RetirementPlanChoice– TierII

Rev. 01.24.2020

Important

ThispresentationisforSURSmemberswhoareinTierII.

Tier II members are participants with SURS, or another eligible Illinois public retirement system, who began participation (certified) on or after 01/01/11.

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AboutSURS• 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

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WhatWeDo• Retirement• Disability• DisabilityRetirement• Refunds• DeathBenefits• SurvivorBenefits• ServiceCreditPurchases

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ImportantBasics• Planchoiceisone-time,lifetimedecision

• Irrevocableelection– cannotchangeatanytime

• Youhave6monthsfromyourparticipationdatetomakeaplanchoiceelection• If no election after 6 months, you will default to Traditional plan

• SURS encourages you to make an active election

• StatematchingcontributionsfortheSelfManagedPlandonotbeginuntilthefirstfullpayrollafterreceiptofyourChoiceElectionform

• YoudonotpayintoSocialSecurityforyourSURS-coveredemployment

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KeyFactors• Lengthofservice• Importanceofretirementbenefits• Investmentdecisions• Importanceofsurvivorbenefits• PensionableEarningsLimit

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PlanTypes

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DefinedBenefit DefinedContributionTraditional &Portable Self-Managed

• Employer (State of Illinois) promises to pay the member a specific lifetime monthly benefit beginning at retirement

• Employer bears the investment risk

• Benefit is calculated using a specified formula based on age, earnings, and years of service

• You invest in a retirement savings plan that relies on investment performance to determine your retirement benefit

• You decide how to invest your contributions

• Account value fluctuates on the basis of investment returns

• You bear the investment risk• Benefit is calculated based on your

account value on the date you retire

BenefitPlans

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Traditional

• Defined benefit plan• Lifetime monthly benefit• Built-in survivor benefits• If no survivor at retirement, survivor refund

payable

Portable• Defined benefit plan• Optional forms of annuity• Enhanced lump sum distribution• Survivor benefits optional at a cost

SMP• Defined contribution plan• Optional forms of annuity based on account value

at retirement• You select from a choice of hands-off and hands-

on investment options

Contributions

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Traditional Portable SMPPlanType Defined Benefit Defined Benefit Defined Contribution

YourContribution

8% of maximum pensionable earnings required**Full-time community college employees (except City Colleges of Chicago) pay anadditional 0.5% of earnings to fund a health insurance plan devised forcommunity college retirees.

YourContributionBreakdown

6.5% Retirement0.5% Automatic Annual

Increase (AAI)1.0% Survivors

6.5% Retirement0.5% Automatic Annual

Increase (AAI)1.0% Portability

8% Retirement

EmployerContribution

Guarantee of fixed monthly retirement benefit for life

Guarantee of fixed monthly retirement benefit for life or enhanced lump sum

7.35% Retirement0.25% Disability7.60% Total *

*Employer contributions for SMP begin with the first full payroll period after SURS receives your retirement choice election form

EarningsLimits

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Traditional Portable SMP

MaximumPensionable

EarningsOr

IRSLimit

• Set by state law

• FY2020: $114,951.83

• FY2021: $115,928.92

• Increased each year by half of the Consumer Price Index-Urban (CPI-U)

• Set by state law

• FY2020: $114,951.83

• FY2021: $115,928.92

• Increased each year by half of the Consumer Price Index-Urban (CPI-U)

• Set each year by IRS401(a)-17 limit

• FY2020: $280,000

• FY2021: $285,000

For computing SURS benefits, pensionable earnings include: gross salary, overtime,summer teaching pay, or other eligible pay for work performed. Contributions will not bededucted from earnings that exceed above limits in a fiscal year. Any earnings exceedingthe above limits will not be included in benefit calculations.

