UNC System Voluntary 403(b) FAQs

GENERAL QUESTIONS

 

  1. Why have the 17 UNC constituent institutions, UNC Health Care System, and UNC General Administration and affiliates, made a collective decision to implement a new system-wide 403(b) program?
  • The Internal Revenue Service (IRS) recently issued extensive new rules regarding the administration of 403(b) plans for employers like the institutions in the University of North Carolina. These new rules are complex and require that the University play a more active role in administering these plans. In addition, by leveraging the UNC system’s shared purchasing power, we are able to offer a broad array of investment choices at competitive and reasonable fees to all employees.
  1. What has been the process for making decisions about the implementation of the new system-wide 403(b) plan?
  • A UNC 403(b) System-wide Steering Committee was established to develop a process for implementation and to ensure compliance with the federal law. This Committee was made up of human resource/benefits/legal representatives from the 17 constituent institutions, UNC Health Care System and General Administration, assisted by a national benefits consulting firm and outside tax/regulatory legal counsel.
  1. Who are the approved 403(b) vendors and how were they selected?
  • Fidelity Investments and TIAA-CREF were selected through a competitive bid process to be the two 403(b) authorized vendors beginning January 1, 2009.
  1. What are the features of a voluntary 403(b) retirement program?
  • Contributions are deducted from your paycheck on either a pre-tax or post-tax (ROTH) basis and accumulate on a tax deferred basis.
  • Your contributions are immediately 100% vested.
  • Fidelity and TIAA-CREF make available a wide choice of investment options from which you may choose.
  • Loans are available through either Fidelity or TIAA-CREF that would permit you to borrow against your account balance.

Next Steps for Current Participants

  1. Will I need to take any action if I am currently enrolled in my campus’ Fidelity and/or TIAA-CREF 403(b) plan?
  • No. However, since there will be a large array of funds available from which you may choose, you may wish to review your current fund allocations and consult with your 403(b) investment adviser to determine whether you would like to make any changes in your fund allocation.
  1. Will I need to take any action if I am currently enrolled in a 403(b) plan that will no longer be offered after December 31, 2008?
  • Yes. Your contributions will stop and no longer be sent to your current 403(b) vendor after December 31, 2008. Therefore, you will need to contact either a Fidelity and/or TIAA-CREF retirement counselor to learn more about their plans. To enroll in one of these plans you must complete (1) an application form with either Fidelity or TIAA-CREF and (2) a salary reduction agreement to be submitted to your campus benefits office.
  1. Can I leave my existing assets with my current deselected 403(b) vendor?
  • Yes. You may also elect to transfer any existing assets to either Fidelity or TIAA-CREF now or at a later date if you desire. We encourage you to contact your current vendor before you make any transfer. Ask them to explain any fees, transfer restrictions, or surrender charges that you might incur if you transfer your assets.
  1. What is considered a "grandfathered" or "orphan" 403(b) account under the final regulations?
  • Grandfathered contracts are those which received no contributions after December 31, 2004. Grandfathered contracts are governed by the rules in existence prior to the issuance of the final regulations, and funds in a grandfathered contract may remain in that contract without additional restrictions until the participant experiences a triggering event that allows a distribution.
  • Orphan contracts are those accounts that received contributions between January 1, 2005 and December 31, 2008, but which are not selected as vendor under the UNC System-wide program after January 1, 2009.
  • Orphan contracts are subject to the final 403(b) regulations. Any vendor that received contributions for an employee's account during this period must sign an agreement with TIAA-CREF, the loan aggregator under the UNC System-wide program, in order for participants in such contracts to receive loans and hardship withdrawals through the orphan contract.

Roth 403(b)

