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The Annuity Savings Account (ASA) may be comprised of mandatory contributions, voluntary contributions (pre- and post-tax), and investment earnings, gains, and losses.
All active members are required to contribute three (3%) percent of their annual compensation to their ASA. This contribution may be made by the employer. This is referred to as an employer pick-up.
The 3 percent contribution to the member’s ASA may be made by the employer.
An active member may make voluntary contributions in addition to the mandatory amount (three percent of annual compensation). Voluntary contributions may be made pre-tax or post-tax and must be made in one percent increments up to 10 percent (10%). To make voluntary ASA contributions, the member must contact the payroll administrator of the employer.
In order to qualify for voluntary pre-tax contributions, the following requirements must be met:
If a new TRF member fails to allocate ASA contributions, the member’s contributions will default to an age-based target date fund.
The Investment Objective of the Fixed Income Fund is to seek total return, consisting of income and capital appreciation.
The Investment Objective of the Inflation Linked Fixed Income Fund is to provide investors inflation protection and income consistent with investment in inflation-indexed securities. Principal and interest payments are adjusted in response to changes in inflation.
The Investment Objective of the International Equity Fund is to seek investment growth/capital appreciation through both active and passive investment in stocks of non-U.S. companies in both developed and emerging markets.
The Investment Objective of the Large Cap Equity Index Fund is to seek investment growth/capital appreciation through passive investment in the stocks of the 500 largest U.S. companies.
The Investment Objective of the Small/Mid Cap Equity Fund is to seek investment growth/capital appreciation through both active and passive investment in stocks of small- and mid-sized U.S. companies.
The Guaranteed Fund seeks to provide stability of principal and a competitive rate of interest. The interest rate is set by the Board of Trustees each year and is guaranteed for the fiscal year. The guarantee is provided by the assets of the Teachers’ Retirement Fund and, therefore, by the State of Indiana.
The Funds are designed to seek an appropriate amount of total return, commensurate with risk, given the specific time horizon of each Fund. The Target Date Funds provide participants with a one-stop shop for investing. Participants simply choose the Fund most appropriate for them based on the year in which they plan to withdraw their money (usually their retirement year). For instance, a participant wishing to retire in 2041 would select the 2040 Fund, whereas a participant wishing to retire next year would select the Retirement Fund. Once a participant selects the appropriate Fund, the underlying asset allocation automatically adjusts over time.
Investment allocations must be in 1 percent increments, totaling 100 percent, and may be changed daily. The valuation of your ASA account includes a deduction of investment expense fees.
Beneficiaries should be named and kept current for the ASA. The designated beneficiary’s right to a benefit vests upon the member’s death. A change of beneficiary designation must be on file with INPRS before death. A change received after a member’s death is not valid. If no beneficiary is named, the account balance is paid to the member’s estate upon death of the member. Should you decide to designate more than one beneficiary, you can allocate benefit shares in percentage increments. Please note: Pursuant to IC 5-10.4-4-10, regardless of whether there are court orders, levies or agreements to the contrary, TRF must distribute death benefits to the designated beneficiary on file with TRF.
If a member designates more than one primary beneficiary, and a primary beneficiary predeceases the member and the member does not complete a new beneficiary designation form, the remaining primary beneficiaries will receive an apportioned pro rata share based upon the remaining primary beneficiaries' allocated percentages of the deceased primary beneficiary’s portion.
For example, member X designates three (3) primary beneficiaries as follows: Ann 60%, Bob 30%, and Carl 10%. Ann predeceases member X, and member X does not submit a new beneficiary designation form. Member X had $10,000 in her annuity savings account (ASA) at the time of her death. Ann's 60% share will be divided between Bob and Carl as follows: Bob $4,500 and Carl $1,500. The total amount that Bob will receive from member X's ASA is $7,500, and the total amount that Carl will receive from member X's ASA is $2,500.
Beneficiaries should be named to avoid potential conflicts upon the death of the member.
Any member with an ASA balance may view their quarterly member statement electronically. Log on to your online account to view a summary of your contributions, investment elections, and investment earnings, gains or losses.
If you would like a paper statement mailed to your home, log on to your account and select the Personal Information tab, Communications, E-mail Address, then Communications Preferences. Or, you can download the Annuity Savings Account (ASA) Quarterly Member Statement Opt-In form.
Please note: Your Annuity Savings Account is valued one final time on the day prior to your withdrawal date.
A suspended member (refer to Suspension of Membership section for more information) may make a lump sum withdrawal of the member’s ASA funds. To receive a distribution, members can log in to their online account to initiate their request for a distribution. Members may also call (888) 286-3544 to initiate their distribution request via phone with a customer service representative. We are available Monday through Friday from 8 a.m. to 8 p.m. EST.
The withdrawal process may take up to 60-90 days. If an inactive member does not withdraw the ASA funds within five years of the suspension, those ASA funds are credited to TRF unless or until claimed by the former member or the member’s beneficiary. Once credited to TRF, no further interest credits or earnings will be deposited into the ASA account.
If TRF suspends a membership because two years have passed since an unvested member with $1,000 or less in his or her ASA was employed in a covered position, TRF shall close the member’s ASA and issue a lump sum payment of the ASA balance to the member.
Effective July 1, 2011, if a member is eligible for a reduced pension benefit, but not normal retirement, and has not been working for at least 30 days, the member may:
If the member suspends membership because the member is vested, not retired, not currently employed in a TRF-covered position, and is transferring TRF creditable service to another governmental retirement plan, the member may withdraw only the amount necessary from the ASA to purchase creditable service in the other governmental retirement plan. Any such withdrawal must be paid as a trustee-to-trustee transfer to the other governmental plan. If the former member re-employs in a TRF-covered position, TRF service credit for the years transferred to another plan cannot be reinstated unless those years are purchased and transferred back to TRF.