RetirementEligibility

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Traditional Portable SMPRetirement

Vesting• Age 67 with 10 or

more years of service (no age reduction)

• Age 62 with 10 or more years of service (with age reduction)

• Age 67 with 10 or more years of service (no age reduction)

• Age 62 with 10 or more years of service (with age reduction)

• Age 62 with 5 or more years of service

• Age 55 with 8 or more years of service

• Any age with 30 or more years of service

Refund

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Traditional Portable SMPLessThan5Years

• Your contributions• Up to 4.5% interest

earned

• No employer contributions

• Your contributions• All interest earned• No employer

contributions

• Account value at time of refund which includes:Ø Your contributions

Ø Investment gain or loss on your contributions

Ø No employer contributions

5YearsorMore

• Your contributions• Up to 4.5% interest

earned

• No employer contributions

• Your contributions• All interest earned• Employer match of

$1 for $1

• Account value at time of refund which includes:Ø Your contributions

Ø Employer contributionsØ Investment gain or loss

on your and employer contributions

Important Note: Taking a refund will forfeit any/all retirement benefits, including insurance

ServiceCredit

• Earnedservice• Unused,unpaidsickleave• Purchases• Reciprocalservice

• Service with another Illinois public retirement system

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EarnedServiceCredit

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• ServiceyearisSeptember1-August31

• Only1yearofserviceisallowedperserviceyear

Days/Months Worked Service Earned

15 or more calendar days 1 month1-2 months .25 year3-5 months .50 year6-7 months .75 year8 months or more 1 full year

SickLeaveServiceCredit

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• Unused/unpaidsickleavereportedtoSURSbyemployeruponterminationofemployment

• Mustretirewithin60daysoftermination

Full Work Days Additional Service Credit

20-59 days .25 year60-119 days .50 year120-179 days .75 year180 days or more 1 full year

Part-timeEmployee• Employerverifiesallacademiccontractsatthetimeofretirement• Any changes could affect your eligibility for

retirement• Retirement eligibility determined by service credit

and age• Employerreportsthepart-timepercentagetoSURSonpayrolls• If 50% time or less for more than 3 years,

service credit may be adjusted for calculation of the benefit

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ServiceCreditPurchases

Typesofpurchases• Repayment of Refund

• Prior Service

• Other Public Employment (OPE)• Does not apply toward vesting

• Military

• Leave of Absence

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PurchasesGeneralInformation

• Allpurchasetypesmustbeverified• Contact SURS to initiate process

• Notrequiredtomakethepurchase• Paymentsmustbemadepriortoretirementdate• SMPmembersmustbeactivelyemployedintheSURSsystem• Except repayment of a refund

• Costincreaseseachmonthbyinterest18

ReciprocalService• SURShasareciprocalagreementwithotherIllinoispublicretirementsystems• Canprovidearetirementbenefitfromapublicpensionsystem

forwhichyoumightnotnormallybeeligible

• Mayenhancetheretirementbenefitfromoneormoreoftheretirementsystemsinvolved

• Minimumrequirementsforreciprocalretirementbenefit:• Atleast1yearofpensioncreditineachoftheretirement

systems,and

• Ageandcombinedservicecreditmustmeetthelongestminimumvestingrequirementineachsystem

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ReciprocalSystems

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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

RetirementBenefit

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Traditional Portable SMPRetirement

Benefit• Lifetime monthly

annuity based on years of service and earnings

• Automatic annual increases apply

• Lifetime monthly annuity based on years of service and earnings

• Automatic annual increases apply

• Optional Lump Sum in lieu of monthly annuity

• Lifetime monthly annuity based on account value at retirement

• No Automatic annual increases to benefit

RetirementBenefit

Calculation

Years of ServiceX 2.2%X Final Average Earnings

= Lifetime Monthly Retirement Benefit*

*less age reduction, if applicable

Years of ServiceX 2.2%X Final Average Earnings

= Lifetime Monthly Retirement Benefit*

*less age reduction, if applicable

• Purchase annuity contract with provider(s)

• Based on vested account balance at retirement

AdditionalRetirementInformation

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Traditional Portable SMPMaximumBenefit

