Policy & Procedure for University Noncontributory Retirement Plan

Support Staff Policies & Procedures

Policy & Procedure for University Noncontributory Retirement Plan

(Revised 03/05)

Policy

Eligibility:The regular full-time faculty and University support staff described below:

Faculty, MSU Extension, AP and POAM staff employed prior to July 1, 1958, who participated in the TIAA program on a 5% to 10% basis no later than July 1, 1973.
Employees promoted to AP status between July 1, 1958, and January 1, 1973, who participated in TIAA on a 5% to 10% basis by July 1, 1973.
AP staff hired before July 1, 1970, who prior to July 1, 1970, and thereafter, opted to be covered by the UNCRP.
MSU Extension staff hired before January 1, 1973, who prior to January 1, 1973, and thereafter, opted to be covered by the UNCRP.
CTU, 1585, SSTU, 324, MSUSA, and off-campus employees employed prior to January 1, 1973.

History:

The UNCRP provides income during retirement for eligible employees who meet the University's minimum retirement requirements.

The University Noncontributory Retirement Plan (UNCRP) was established in 1937. Major adjustments and improvements were made in its provisions since that time. The UNCRP was gradually phased out for new employees as described below:
- On July 1, 1958, faculty, MSU Extension, and AP staff (Board Appointees) became eligible for the TIAA Retirement Annuity Program. This action eliminated the UNCRP for faculty hired on or after July 1, 1958, and partially replaced the UNCRP for AP and MSU Extension staff as described below:
  - APs hired between July 1, 1958, and July 1, 1970, had to choose between TIAA or the UNCRP. Where employees chose TIAA, they ceased to be eligible for the UNCRP. As of July 1, 1970, this choice was eliminated and all new AP's had only TIAA available as a retirement plan.
  - MSU Extension staff hired between July 1, 1958, and January 1, 1973, had to choose between TIAA and the UNCRP. Where employees chose TIAA, they ceased to be eligible for the UNCRP. As of January 1, 1973, all new MSU Extension staff were not eligible for the UNCRP.
- On October 1, 1967, POAM employees became eligible for the TIAA Retirement Annuity Program, eliminating the UNCRP for any POAM employees hired after that date.
- On January 1, 1973, CTU, 1585, SSTU, 324, and off-campus employees became eligible for the TIAA Retirement Annuity Program. As of January 1, 1973, the UNCRP ceased to exist for any new employees.
Certain benefit guarantees of the UNCRP remained effective after the UNCRP was replaced by the TIAA Retirement Annuity Program. To receive these benefit guarantees, eligible employees must have 15 years of continuous full-time service and be at least age 62 or have 25 years of continuous full-time service at any age when retiring.
This policy details the provision of the remaining UNCRP benefits, and should not be confused with the policies and procedures of the TIAA Retirement Annuity Program.

UNCRP groups: The UNCRP benefit entitlements vary by group, as described below. An employee may be eligible for UNCRP benefits in only one group.

Group I UNCRP only consists of all regular full-time:

CTU, 1585, SSTU, 324, MSUSA and off-campus employees hired before January 1, 1973, who chose not to participate in TIAA as of January 1, 1973, or thereafter.
AP staff hired before July 1, 1970, who prior to July 1, 1970, and thereafter, chose not to participate in TIAA.
MSU Extension staff hired before January 1, 1973, who prior to January 1, 1973, and thereafter, chose not to participate in TIAA.

All staff in Group I were over age 55 or had 25 years of continuous full-time service on January 1, 1973. They were offered optional participation in the TIAA Retirement Program. Since they did not choose to participate in TIAA, they are entitled to a UNCRP only pension as calculated under Pension computation below.

Group II UNCRP comparison consists of all regular full-time:

CTU, 1585, SSTU, 324, MSUSA, and off-campus employees hired before January 1, 1973, electing participation in TIAA effective January 1, 1973, or thereafter.
AP staff hired before January 1, 1970, electing participation in TIAA on a 3% to 6% basis effective January 1, 1973, or thereafter.
MSU Extension staff hired before January 1, 1973, electing TIAA participation on a 3% to 6% basis effective January 1, 1973, or thereafter.

All staff in Group II who were between ages 35 and 55, with three years of continuous full-time service on January 1, 1973, were required to participate in the TIAA Retirement Program no later than July 1, 1973 (VARIES: MSU Extension staff who were between ages 35 and 55, with three years of continuous full-time service on January 1, 1973, were not required to join TIAA if they were participating in the Federal Retirement Program, in which case their retirement pension would come solely from the Federal Retirement Program [no TIAA or UNCRP benefits]).

