Section 60 of the state’s Pension Reform Act of 2011 allows a one-time opportunity for:
FINAL REMITTANCE – TIAA Traditional Account Assets: The Department of Higher Education (DHE), in conjunction with TIAA and the State Retirement Board (SRB) has developed a method of moving ORP assets held in the TIAA Traditional Account (TTA) to the SRB.
Termination of Employment (for any reason) remains the best opportunity to remit those ORP assets still due the SRB under the terms of Section 60. Especially important: the Retirement Board reports that it will withhold pensions for those who owe these TTA funds and do not remit them.
Please note that the new approach requires working with the DHE to determine amounts due and to affect the actual transfers. So, participants will not be “on their own” to complete these transactions.
TIAA Traditional Account Assets: Participants holding assets in the TIAA Traditional Account (TTA) must remember that some or all of those assets are due the Commonwealth at some time in the future. Under the terms of Section 60, all Employer and Employee assets must be remitted to the Retirement Board.
At this time, the Retirement Board is working to determine the “if/when/how” of conveying these funds from the ORP to the Board. Please monitor the Retirement Board’s web site for information about this issue.
Currently, the Board is not able to accept the Transfer Payout Annuity assets that participants may now hold in their ORP accounts in funds that can be fully liquidated.
When to transfer TTA Assets: Termination of employment with the Commonwealth is currently the only opportunity to transfer TTA assets to the Retirement Board.
FAQ Revisions: The Section 60 FAQs have been revised. Important changes include the TIAA Traditional Account sections and changes in what happens if one were to die before completing the Section 60 process.
Section 60 Progress: At this time, the Dept. of Higher Education and the Retirement Board have:
Total Assets Transferred so far are: $277,772,869
ORP Beneficiaries: ORP participants who hold assets in the ORP should ensure that their beneficiary designations are up-to-date.
Forfeiture Mailing: On December 1, the Department of Higher Education mailed a final forfeiture notice to those ORP participants to whom we mailed a Retirement Plan Information Package, but from who we did not receive any response. This mailing reported the absence of a response and the forfeiture of Section 60 rights as of January 2, 2016.
Cut-off Date: The mailing population mistakenly included participants whose 180-day election period ended after November 30. These participants will have until the end of their stated election period due date to report their choice of plans.
TIAA Traditional Liquidity Extended: TIAA-CREF has extended their policy of liquidating all assets held in the traditional account, and waiving the 2.5% surrender charge for those participants who change plans under Section 60 and retire prior to January 1, 2017. This will help many participants purchase their service upon entry in the MSERS.
MetLife Dental: Particpants who change plans and retire must coordinate the termination of their MetLife Dental coverage and the purchase of the Group Insurance Commission’s Retiree Dental coverage. Participants must apply for the GIC coverage within sixty (60) days of the termination of their MetLife coverage.
Current Status: Of the 3,892 ORP participants who received Notices of Eligibility about changing their retirement coverage to the Masschusetts State Employees Retirement System (“MSERS”), 2,096 expressed an interest in seeing estimates of their service and the cost related to changing plans to the MSERS. Here is a snapshot of the progress the Massachusetts State Board of Retirement (the Board) and the Department of Higher Education (DHE) have made in processing the inquiries:
About Asset Transfers: Nine hundred and eighty ORP participants have submitted elections to change plans to the MSERS, and are in line to have their ORP (employee) assets transferred to the Board to be applied towards their service purchase under Section 60.
The first step in this part of the process is for the Board to update its estimates of service and cost for each individual, drawing from supplemental payroll information provided by the DHE. This step also involves a thorough review of the salary, contribution and work histories for each person, and updating these factors through the person’s final contribution to the ORP.
Once the Board has completed its update calculations, the DHE is then able to initiate the transfer of ORP assets to the MSERS.
At this time, the Board is focused on updating service and cost estimates for those who have changed plans and have either already separated from employment or are retiring presently. There are approximately 110 new MSERS members in this group.
The Transfer Period: Many new MSERS members who are waiting for the DHE to transfer their ORP assets to the Board, had heard that the transfer should be completed within 90 days (of receipt of their MSERS Election Form). They ask why their transfers have not been completed within 90 days.
Please note that the two departments are working very hard to update the nearly 980 initial service and cost estimates for those who elected to change plans, and to effect the final asset transfers as quickly as possible.
While the idea of a 90-day window in which to complete the transfers was reported in a variety of media, including these web pages, it is not an obligation prescribed by the law. The 90-day period represents the two departments’ early estimate of the time needed to complete the update calculations and transfer ORP assets. As the complexities of Section 60 unfolded over the past year, this goal became untenable.
Please note that for those who have elected to change plans and are not retiring now, the cost to purchase Qualifying Service under Section 60 is fixed because of the temporary moratorium on additional interest accruals. This means that the two departments can complete the update calculations and transfer assets to the MSERS at a later date.
Using Other Assets to Complete a Service Purchase: In cases where a new MSERS member’s ORP (employee) assets are not sufficient to complete their Section 60 service purchase, they may turn to their personal savings for additional assets. In many cases, these personal savings are held in “403(b)” plans and/or the Commonwealth’s SMART Plan (a “457(b)” plan).
Participants in either (or both) of these plans who elect to use these assets, must utilize a special, direct transfer mechanism to move the money to the Retirement Board in order to complete their service purchase.
When contacting one’s 403(b) provider and/or Empower (the SMART Plan administrator), the MSERS member must instruct the company to use the special transfer of assets “to a governmental defined benefit plan (MSERS) for the purpose of purchasing eligible service credits”.
This transaction is not a “rollover” from 403(b) and/or SMART Plan accounts, but a “direct transfer” to the Retirement Board.