80% of final average pensionable earnings

80% of final average pensionable earnings

No maximum or minimum benefit

HealthInsurancebenefitsatretirement

If eligible, must take a lifetime monthly benefit

If eligible, must take a lifetime monthly benefit

If eligible, must take a lifetime monthly benefit

RetirementFormulasTraditional&Portable

• GeneralFormula• 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

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RetirementAnnuityTraditional&Portable

GeneralFormula1. 2.2% x years of service=percentage2. 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

applicable3. Less age reduction, if applicable

Note: Maximum benefit allowable is 80% of the FAE

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GeneralFormulaExample

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• 28 years service credit

• Final Average Earnings= $48,350Calculation of Benefit:28 yrs x 2.2% = 61.6%Annual Benefit: 61.6% x $48,350 = $29,783Monthly Benefit: $29,783 ÷ 12 = $2,481*

*Assumes no age reduction applicable

AgeReductionTierII

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Ifunderage67,annuityreducedby½of1%foreachmonthunderage67.Age 67 $2,481 No reductionAge 66 $2,332 6% reductionAge 65 $2,183 12% reductionAge 64-1/2 $2,108 15% reductionAge 63 $1,885 24% reductionAge 62 $1,736 30% reduction

Self Managed Plan

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TIAA 888-219-8310www.tiaa.org/illinois

Fidelity 800-343-0860www.netbenefits.com/surs

Principal* 877-210-5565, ext. 202*annuity payout only RRC@exchange.principal.com

26 individual investment options3 Lifecycle Fund Series (target date funds)

http://www.surs.org/fund-overview

TwoTypesofSMPInvestors

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• Hands-Off Investor (Target Date Funds)• All-In-One option with simplicity & diversification• Ongoing management by a team of professionals• Lifetime investment strategy

• Hands-On Investor• Choice of diverse asset classes• Control to create your own portfolio• Ability to continually evaluate your portfolio and

ensure that your goals are being achieved

SMP Distributions

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• Based on value of member’s account on retirement date

•Member chooses form of distribution• Lump sum*• Rollover*• Annuity (with SMP providers)

• Contact provider(s) for estimate• TIAA: 888-219-8310• Principal: 877-210-5565, ext. 202

*If qualified for insurance, not eligible for insurance benefits with this option

SMPTypesofAnnuity

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Single-LifeAnnuity• Without Guarantee Period• With Guarantee Period • 10 years

• 15 years• 20 years

Joint&SurvivorAnnuity• Without Guarantee Period 50% or 100%• With Guarantee Period 50% or 100%

• 10 years• 15 years• 20 years

SMPAnnuityExample

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ProjectedAccountValuesTypeofAnnuity Age $100,000 $150,000 $200,000Single-Life 60 $440 $670 $ 900

65 $490 $730 $980

50% Joint&Survivor 60 $380 $570 $ 78065 $420 $650 $ 870

100%Joint&Survivor 60 $350 $525 $ 700

65 $380 $570 $ 780

Above information provided by Principal Life Insurance CompanyAs of October 1, 2019 (Amounts rounded down to nearest dollar). All J & S options assume spouse is 5 years younger. No guarantee option selected.

ChangesareComingtotheSMPBetter meet the needs of participants by:• Streamlining plan administration to improve operations, cost

efficiency and the member experience. (Voya selected as record keeper)

• Moving away from “brand name” investment options

• Providing a hands-off default investment option that better preserves the member’s ability to generate income at retirement by managing interest rate risk

• Offering distribution options at retirement that allow for:• lifetime income replacement without 100% annuitization• Retain access to partial account balance• health insurance, if applicable

*Transition to new SMP tentative implementation date: 9/1/20

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NewSURSSupplementalDefinedContributionPlan

• 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 Supplemental savings plan will:

• Provide a vehicle for all SURS members (regardless of plan choice) to save via payroll deduction

• Be a 457 plan

• Offer similar investment options as the SMP Plan*Tentative Implementation Date: 9/1/20