A UNCRP pension as calculated under "Pension Computation" below will be the minimum pension a Group II employee is eligible for. At the time of retirement, the single life UNCRP pension will be compared to the single life annuity generated from the University's contributions to TIAA. The employee will receive the greater of the two amounts, as follows:

If the University-generated TIAA annuity is less than the UNCRP pension, the employee will be paid the difference as a UNCRP pension, plus the TIAA annuity.
If the University-generated TIAA annuity exceeds the UNCRP pension, the employee will receive the TIAA annuity but no UNCRP pension. In addition, the employee will always receive the annuity generated from his/her contributions to TIAA.

Group III UNCRP frozen benefits consists of all regular full-time:

Faculty, AP, and MSU Extension staff employed prior to July 1, 1958, who participated in the TIAA program on a 5% to 10% basis by July 1, 1973.
Employees promoted to AP status between July 1, 1958, and January 1, 1973, who participated in TIAA on a 5% to 10% basis by July 1, 1973.
POAM staff hired prior to July 1, 1958, who entered the TIAA program October 1, 1967, or later.

All staff in Group III are eligible to receive a UNCRP pension in addition to their TIAA Retirement Annuity. Their frozen benefit UNCRP pensions will be as calculated under Pension computation below.

Pension computation:

Pensions are based upon length of creditable service (as defined in the Policy and Procedure for Retirement from the University) and average compensation for the three consecutive years of highest earnings, and will be calculated as follows:

Base pension: The pension, as computed below, is without reduction for drawing prior to age 65 and without consideration of a survivor option.

Service credits for determination of base pension are 2% for each year of creditable continuous full-time service (varies for frozen benefits). Creditable service is the years prior to July 1, 1958, for employees in Group III 1 & 3, or years prior to being promoted to AP status for employees in Group III 2. (Employees reclassified to AP status as of July 1961, who were CTU or labor employees prior to that date, receive frozen benefit credit from their full-time employment date to July 1961.) In calculating service credits for base pension (not determining retirement eligibility), partial years of creditable service are equated as follows:
- Less than 3 months - No credit
- 3 months but less than 9 months - ½ year credit
- At least 9 months - 1 year credit
Employees who changed from Board Appointed to AP status as of July 1961 receive frozen benefit credit only for their service prior to July 1958 (if any). The service credit percentage described above is multiplied by the average of the three consecutive years of highest earnings. Earnings used to derive the three highest years of consecutive earnings will be those reported for W-2 purposes (including COLA, longevity, and any employee tax-deferred payments to TIAA). Workers' Compensation is added to an employee's earnings if the base pension comes to less than $3600 (VARIES for frozen benefits). The service credit percent is multiplied by the annual budgeted salary as of July 1, 1972.
The maximum pension under this formula cannot exceed $3600 per year. For employees not receiving a University contribution to TIAA, 10% is added to the computed or maximum pension.
Adjustments to the base pension will be made if the employee is under 65 at retirement or selects a survivor option.

Pension adjustment for employees who retire prior to age 65: The base UNCRP pension described above is adjusted for employees who retire and draw their UNCRP pensions prior to age 65. The pension adjustment is calculated at the time of retirement according to the following rules. There is no adjustment if the employee defers receipt of the pension until age 65.

To determine age, month and year of birth are subtracted from month and year prior to first pension payment or retirement date, whichever is appropriate. Example: January 1978 is one month prior to first pension payment. Birth date is July 1915. The age when pension begins is 62 years and 6 months.
Two methods of adjustment are used:

The Actuarial Reduction is a 5/9 of 1% reduction for every month the employee is under age 65 when the pension begins, e.g., 20% for age 62 retirement. This adjustment method is used only for employees who begin drawing their pensions between ages 62 and 65. The Creditable Years Reduction subtracts the years prior to 65 that the employee will be at retirement from creditable service, with the pension recalculated based upon the reduced creditable years. This adjustment method is used only for employees with 25 years of continuous full-time service. The reduction in creditable years is calculated as follows:

Age to draw full pension Age at retirement Adjustable years	64 years 12 months -62 years 6 months 2 years 6 months

Creditable service Adjustable years Reduced credible service	31 years 6 months - 2 years 6 months 29 years

Pension is then recalculated based on 29 years of reduced creditable service.
The adjustment method(s) available vary according to age and amount of creditable service, as described below.
- An employee with 25 or more years of creditable service has a choice between:
  - receiving an actuarially-reduced pension anytime after attaining age 62,
  - immediately receiving a pension based upon reduced creditable years, or
  - freezing the pension until age 65 with no reduction.
- An employee who is at least age 62 with more than 15 years but less than 25 years of creditable service has a choice between:
  - receiving an actuarially reduced pension at any time, or
  - freezing the pension until age 65 with no reduction.