  1. What is a Roth 403(b) Account?
  • Unlike a traditional 403(b) plan that allows you to make contributions on a pre-tax basis, a Roth 403(b) account allows you to make contributions on an after-tax basis, as permitted under the Internal Revenue Code. Under this type of account, employees can designate some or all of their contributions as Roth 403(b) contributions (which are included in gross income), rather than traditional, pre-tax contributions. Interest and earnings on these contributions when withdrawn are tax-free if the distribution is considered to be a “qualified” distribution.
  1. What is a “qualified” distribution? 
  • A qualified distribution is one in which the earnings on Roth 403(b) contributions can be withdrawn tax-free. Roth 403(b) contributions are always considered tax-free at withdrawal.
  • When is a Roth 403(b) distribution considered to be a “qualified” distribution?
    • A Roth 403(b) distribution must meet both eligibility and non-exclusion period requirements in order to be considered a “qualified” distribution.
    • Eligibility refers to when you become eligible to receive a Roth 403(b) distribution. For a participant to be eligible, the distribution must be made
      • On or after the date the participant attains age 59 ½ OR
      • To a beneficiary (or the participant’s estate) on or after the participant’s death OR
      • Pursuant to the participant being disabled, AND
      • Made after the “non-exclusion period”
    • Non-exclusion Period is the 5-year period from which you make your first Roth contribution and refers to:
      • The first taxable year for which a Roth contribution was made under the plan; OR
      • The date of the first taxable year from the original Roth contribution if the participant has rolled from one Roth 403(b) account to another Roth contribution account under a plan.
  1. What if I receive a Roth distribution before it is considered “qualified”?
  • If a distribution is not "qualified," then the earnings and interest are subject to taxation and possible early distribution penalties. However, taking a partial distribution prior to becoming qualified does not disqualify remaining funds in your Roth account from being "qualified" in the future.
  1. How much can I contribute to a Roth 403(b)?
  • The combined amount contributed to a Roth 403(b) account and a traditional pre-tax account in any one calendar year for any individual is limited by the Internal Revenue Code 402(g) limit. In 2009, the combined limit is $16,500 plus an additional $5,500 in catch-up contributions if you are age 50 or older by the end of the year.
  1. Do the same income restrictions that apply to Roth IRAs apply to Roth 403(b) contributions?
  • No, there are no limits on income in determining if Roth 403(b) contributions can be made. Of course, you must have salary from which to make any 403(b) contributions.
  1. What effect does my Roth 403(b) contribution have on my Roth IRA? 
  • None. You may contribute up to the maximum amount allowed under 403(b) and, if eligible, the maximum amount allowed under a Roth IRA. You should consult with your financial/tax advisor for information about eligibility to contribute to a Roth IRA.
  1. Can my pre-tax 403(b) account be converted to a Roth after-tax 403(b) account?
  • No. While it is possible for a traditional IRA to be converted to a Roth IRA, no conversions are allowed for a pre-tax 403(b) account to a Roth after-tax 403(b) account.
  1. Are Roth 403(b) accounts subject to the Required Minimum Distribution (RMD) rules?
  • Yes. Generally, 403(b) accounts, including Roth accounts, are subject to the RMD rules and begin at (1) the later of age 70½ or (2) separation from employment from the university sponsoring the plan, subject to plan provisions. However, a Roth 403(b) account may be rolled over to a Roth IRA (which is not subject to the RMD rules) prior to the required beginning date.
  1. Can I roll over my Roth 403(b) account to other types of plans?
  • Yes. In addition to rolling over a Roth 403(b) account to a Roth IRA, they can be rolled over to other Roth 403(b) or Roth 401(k) accounts, if the plan will accept the rollover.
  1. Can I borrow against my Roth 403(b) accounts?
  • This will vary by 403(b) vendor.
  1. Why should I consider making contributions to a Roth 403(b) account?
  • A Roth 403(b) account might appeal to you if:
    • You are not eligible to contribute to a Roth IRA due to income limit restrictions;
    • You are in a lower income tax-bracket and have a long investment horizon for tax-free growth;
    • You are financially stable, view tax hikes as inevitable, and believe that by paying taxes now future tax burdens might be reduced; or
    • You want the flexibility to save on both a pre-tax and after-tax basis.