The taxable ASA amounts withdrawn from TRF before retirement are subject to mandatory 20 percent federal tax withholding unless the member elects to roll over the taxable amount into an individual retirement account (IRA) or other qualified retirement plan. If the member is under age 59½, the IRS may impose an additional 10 percent tax penalty on the taxable amount of the withdrawal unless the member elects to roll over the taxable amount into an IRA or other qualified plan.
Members who elect to withdraw their ASAs at retirement will remain invested according to their pre-retirement investment allocations until their ASA is paid out at the time TRF processes their retirement. This means that allocations in the alternative accounts may gain or lose money while your retirement application is being processed. To avoid risk of loss, members may reallocate their ASA investments to the Guaranteed Account.
Members who elect to annuitize their ASAs at retirement will have the balance of their ASA put into a fixed value account set at the same rate as the Guaranteed Fund. This happens not more than 15 days prior to the member’s retirement date or the processing of the member’s retirement application.
Members who elect to defer their ASA at retirement will have the balance of their ASA invested according to their pre-retirement investment allocation.
The following options are available to the member at retirement:
Monthly ASA: You may choose to combine the total amount of your ASA with your monthly pension benefit check. You will not receive any other money from the ASA outside of this monthly payment. If you combine your ASA payment with your pension benefit, your account balance and any money posted after your benefits are processed will be moved into a fixed value account. This happens about 30 days before processing your retirement application. The money will earn the same rate as the Guaranteed Fund until you receive payments.
Withdraw Non-Taxable Portion/Monthly ASA: With this ASA option you withdraw the non-taxable portion of your ASA as it existed on December 31, 1986. The remainder of your ASA will be paid as a monthly benefit. Your monthly pension will be combined for a higher monthly benefit payment.
Direct Rollover: You may choose to have the entire taxable portion of your ASA rolled over to a Qualified Retirement Plan. The after-tax (tax basis) will be paid directly to you. The amount will equal the after-tax (tax basis) balance of ASA as it existed on December 31, 1986.
Partial Rollover/Partial Withdrawal
You may receive a portion of the taxable portion of your ASA as a direct rollover to a Qualified Retirement Plan. The portion that is not rolled over will be paid directly to you. The amount will equal the after-tax (tax basis) balance of ASA as it existed on December 31, 1986.
Full Withdrawal: When you withdraw your entire ASA, you may have your ASA paid directly to you.
Full Deferment: You may leave your ASA invested with PERF. When you decide to do this, you delay distribution of your ASA balance. IRS regulations require distributions by April 1 of the calendar year that you turn age 70 1/2. Your funds remain invested according to your directions until you choose to receive them. At a later date, you may choose one of the other options listed.
Do you have money in your ASA from before Dec. 31, 1986? If yes, you must choose the Partial Deferment/Withdraw Non-Taxable option to defer.
Partial Deferment/Withdraw Non-Taxable: You may choose to receive an amount equal to your after-tax (tax basis) of your ASA as it existed on December 31, 1986. You may delay distribution of the remainder of your ASA until a later date. IRS regulations require distributions by April 1 of the calendar year that you turn age 70 1/2.
With this option, we would pay you the money in our account from before Dec. 31, 1986. Again, you have already paid the tax on that money.
The minimum amount provision is relevant to the A-2 option where the retiree has also chosen the ASA 1 or ASA 7 option for distribution of the ASA. The minimum amount provision is in place to guarantee that a member or that member’s beneficiary will receive benefit payments that total at least the balance of the member’s Annuity Savings Account (ASA) at the time of retirement. If a member does not receive this minimum amount in combined annuity and pension payments during his or her lifetime, the member’s beneficiary can claim the remaining amount due. For example, if a member has $100,000 in her ASA at the time of retirement, this member’s total benefits received (combined annuity and pension payments) must equal $100,000 or the member’s beneficiary may claim the difference.
The decision of how to receive the distribution of your ASA can have significant tax implications, and we urge you to consult with a tax advisor. TRF can explain your options but cannot offer tax advice. The information below is included to aid you and your advisors with federal tax provisions as they apply to TRF benefits.
Any contributions to your ASA made with after-tax dollars are considered “tax basis” because you have already paid taxes on those dollars. Mandatory contributions paid by your employer were not taxed at the time they were paid. Therefore, they do not create “tax basis”. Upon retirement, any after-tax contribution (your tax basis) is reported by TRF as non-taxable on the IRS Form 1099-R issued to retired members and the IRS. However, it is important to note that your tax basis is recoverable under very specific IRS rules. The following briefly outlines the basis recovery rules applicable to your situation.
You can elect to receive a total distribution of your ASA at the same time you begin receiving your monthly pension benefit. However, if you elect to do so, federal tax law does not allow you to immediately recover your entire basis when you receive your ASA. Instead, part of the basis has to be allocated to the monthly pension benefits. The basis allocated to the monthly pension payment is divided up and recovered over a mandatory number of monthly payments, as determined by applicable IRS regulations. Therefore, a portion of each monthly benefit paid to you is non-taxable, for as long as basis remains.
This division of the basis is required because the IRS has issued a private letter ruling to TRF concluding that the ASA and monthly pension benefits payable to you do not constitute separate accounts. The consequence of this ruling is that, upon retirement, basis from contributions to the ASA must be partially allocated to your pension benefit, as we have described above. One exception to this basis allocation rule is also relevant: a special provision of federal tax law permits you to immediately recover any tax basis that you may have had in your ASA on Dec. 31, 1986. The post-1986 basis, however, may be partially recovered with the remainder allocated to your monthly retirement benefits.