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MonthlySurvivorBenefit

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Traditional Portable SMPEligibleSurvivor

• Spouse or civil union partner• Dependent child up to 18, or

22 if full-time student

• Disabled child(ren) 18 or over if disabled prior to age 18

• Financially dependent parent

• Spouse/civil union partner, or may name Contingent Annuitant (if no spouse or with spousal consent)

• Spouse/civil union partner, or may name Contingent Annuitant (if no spouse or with spousal consent)

SurvivorBenefit

• Included at no additional cost• 662/3% of member’s earned

retirement benefit

• If no eligible survivor at retirement, survivor contributions and interest refunded at retirement (1% of the 8% contribution)

• Available option at retirement at a cost

• Reduction applied to retirement annuity

• 50, 75, or 100% of reduced annuity elected at retirement

• Available option at retirement at a cost

• Reduction applied to retirement annuity

DeathBenefitOne-TimeLumpSum

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Traditional Portable SMPBeneficiaries • Any person or legal

entity• Spouse or Civil Union partner,

or

• Alternate beneficiary

• Spouse or Civil Union partner, or

• Alternate beneficiary

Pre-Retirement

• Account balance, less 1/8 if survivor benefit payable

• Member and employer contributions and interest, less value of survivor benefit payable, if applicable

• Account investment value

Post-Retirement

• Without survivor: Greater of $1,000 or remainder of account balance

• With survivor: No death benefit

• See terms of annuity contract with provider

SocialSecurity

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• WindfallEliminationProvision“How it affects your Social Security retirement or disability benefit”

• GovernmentPensionOffset“A law that affects spouse’s or widower’s benefits”

• ContactSocialSecurityformoreinformationwww.ssa.gov(800) 772-1213

PlanChoiceBooklet

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• MailedinpacketfromSURSwithin1weekofparticipationnotificationfromemployer.1. Consider important factors

2. Compare the plans

3. Complete your retirement choice election form

• Electronically preferred

SURSWebsite

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LifeEvents-NewtoSURS

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OnlineElection

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• RegistertoSURSMemberWebsite• LogintoyourSURSaccount• HomePagemessagethatRetirementChoiceElectionformisneeded

• Clickonmessagetogettotheelectronicform

OnlineElectionForm

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• Selectyourplanchoiceandcontinuethroughsubmissionsteps

LifetimeDecision

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• One-time,lifetime,irrevocabledecision• Cannot be changed• 6 months to choose a plan

• Importantdecisionforyourfutureretirement• Review material carefully• View FAQS and Choice video at www.surs.org• Your default date is listed on the cover letter of

your Retirement Choice Election Packet

• Donotdefaultonyourplanchoice!

TimeisRunningOut

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• Submityourelectionformonline• ThroughSURSMemberWebsiteor• MailcompletedformtoSURS

• SURSwillsendconfirmationofyourplanelection

OnePieceofthePuzzle

• 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 payroll deducted and tax deferred 403(b) or 457 savings plans offered by your employer

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HowtoContactSURS

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SURS1901 Fox DriveChampaign, IL 61820

800-275-7877217-378-8800217-378-9800www.surs.org

“Like” Us on Facebook

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Disclaimer

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All aspects of administration of the State Universities Retirement System(SURS), including but not limited to benefit calculation and payment, mustcomply with state and federal law. No employee of SURS has the authorityto bind the System to take action contrary to law, even in the event ofmisstatement of fact or law. Furthermore, the information containedherein states SURS’ current understanding of the law which could changeover time due to court opinions, statutory changes, or other legal mattersor interpretations (e.g., attorney general opinions). SURS is requiredunder law to correct any mistake in benefit amount, even after paymentshave begun. This document was created for general information only. Anyinformation provided by SURS does not represent personal tax or legaladvice, either express or implied. You are encouraged to seek professionallegal and/or tax advice for your personal income tax questions and for allother legal purposes.