FIDELITY

  1. What investment options will be available with Fidelity ? 
  • For your convenience, Fidelity has categorized your options into four tiers, ranging from more conservative to more aggressive. For a complete description of all the funds available in the plan, please call Fidelity at 1-800-343-0860.
    • Tier 1: Fidelity Freedom Funds®. Choose one of twelve funds based on your expected retirement date.
    • Tier 2: Core Investments. Select from a concise menu of 20 investment options representing the primary asset classes (stocks, bonds, short-term instruments).
    • Tier 3: Expanded Selection. An offering of hundreds of choices from various fund families, including all Fidelity mutual funds not included in Tier 2 and funds from American, T. Rowe Price and Vanguard.
    • Tier 4: Fidelity BrokerageLink®. Offers you the flexibility to select from numerous mutual funds – beyond those you already have in the UNC 403(b) Program.
  1. Can you explain what “Lifecycle Funds” are? 
  • Lifecycle funds are designed to provide appropriate investment asset allocations based on a participant’s expected retirement date. This approach provides an especially attractive option to participants who areunsure of how to allocate their contributions.
  • Freedom Funds, Fidelity’s proprietary lifecycle funds, allow participants to choose one investment for all their retirement contributions. Freedom Funds invest in portfolios of underlying Fidelity mutual funds and were designed to maximize assets for retirement while providing participants a simple way to save.
  • Participants simply select the Freedom Fund that most closely aligns with their expected retirement date. Over time, our investment professionals adjust the underlying investments to correspond with appropriate levels of risk and return.
  1. Are there any restrictions on withdrawals and/or exchanges with the Principal Fixed Account?
  • No restrictions or surrender charges will apply to the amount you withdraw as a result of retirement, death, disability, unforeseen hardship, separation from service, or attainment of age 65. For all investment options administered by Fidelity, you may make a direct exchange from The Principal Fixed Account to a non-competing fund. A non-competing fund is generally an equity or stock fund, or a bond fund with a duration of greater than three years. Before exchanging from the Principal Fixed Account to a competing fund, you must first exchange into a non-competing fund for 90 days.
  • If you request a transfer to another account outside of the UNC System Voluntary 403(b) Retirement Program with Fidelity, withdrawals in excess of 20% of your account within a calendar year will be subject to a surrender charge of 4% of the amount of the excess withdrawal.
  1. What is a self-directed brokerage option? 
  • Fidelity offers Fidelity BrokerageLink® to enable participants to diversify their retirement savings among a wide array of investment choices through a brokerage account. Fidelity BrokerageLink® is an additional plan investment option that is a window to thousands of available mutual funds.
  • Through BrokerageLink®, participants have access to quality brokerage services that are the hallmark of Fidelity Brokerage Services LLC. BrokerageLink® offers participants the flexibility to select from thousands of mutual funds, beyond those already available in the UNC 403(b) Program.
  • BrokerageLink also offers participants instant access to their accounts and to investment resources through online access, portfolio management software, and through toll-free telephone service. These technologies make it easy for your participants to manage their money virtually 24 hours a day. The BrokerageLink® service allows participants to do the following: 
    • Elect to have their payroll contributions allocated directly to BrokerageLink®
    • Exchange money between their existing plan options and BrokerageLink®
    • Place orders to buy and sell mutual funds
    • Obtain real-time quotes on mutual funds and market indices
    • Check current account balances and holdings
    • Review orders and account activity
  • Our recordkeeping system maintains the BrokerageLink® Account as a separate account. To request exchanges into or out of the BrokerageLink® Account, you can transact on line or call our toll-free retirement Service Center. Once the assets are transferred to the BrokerageLink® Account, you may immediately place a trade in that account.
  1. How can I find out what, if any, fees are being charged for funds I invest in through the Brokerage Window? 
  • All investment options offered for UNC’s retirement plan, including Fidelity retail funds, Select Funds, and Fidelity FundsNetSM funds, are without loads. There is no annual BrokerageLink plan or participant fee. Brokerage trading fees and commissions do apply. There is a transaction fee for some non-Fidelity Funds available via BrokerageLink.
  • You will receive a Brokerage Commission Schedule, detailing applicable commissions and fees for trades, upon enrolling in the BrokerageLink service. We include all commission charges for transactions in the trade proceeds and add commission charges for purchase transactions to the amount that you pay for the trade. In addition, we deduct commission charges for sell transactions from the amount that you receive for the trade.
  • For more information on Fidelity BrokerageLink, you are encouraged to call Fidelity at 1-800-343-0860.
  1. If I invest some of my retirement plan monies through the Brokerage Window, will I receive a consolidated statement showing all my retirement plan investments?
  • Yes. Once you have opened a Fidelity BrokerageLink® account, the total market value of the account will appear, in addition to your standard plan options, on your account statement. You also receive a separate statement for their Fidelity BrokerageLink® account detailing the holdings and market value of all mutual funds held for any month in which there is account activity (or quarterly, if no activity). In addition, if you have an established account on Fidelity.com, you will also have access to the retail online statement.
  • We mail a confirmation statement the day following a trade execution within a participant’s BrokerageLink account. We also distribute annual and semiannual reports for the investments owned.
  1. Is there a way that I can set up a recurring investment into a mutual fund available in the Brokerage Window, each pay period (i.e., bi-weekly or monthly), similar to the investment direction I already make in the 403b plan?
  • Yes. You may elect to contribute all or a portion of your payroll contributions directly to the Fidelity BrokerageLink® account. You may have your BrokerageLink payroll contributions systematically invested in mutual funds through a Fidelity Brokerage Representative.
  1. Can I invest my after-tax ROTH contributions through the Mutual Fund Brokerage Window?
  • Yes. You can invest monies in the after-tax Roth contribution source to your Fidelity BrokerageLink® account.

