class fund line up to create your own portfolio
• Accept risk and rewards of investing in the market
26Retirement Benefit - RSP
Annuity LIS
Retirement • Annuity options through SURS • Lifetime monthly income
Benefit annuity provider – Principal • Optional lump sum in lieu
Financial Group of lifetime monthly income
Available
• Hybrid benefit – lifetime
• Optional lump sum in lieu of income and access to
lifetime monthly benefit partial balance for future
partial distribution
Retirement • Lifetime monthly annuity • Lifetime monthly income
Benefit benefit based on your account based on the amount of
Amounts value at retirement money secured in the
Lifetime Income Strategy at
retirement.
• No automatic annual
increase, but potential for
market gains to increase
monthly income
27RSP Types of Annuity
Principal Financial Group
Single-Life Annuity
• Without Guarantee Period
• With Guarantee Period • 10 years
• 15 years
• 20 years
Joint & Survivor Annuity
• Without Guarantee Period 50% or 100%
• With Guarantee Period 50% or 100%
• 10 years
• 15 years
• 20 years
28RSP Annuity
Example
Projected Account Values
Type of Annuity Age $100,000 $150,000 $200,000
Single-Life 60 $410 $620 $ 820
65 $470 $710 $950
50% Joint & Survivor 60 $370 $550 $ 740
65 $410 $630 $ 840
100% Joint & Survivor 60 $330 $500 $ 670
65 $370 $560 $ 740
Above information provided by Principal Life Insurance Company
As of July 1, 2020 (Amounts rounded down to nearest ten dollars). All J & S options
assume spouse is 5 years younger. No guarantee option selected.
29Additional Retirement
Information
Traditional Portable RSP
Maximum 80% of final average 80% of final average No maximum or
Benefit pensionable earnings pensionable earnings minimum benefit (up
to 401(a)-17 limits)
Health Insurance If eligible, must take a If eligible, must If eligible, must be
benefits at lifetime monthly benefit take a lifetime receiving lifetime
retirement monthly benefit monthly income
30Monthly Survivor Benefit
Traditional Portable RSP
Eligible • Spouse or civil union partner • Spouse/civil union • Annuity:
Survivor • Dependent child up to 18, or partner, or may Spouse/civil union
22 if full-time student name Contingent partner, or may
Annuitant (if no name Contingent
• Disabled child(ren) 18 or over spouse or with Annuitant (if no
if disabled prior to age 18 spousal consent) spouse or with
• Financially dependent parent spousal consent)
• LIS: only spouse
Survivor • Included at no additional cost • Available option at • With annuity:
Benefit • 662/3% of member’s earned retirement at a cost various options at
retirement benefit • Reduction applied to retirement at a
retirement annuity cost
• If no eligible survivor at
retirement, survivor • 50, 75, or 100% of • LIS: 100% survivor
contributions and interest reduced annuity option, reduction
refunded at retirement (1% of elected at applied to
the 8% contribution) retirement guaranteed
withdrawal benefit
31Death Benefit
One-Time Lump Sum
Traditional Portable RSP
Beneficiaries • Any person or legal • Spouse or Civil Union • Spouse or Civil Union
entity partner, or partner, or
• Alternate beneficiary • Alternate beneficiary
Pre- • Account balance, • Member and employer • Account investment
less 1/8 if survivor contributions and interest, value
Retirement benefit payable less value of survivor
benefit payable, if
applicable
Post- • With annuity: depends
on terms of annuity
Retirement contract with RSP
• Without survivor: Greater of $1,000 or remainder of
provider
account balance
• With survivor: No death benefit
• LIS: Lump sum equal to
market value (if no joint
and survivor benefit
payable)
32Social Security
• Windfall Elimination Provision
“How it affects your Social Security retirement or
disability benefit”
• Government Pension Offset
“A law that affects spouse’s or widower’s benefits”
• Contact Social Security for more
information
www.ssa.gov
(800) 772-1213
33Plan Choice Booklet
• SURS will send out a packet
of information following
notice of your employment
from your employer.
1. Review packet materials
2. Use online interactive Plan
Choice Decision Pool
3. Compare the plans
4. Submit retirement choice
election within six months
from the date SURS receives
your certification of
employment
• Online preferred
34SURS Website
35Life Events-New to SURS
36Online Election
• Register on SURS Member Website
• Login to your SURS account
• Home Page message that Retirement Choice
Election is needed
• Click on Retirement Choice Election button
37Online Election Form
• Use the tool to learn about the three plans
• When you are ready, select your plan online
38Lifetime Decision
• One-time, lifetime, irrevocable decision
• Cannot be changed
• Six months to choose a plan
• Important decision for your future retirement
• Review materials carefully
• Take advantage of available resources
• Default date is listed on the cover letter of your
Retirement Choice Election Packet
• Do not default on your plan choice!
39One Piece of the Puzzle
• Think of your SURS benefit, or any retirement benefit for that
matter, as just one piece to your retirement puzzle
• After retirement, an estimated 75-80% of pre- retirement
income is needed to maintain pre-retirement lifestyle
• Social Security benefits could be affected by the Windfall
Elimination Provision or the Government Pension Offset
• Personal savings is a key component to retirement security
• Take advantage of the new SURS Deferred Compensation
Program - payroll deducted and tax deferred (employer must
adopt by 6/30/21)
40New SURS Deferred
Compensation Plan
• Public Act 100-769, passed in August of 2018, requires SURS
to implement a new Supplemental Plan
• Supplemental savings plays a critical role in retirement
readiness
• SURS Deferred Compensation plan will:
• Provide a vehicle for all active SURS members (regardless of plan
choice) to save additionally via payroll deduction
• Be a 457 plan
• Offer the same investment lineup as the RSP Plan
*The new SURS 457(b) Plan will be adopted by your employer before June 30, 2021.
41How to Contact SURS
SURS 800-275-7877
1901 Fox Drive 217-378-8800
Champaign, IL 61820 217-378-9800
www.surs.org
42“Like” Us on Facebook
43Disclaimer
All aspects of administration of the State Universities Retirement System
(SURS), including but not limited to benefit calculation and payment, must
comply with state and federal law. No employee of SURS has the authority
to bind the System to take action contrary to law, even in the event of
misstatement of fact or law. Furthermore, the information contained
herein states SURS’ current understanding of the law which could change
over time due to court opinions, statutory changes, or other legal matters
or interpretations (e.g., attorney general opinions). SURS is required
under law to correct any mistake in benefit amount, even after payments
have begun. This document was created for general information only. Any
information provided by SURS does not represent personal tax or legal
advice, either express or implied. You are encouraged to seek professional
legal and/or tax advice for your personal income tax questions and for all
other legal purposes.
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