Selection of survivor option:

Just prior to the actual retirement date, employees will be given the opportunity to select one of the three survivor options, or a single life annuity option.
This option selection is irrevocable once retirement payments begin.
If a survivor option is selected, the amount of Base pension (as described in Pension computation #1 above) is adjusted according to the actuarial option tables then in effect. The survivor option adjustment, if any, is made after any adjustments for drawing the pension prior to age 65.
In order to make the adjustment, the age of the retiree and spouse - when pension is to begin - is determined. The age is rounded to the nearest year, e.g., 64 years and 6 months is 64 years of age; 64 years and 7 months is 65 years of age. Next, the ages are located on the appropriate survivor option table, and the percentage factor for each option is recorded. The percentage factor is then applied to the Base pension (as adjusted for age) which determines the pension amount for each survivor option.
Options offered are those designated by TIAA and include the following:
- The Single Life Annuity Option - The retiree receives a lifetime income with all payments ceasing at death of the retiree.
- The Two-Thirds Benefit to Survivor Option - The retiree and spouse receive a lifetime income. At the death of either, payments continue to the survivor for life at two-thirds the original amount.
- The Full Benefit to Survivor Option - The retiree and spouse receive a lifetime income. At the death of either, payments continue to the survivor for life in the same amount that would have been paid if both had lived.
- The One-Half Benefit to the Spouse Option - The retiree and spouse receive a lifetime income. At the death of the retiree, payments continue to the surviving spouse for life at one-half the original amount.

Survivor's benefits prior to employee's retirement (Spouse's Annuity Benefit): The Spouse's Annuity Benefit is available to a surviving spouse who was married for at least one year to a non-retired employee who met the following conditions:

Was in a group eligible for UNCRP benefits (see Applies to section above),
was at least age 55 with 25 or more years of creditable service (this provision went into effect July 1, 1973) OR was at least age 60 with 15 or more years of creditable service (this provision went into effect July 1, 1969).
The Spouse's Annuity Benefit will be based upon 50% of the Base Pension calculated at the date of death in accordance with Pension computation, Section 1, above. (There is no reduction in the Base pension amount for years short of age 65.)
The Spouse's Annuity Benefit is reduced by one-half of 1% for each year, over five, that the spouse is younger than the employee.
The surviving spouse of an employee eligible for frozen benefits or a UNCRP-only pension will receive a Spouse's Annuity Benefit as calculated above.
The surviving spouse of an employee eligible for a "comparison" will have the Spouse's Annuity Benefit calculated above compared to the Single Life Annuity that would result from the University's contributions to TIAA on behalf of the deceased employee. If the single life annuity generated from Michigan State University's contributions to TIAA is less than the UNCRP spouse's annuity benefit, the surviving spouse will be paid the difference as a UNCRP benefit.
The Spouse's Annuity Benefit is offset by any benefits under Workers' Compensation which the spouse may be eligible for, and continues for the life of the spouse.

Workers' Compensation offset: University operating guidelines and administrative policy provide an offset to Workers' Compensation payments due to receiving UNCRP income. Therefore, if an individual is receiving Workers' Compensation payments and chooses to receive income from UNCRP, the Workers' Compensation payments will be reduced by a portion of the money received from the UNCRP.

Premium contribution: The University pays the entire cost of the benefit.

Effective date of benefit: Coverage under UNCRP was effective upon employment. UNCRP payments begin the first of the month following retirement, unless deferred to a later date. If the pension is deferred until age 65, the first check is issued the first of the month following the 65th birthday.

Termination date of benefit: Accrual of creditable service will cease on the last day of employment, unless terminated or modified by entry into the TIAA program.

Conversion of coverage: No conversion possible.

Procedure

Application for enrollment:
Employee: No action required. Enrollment is automatic depending on date of employment.

Changes in coverage or personal information:
Employee: No action required while employed at MSU. After retirement, notify MSU Human Resources of address changes and deaths.

Initiating pension payments: See Policy and Procedure for Retirement from the University.

Refer questions to: MSU Human Resources (telephone 517-353-4434 or email solutionscenter@hr.msu.edu)

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