ROTH (After-Tax) Contributions

  1. What is a Roth 403(b) account?
  • Fidelity offers a Roth contribution feature in the UNC 403(b) Program. This provision allows participants to make after-tax contributions to the plan while taking earnings tax-free at retirement—as long as the withdrawal is qualified.
  1. Should I consider making Roth plan contributions?
  • To best help with each individual’s particular situation, you are encouraged to visit the Fidelity Roth 403(b) Contribution Educational Calculator online at: https://www.mysavingsatwork.com/taxexempt/tools/Roth403bTool.xls.
  1. What is a "qualified" distribution? 
  • A Roth 403(b) distribution must meet both eligibility and the non-exclusion period requirements in order to be considered a “Qualified Distribution”. A qualified distribution is one in which the earnings on Roth contributions can be withdrawn tax-free. Roth contributions are always considered tax-free at withdrawal.
  • Eligibility refers to when you are eligible to receive their Roth 403(b) distribution. For a participant to be eligible, his or her distribution must be made...
    • on or after the date the participant attains age 59 ½ OR
    • to a beneficiary (or the participant’s estate) on or after participant’s death OR
    • pursuant to the participant being disabled, AND
    • made after the "non-exclusion period"
  • The Non-exclusion Period is the 5-year period from which a participant makes his or her first Roth contribution. This refers to:
    • The first taxable year for which a Roth contribution was made under the plan; OR
    • The date of the first taxable year from the original Roth contribution if the participant has rolled from one Roth 403(b) account to another Roth contribution account under a plan.
  1. What if I receive a Roth distribution before it is considered "qualified"?
  • If it is not considered qualified, the Roth 403(b) distribution will be taxed in the same manner as distributions of traditional after-tax contributions. The basis would be equal to the sum of the Roth 403(b) contributions and would not be taxed - these monies were taxed prior to contribution to the account. Any investment earnings on the account would be taxed.
  1. How much can I contribute to a Roth?
  • 403(b) Roth contributions are subject to the contribution limits of regular 403(b)’s, i.e.,$16,500 for 2009, or $22,000 for those 50 or older by the end of the year.
  1. Is there an Adjusted Gross Income (AGI) limit to be eligible to make a Roth contribution?
  • Unlike the Roth IRA, there are no adjusted gross income (AGI) limits for participants making designated Roth 403(b) contributions.
  1. What effect does the Roth contribution have on a Roth IRA?
  • None. You can contribute up to the maximum amounts allowed to both a Roth 403(b) and a Roth IRA. Please consult a tax advisor for your eligibility in contributing to a Roth IRA account.
  1. Can my pretax 403(b) accounts be converted to a Roth account?
  • Pre-tax 403(b) contributions cannot be converted to a Roth account.
  1.  Are Roth accounts subject to Required Minimum Distribution (RMD) rules?
  •  RMDs are required on Roth 403(b) contributions and earnings. This is different from Roth IRAs, where RMDs are not required. Roth sources distributed in the course of a RMD will be taxed prorata. Any other traditional after-tax sources will be taxed via the simplified method.
  1.  Can I borrow against my Roth account?
  • Yes, Roth sources will be included in the loan hierarchy. There will be no tax implications at the time the loan is initiated.
  • Note: If you default on your loan from Roth sources, you would be responsible for the taxes on the earnings.

Accessing Your Funds (Distributions/Transfers/Rollovers/Terminating/Retiring)

  1. When can I access my money?
  • You may access your money if you become disabled, upon reaching age 59 ½ or separation of service from the UNC System.
  • While still working, you may be able to access your money through a loan or hardship withdrawal. Please contact Fidelity at 1-800-343-0860 to discuss your situation in more detail.
  1. Can I borrow from my UNC System 403(b) account?
  • Yes, loans are available in the UNC System 403(b) Program. To determine your eligibility and model loan scenarios, please contact Fidelity at 1-800-343-0860.
  1.  Should I borrow money from my 403(b) plan?
  •  If you are considering taking a loan from your UNC System 403(b) Program account, be sure to understand the issues outlined below. To discuss your specific situation in more detail, please contact Fidelity at 1-800-343-0860.
  • Tax penalties. If you default on your loan or otherwise fail to pay it back, your outstanding balance may be considered a distribution, which will be subject to ordinary income taxes and possibly a 10% early withdrawal penalty if you're younger than age 59½, unless you qualify for an exception to this rule.
  • May lose out on higher potential investment returns. Any money you borrow from your plan could miss out on any opportunities for growth, if the market is rising. When you take money out of your account, even for a limited period of time, you lose some of the benefits of compounding—the ability of your savings to build potential earnings on top of previous earnings.
  • Loan payments (plus interest) are made with after-tax dollars. Simply put, you're borrowing money you contributed on a pretax basis, and paying it back with after-tax income. It also means you need to consider how you're going to manage with that much less take-home pay. Loan repayments (plus interest) to your plan account are automatically deducted from a bank account you establish to pay back the loan through Automated Clearing House (ACH) processing.
  • Loan fees. There is a $50 set up fee and $25 annual maintenance fee ($6.25 per quarter while loan is outstanding) for taking a loan on your UNC System 403(b) Program account.
  1. Can I take a "hardship withdrawal" from my 403(b) plan?
  • Yes. You may initiate hardship withdrawals by calling Fidelity directly at 1-800-343-0860. Fidelity will send you a withdrawal request form and you will be required to complete the form and send any supporting documentation back to Fidelity. We will review and approve the hardship withdrawal request and the check is typically mailed to you within two to three business days.
  1. What happens if I terminate employment?
  • When you terminate employment, you may keep your plan assets in the UNC System 403(b) Program, request a rollover to a personal account or initiate a withdrawal. You should contact Fidelity at 1-800-343-0860 upon termination to discuss your specific situation in more detail.
  1.  What are my options at retirement?
  • Our recordkeeping system is flexible and can administer distributions as your plan provisions allow and according to direction from you.
  • Lump Sum Withdrawals - You can request a lump sum distribution through a Retirement Services Specialist. Mutual funds are redeemed at current market value on the same business day the lump sum redemption is requested if prior to 4:00 P.M. Eastern time. Fidelity will issue the check, process the tax reporting, and mail the check to you within three business days.
  • Partial Withdrawals - Fidelity can process partial distributions through a systematic withdrawal plan for participants who wish to leave their assets in the plan and take income as they need it. Our recordkeeping system can use several methods to calculate installment distributions. Participants can request fixed dollar amounts be paid out monthly, quarterly, or annually over the life of the installment program. You may also use our decremental counter, which will pay out a proportional amount of your account monthly, quarterly, or annually based upon the number of payments remaining and the current account balance, thus mirroring annuity type payments.
  • Rollover IRAs - We can also provide rollover kits to participants who wish to roll over their assets into an IRA. You may establish a no-load rollover IRA with Fidelity, which would allow you to remain in or move to a Fidelity fund. In addition, effective January 2008 per the Pension Protection Act of 2006, we will support rollovers from retirement plans directly to Roth IRAs.
  1. What happens to my 403(b) account if I should die before I retire?
  • Recognizing that certain life events require extreme sensitivity, all Fidelity Retirement Services Specialists are trained to handle bereavement calls and assist beneficiaries. Beneficiaries can call the Retirement Service Center and immediately speak with a Retirement Services Specialist, who will assist them with any questions they may have, discuss their options, go over the distribution forms and process, and send out beneficiary distribution paperwork. For security purposes, we do not disclose any account information or beneficiary names on file to the caller. The beneficiary has two distribution options: to cash out the account immediately, or to transfer the account into his or her name and take a distribution at a later time. When the beneficiary returns the forms to Fidelity, we verify that he or she is listed as a beneficiary on the account and process the transaction.
  1. May I combine my other 403(b) account from a previous employer with my UNC System 403(b) account?
  • Yes. Rollovers of assets into the UNC System 403(b) Program from another retirement program are permitted. In order to initiate a rollover of assets, a participant may obtain a rollover form by calling a Retirement Services Specialist or by accessing the form on line.ll also require a distribution form in order to roll over the assets. The plan sponsor or the

WHERE CAN I GET HELP OR MORE INFORMATION

  • If you have any questions on the UNC System 403(b) Program, you are invited to call the Fidelity Retirement Services Center at 1-800-343-0860. Representatives are available Monday through Friday from 8:00 A.M. to midnight Eastern time. Additionally, Fidelity will be frequently visiting each campus to conduct onsite appointments. To view the latest schedule, and reserve a time that is convenient for you, please visit www.fidelity.com/atwork/reservations.

TIAA-CREF
Investment Options

  1.  What investment options will be available with TIAA-CREF?
  • Effective January 1, 2009, TIAA-CREF will be offering a range of investment options across four Investment Tiers.
  • Tier I: TIAA-CREF Lifecycle Funds- Asset class and fund weightings automatically adjusted based on your age; choose a fund based on your expected retirement date.
  • Tier II: Core Investments- Proprietary and non-proprietary accounts and funds representing the major asset classes- fixed income, money market, stocks and real estate.
  • Tier III: Expanded Selection- A broader menu of annuity accounts and mutual funds offered by TIAA-CREF, representing a broad array of asset classes and investment styles. 
  • Tier IV: TIAA-CREF Brokerage Service- Allows you to build and manage a portfolio by providing you access to hundreds of no transaction fee mutual funds, transaction fee mutual funds and Electronic Traded Funds (ETFs).
  • For information about the investment choices currently available under the program, you can visit enroll.tiaa-cref.org/unc403b/.
  1.  Can you explain what “Lifecycle Funds” are?
  • TIAA-CREF Lifecycle Funds offer a convenient solution for investors who prefer to have their retirement investments professionally managed using a strategically developed, disciplined approach.  
  • TIAA-CREF Lifecycle Funds are managed to target the retirement years of 2010 through 2050 in five-year increments. Simply select the Lifecycle Fund that is closest to the year you expect to retire. We also offer a Retirement Income Fund which provides you with asset allocation management throughout your retirement years. 
  • By investing in a selection of the TIAA-CREF Funds, whose underlying investments include stocks and bonds, each Lifecycle Fund provides a diversified portfolio whose asset allocation dynamically adapts over time to help meet the investment objectives consistent with an investor’s planned retirement date. These funds are professionally managed, reliving your need to make complicated investment, portfolio allocation and adjusting decisions as your time horizon changes.
  1.  What is a self-directed brokerage option?
  • TIAA-CREF Brokerage Services offers simplicity, flexibility and choice. The investments available through our brokerage window include:
    • Thousands of mutual funds from some of the best-known fund families
    • Tools and resources – Clients of TIAA-CREF brokerage services have access to market news, including:
      • Fund Finder mutual fund screener powered by Morningstar
      • Thomson Financial research
      • S&P equity research
      • Real-time quotes
      • Dow Jones business news
    • We have partnered with Pershing LLC as our clearing partner. Pershing boasts over 60 years’ experience supporting financial institutions in trade execution, data processing and investment product and clearance services.
  1. How can I find out what, if any, fees are being charged for funds I invest in through the Brokerage Window?
  • Participants using the TIAA-CREF Brokerage Window will pay an Annual Fee of $40 per account, or $10 per quarter. In addition, depending on the investment selected, transaction fees are assessed.
  • Mutual Funds
    • No-transaction-fee (NTF) funds:
      •  Short-term redemption fee: $50 minimum, or 1% of proceeds up to $250, for shares held less than six months
      • Dollar cost averaging transactions: No fee, minimum transaction $100
    • Transaction-fee (TF) funds:
      • Transaction fee: $35 per trade regardless of order size
      • Dollar cost averaging transactions: No fee ; minimum transaction $100
  • If I invest some of my retirement plan monies through the Brokerage Window, will I receive a consolidated statement showing all my retirement plan investments?
  • Your assets in your TIAA-CREF Brokerage Account will appear on your statement with your other retirement plan investments with TIAA-CREF. However, you will also receive a separate quarterly statement showing only the activity in your Brokerage Account.
  1. Is there a way that I can set up a recurring investment into a mutual fund available in the Brokerage Window, each pay period (i.e., biweekly or monthly), similar to the investment direction I already make in the 403(b) plan?
  • With the TIAA-CREF Brokerage Window, contributions cannot be directed from your payroll into the Window. However, you are able to transfer funds from your 403(b) Voluntary Plan into the Brokerage Window. The minimum initial transfer amount is $5,000 and subsequent transfer amounts must be at least $1,000. Once the funds are transferred into the Brokerage Window you can direct the money to be automatically “swept” into any available investment on a monthly, bi-monthly, quarterly, semi-annual or annual basis.
  1.  Can I invest my after-tax Roth contributions through the Mutual Fund Brokerage Window?
  • With the TIAA-CREF Brokerage Window, you are able to transfer accumulations attributable to your after-tax Roth contributions to funds offered through Brokerage. You are not able to have your after-tax contributions directly contributed to investments in your Brokerage account from payroll, but you can transfer those contributions and attributable interest and/or earnings in your 403(b) into the Brokerage Window.

 Roth (After-Tax) Contributions

  1. What is a Roth 403(b) account?
  • With the Roth 403(b) option, your contribution is taken out of your paycheck after your income is taxed, which does not lower your current taxes. The benefits of the Roth option are tax-deferred earnings and the possibility for tax-free income in retirement. If you make a withdrawal of your Roth accumulations at least five years after making your first Roth contribution and you are at least age 59½ (or disabled or you die), the earnings will also be tax-free.
  1.  Should I consider making Roth plan contributions?
  •  The Roth 403(b) option may be right for you if:
    • You want to make higher after-tax contributions
      • You can maximize your after-tax savings by contributing up to $16,500 in 2009 and an additional $5,500 if you are age 50 or older, for a total of $22,000 in Roth 403(b) contributions in one year. As a reminder, if you also make pre-tax contributions, they are combined with the Roth contributions for the maximum of $16,500 or $22,000 (if you are age 50 and older).
    • You expect to be in a higher tax bracket when you retire
      • It may be difficult to predict what your tax situation will be in the future. But, if you think you will be in a higher income tax bracket in retirement than you are now, then you may want to choose the Roth 403(b) option. You will pay taxes on the Roth contributions now, potentially at a lower tax rate, and then receive your assets tax-free when you’re in a higher tax bracket.
    • You earn too much to contribute to a Roth IRA
      • If you earn more than what the income limits allow for contributing to a Roth IRA in 2009, up to $105,000 for a full contribution, and between $105,000 and $105,000-$120,000 for a partial contribution, and between $166,000 and $166,000-$176,000 for a partial contribution for joint filers, you might want to consider making Roth 403(b) contributions since there are no income limits.
    • You want to pass on tax-free income to your heirs
      • If you are near retirement and believe you will have more than enough savings to meet your immediate needs, Roth 403(b) contributions may be a way you can pass some of your retirement assets to your beneficiaries tax fee, under certain circumstances.
  • Because of the tax implications associated with traditional pre-tax and after-tax contributions, you should consult with your tax advisor regarding your situation.
  1.  What is a "qualified" distribution?
  • A qualified distribution is when you attain age 59½ (or you are disabled or you die) and you (or your beneficiaries) withdraw monies at least five years after you make your first Roth 403(b) contribution.
  1.  What if I receive a Roth 403(b) distribution before it is considered "qualified"?
  • Roth 403(b) contributions are always tax-free. However, if you withdraw before the age of 59½ and have not met the five-year seasoning period, the Roth 403(b) earnings will be taxable. You may also be subject to an IRS early withdrawal penalty for distributions prior to the age of 59½.
  1.  How much can I contribute under the Roth 403(b) option?
  • In 2009, you can contribute up to $16,500 to a 403(b) plan. If you are age 50 or older, you can contribute an additional $5,500 as part of the catch up provision. You can make any combination of pre-tax and after-tax Roth contributions to the plan as long as your total does not exceed the limits noted herein.
  1.  Is there an Adjusted Gross Income (AGI) limit to be eligible to make Roth 403(b) contributions?
  • No. The income limits that apply to a Roth IRA do not apply to a Roth 403(b) (see 2nd question in this section for more information related to Roth IRA income limits).
  1.  What effect does the Roth 403(b) contributions have on a Roth IRA?
  • You can contribute to both the Roth 403(b) and Roth IRA, assuming you are eligible for a Roth IRA. But as noted above, the total between the two cannot exceed the annual limits.
  1.  Can my pretax 403(b) accounts be converted to a Roth account?
  •  No. Pre-tax contributions cannot be converted into Roth 403(b) contributions, or vice versa.
  1.  Are Roth 403(b) accumulations subject to Required Minimum Distribution (RMD) rules?
  • Yes. If you participate in a 403(b) plan--including plans offering the Roth option--you are generally required to take minimum distributions at age 70½. If you continue working at the same employer past the age of 70½, you are not required to take your first minimum distribution until April 1 following the year you retire from that employer.
  • The Roth IRA, on the other hand, is not subject to minimum distribution. In addition, you can rollover your Roth 403(b) accumulations to a Roth IRA. If you do prior to the required distribution start date, you won’t be required to make any withdrawals.
  • Keep in mind that if you rollover your Roth 403(b) accumulations into a new Roth IRA, your five-year time frame for the Roth IRA begins on the date you roll over the Roth 403(b) accumulations. Your five-year period from your Roth 403(b) plan is not carried over to the Roth IRA. On the other hand, if you rollover the Roth 403(b) accumulations into an established Roth IRA, the five-year Roth IRA period begins with the date you made your first contribution to a Roth IRA and is unaffected by the transfer of Roth 403(b) accumulations into the Roth IRA.
  1.  Can I borrow against my Roth 403(b) accumulations?
  • No, loans will not be available from Roth 403(b) accumulations. However, if you also have pre-tax accumulations, the Roth accumulations will be included in the loan calculation, but they will not be issued in the collateral required to secure the loan.

Accessing Your Funds (Distributions/Transfers/Rollovers/Terminating/Retiring)

  1.  When can I access my money?
  • 100% of the contract balance is available if you have terminated employment from the UNC system. You also have the ability to access funds from this account while still employed if you have attained age 59½, through a loan or in the event of a hardship situation.
  1.  Can I borrow from my UNC System 403(b) account?
  • Yes, you can borrow funds from your 403(b) account issued by TIAA-CREF as the UNC System allows for this feature. You can log in to your account to see if you are eligible to borrow from your account, and what amount is available for a loan.
  • Loans are subject to and reduce the availability of funds. Please note the total collateralized amount reduces the availability of funds.
  • Loans are available from a minimum of $1,000 to a maximum of $50,000. How much you can borrow depends on the amount you currently have in the plan and whether you have other outstanding loans.
  1.  Should I borrow money from my 403(b) plan?
  • Your 403(b) plan is designed to supplement your retirement savings through other vehicles. Ideally it is used for that purpose.
  • Each individual’s circumstances are unique, and we cannot provide tax advice. However, borrowing against your 403(b) is often preferable to making a withdrawal from the plan assuming you would be eligible for both. Borrowing could be advantageous versus a withdrawal of funds for participants who do not meet the 10% penalty tax exemptions. The benefits of choosing a loan in lieu of a withdrawal are:
    • Participant would avoid taxation as well as the penalty tax if applicable.
    • Participant would not be depleting their plan accumulations, assuming repayment of the loan.
  • Other issues to consider when contemplating a loan against your 403(b):
    •  For loans issued on or after January 1, 2002: If we do not receive a loan repayment by the last day of the month it is due, the outstanding loan balance will be in default. Generally, if the total overdue amount is not paid by the end of the calendar quarter following the calendar quarter in which the repayment was due, the outstanding loan balance (including accrued interest) will be deemed a distribution and reported to the IRS as current taxable income.
    • If you're in default, it means you haven't met the legal obligations of the loan. Non-distributable default amounts are those that cannot be deducted from your account since you did not reach a triggering event (such as termination of service or attainment of age 59½.) Since the non-distributable default amount may be different than the entire defaulted amount, it is recommended that you contact the alternate carrier for this information. Note that you are legally obligated to report this amount, which will impact additional loan availability.
    • Tax Ramifications: It is important to remember that defaults are taxable as ordinary income in the year they occur. If you are under age 59½, your defaulted amount may also be subject to an additional 10% federal tax penalty for an early distribution from your retirement account. Defaulted amounts are reported on Tax Form 1099R.
  1.  Can I take a "hardship withdrawal" from my 403(b) plan?
  • You can withdraw your elective deferrals (but not earnings) due to financial hardship while still employed. Generally, you must show an immediate, significant need that cannot be met with other resources, including loans from your retirement plan.
  1.  What happens if I terminate employment?
  • With TIAA-CREF, you have the great advantage of portability of your retirement plan account balance. Almost anywhere you work in the nonprofit community, TIAA-CREF will be part of the retirement plan. Even if you leave the nonprofit field, your retirement savings can continue to grow with interest in TIAA Traditional and with the earnings potential of the TIAA-CREF variable annuity accounts, as well as any mutual funds your plan may offer. There are inherent risks in investing in securities. Past performance is no guarantee of future results. In addition, investment return and principal value of assets will fluctuate, so when redeemed, they will be worth more or less than the original cost.
  1.  What are my options at retirement?
  • When it's time to decide how to take income from The University of North Carolina System Voluntary 403(b) Program, you have a variety of options with TIAA-CREF.
    • Lump Sum — You can withdraw all or part of your account in a single cash payment, depending on your plan rules and the terms of your contracts. (Your right to a lump-sum distribution from your TIAA Traditional Account may be restricted to taking 10 annual payments under those terms).
    • Systematic Withdrawals — You can choose to receive regular income payments (minimum $100) on a semi-monthly, monthly, quarterly, semi-annual or annual basis. You can increase, decrease or suspend the payments at any time. (Note: These withdrawals are not available from TIAA Traditional Account balances.)
    • Fixed Period — You can choose to receive income for a set period of two to thirty years, depending on the terms of our contract and your plan's rules (and not to exceed your life expectancy). Payments stop at the end of the period, during which you will have received all your principal and earnings.
  • Lifetime Retirement Income
    • One-life annuity — Provides income for as long as you live.
    • Two-life annuity — Provides lifetime income for you and an annuity partner (your spouse or someone else you name) for as long as either of you live.
    • One- or two-life annuity with guaranteed period — Guarantees income for up to 20 years, as long as the period you choose does not exceed your life expectancy. It ensures that income continues to go to your beneficiaries for the remainder of the guaranteed period if you (one-life annuity) or both you and your annuity partner (two-life annuity) die before the end of that period.
    • Minimum Distribution Option — Generally, you must begin taking minimum withdrawals from your account by April 1 following the year in which you turn age 70½ or retire, whichever is later. This can help you defer the minimum required distribution while keeping you in compliance with federal regulations.
    • Single-Sum Death Benefit — A set amount your beneficiary(ies) will receive from your retirement account if you die before taking income.
  • Please note that withdrawals of earnings made prior to age 59 1/2 are subject to ordinary income tax and a 10% early withdrawal penalty may apply.
  1.  What happens to my 403(b) account if I should die before I retire?
  • Your beneficiary(ies) will receive the total value of your TIAA-CREF accumulation. This can be paid in any combination of the following options: lump-sum payments, lifetime annuity payments and minimum distribution payments.
  1. May I combine my other 403(b) account from a previous employer with my UNC System 403(b) account?
  • 403(b) plan rules do allow for the combining of 403(b) plans. Your 403(b) plans from previous employers can be rolled over into an IRA.
  1. Are there any restrictions on withdrawals and/or exchanges with the Money Market/Fixed Account?
  • No, there are no restrictions on withdrawals and/or exchanges with the Money Market or Fixed Account other than IRS restrictions on withdrawal eligibility.

Where Can I Get Help or More Information

BY PHONE
Call us at 800-842-2888 to speak with one of our experienced consultants. They are available Monday to Friday from 8 a.m. to 10 p.m. and Saturday from 9 a.m. to 6 p.m. (ET).

ONLINE
Visit us at http://www.tiaa-cref.org/ to explore the many ways that we can serve your financial needs. To send an email message to us, just click Contact Us at the top of the homepage.

IN PERSON
You can arrange a one-on-one meeting with a TIAA-CREF consultant, if your employer’s plan offers this as an option. Just log on to www.tiaa-cref.org/services/meetings/ or call (800-731-8535) to schedule an appointment at the TIAA-CREF office nearest you. You can also check with your employer’s human resources department to find out the next time that a TIAA-CREF consultant will be visiting your workplace.