The DHE has contacted the 403(b) providers and Empower to highlight this matter with them and to encourage their field representatives and their ‘phone center groups to be prepared for participant inquiries for the special transfers. This means that the providers’ staffs should know what you are requesting when you contact them.
TIAA Endorsement Mailing: TIAA recently mailed an Endorsement to their ORP customers reporting the company’s waiver of the 2.5% surrender charge for those who have opened a Transfer Payout Annuity (TPA) and then terminate employment with the Commonwealth and liquidate the remaining value of the TPA contract.
The waiver applies only to those cases where the assets liquidated are transferred directly to the Board to purchase service under Section 60. Participants would contact the DHE to effect the transfer on their behalf.
Thank You: The staff at both departments want to assure Section 60 participants that they are doing their best, every day, to keep the Section 60 process moving forward, and to thank you for your continued cooperation, understanding and patience.
Stock Market Volatility and Section 60
The very dramatic volatility of global stock markets over the past two weeks is a jolting reminder of the direct effect these gyrations can have on individuals changing plans under Section 60, and relying on their ORP (employee) assets to complete all or most of their service purchase.
A 5% loss on a $300,000 portfolio is $15,000. We have seen this happen in just two days. This can be devastating if the affected participant does not have other, stable assets on which to rely for their service purchase.
Thoughtful Investing: While neither the Deptartment of Higher Education nor the Retirement Board can provide investment advice, we can highlight one of the key tenets of investing: to match one’s investment allocation to the time horizon of the investment objective. In this case, the objective is to purchase service under the MSERS.
Your time horizon: Participants who will change plans under Section 60 and liquidate their ORP (employee) assets to purchase their service, should anticipate the entire process being completed – beginning to end – over a period of up to 18 months. Most investment professionals would consider this a relatively short time horizon.
Conclusion: We strongly encourage participants to consult with a qualified and experienced adviser for assistance in aligning their investment allocation with the time horizon of their investment objective.
1. Overview- Of the 3,892 ORP participants who were eligible to transfer their ORP participation to the state pension (MSERS), 2,006 submitted a Notice of Interest form; expressing their interest in learning the service they’d bring into the MSERS, and the cost to purchase that time.
To-date, the Retirement Board and the Department of Higher Education (DHE) have completed and mailed 1,029 Retirement Plan Information Packages to eligible participants.
We have received 257 MSERS Election Forms from participants, conveying their desire to transfer to the MSERS.
With 977 Retirement Plan Information Packages still to prepare and mail, the two departments have a substantial amount of work to complete over the next two months. This is especially important insofar as we are still running several weeks behind schedule. Please note that the Retirement Board has expanded its staff working on service buy-backs, and Section 60 in particular.
2. MSERS Cost Recalculations- The Retirement Board recalculated the cost to purchase MSERS service (prior to ORP enrollment) for approximately 200 participants. The mistaken calculations illustrated a cost to purchase one’s old MSERS service that is higher than it should be.
The DHE has mailed new Statements of Service to the affected participants. Please note that the new Statement does not confer a new 180-day election period.
3. Active MSERS Members- For those of you who are current Active MSERS members for whom Section 60 provides an opportunity to purchase your old ORP time – the significant delays the DHE and Retirement Board have encountered while addressing the ORP participants (who may change plans) have moved our work for you further behind.
At this time, the two departments are considering how to proceed with your group. We are looking for the most expedious approach to working with the data we have compiled.
4. Communicating with the Department of Higher Education- Please submit all of your general questions about Section 60 to the DHE via email. The ORP email address is: ORP@bhe.mass.edu
Questions about the Retirement Board’s service and cost estimates must be directed to the Retirement Board via email: email@example.com
Both departments will reply to you via email.
*Special note about contacting the DHE: Due to the heavy volume of incoming inquiries, we ask that participants first look at the Section 60 FAQs for information about the questions they have before contacting the DHE. Many of the inquires we receive are addressed by the FAQs.
The DHE completed a major overhaul of the FAQs, bringing the information up-to-date, and expanding it to reflect current information.
For questions that are not addressed by the FAQs, please see the guidelines below for contacting DHE staff:
EMAIL: The DHE’s retirement plans group staff will respond to incoming inquiries about Section 60 only via email. The ORP mail box is at: ORP@bhe.mass.edu
TELEPHONE: We will only respond to telephone calls coming into the participant telephone Line: 617-994-6976. Please do not call the staff directly. When leaving a voice mail message on the participant line, please be certain to include your email address so we can write back to you.
5. TIAA-CREF Participant Mailings- TIAA has mailed two endorsements to participants in the recent past. The endorsements alter the provisions of each participant’s contract with that firm, but only in relation to Section 60. These changes will not be useful to all participants. We have provided some notes about each Endorsement below.
Retirement Endorsement: For those participants who reported their intent to retire prior to January 1, 2016, this Endorsement allows a full lump sum liquidation of the TIAA Traditional Account when these participants enter the MSERS. This feature makes more money immediately available to participants in order to purchase service in the MSERS under Section 60. Absent the Endorsement, this would not be possible.
This liquidation will include payment of all “employer” assets in the TIAA Traditional Account to the state’s Pension Reserve Fund.
Additionally, this Endorsement waives the 2.5% surrender fee for these lump sums; providing more money to help purchase service.
Small Sum Transfer Endorsement: This Endorsement allows those participants who are not retiring soon to liquidate all of their TIAA Traditional Assets for transfer to the Retirement Board, but only if they have less than $5,000 in that account at the time of the liquidation. Again, this helps make more money available for participants to purchase their service in the MSERS.
Participants with holdings in the Traditional Account that are $5,000 to $9,999 may not use these funds to purchase service under Section 60. These funds, employer and employee, will remain in the ORP, to the participant’s credit.
Participants whose holdings in the Traditional Account are $10,000 and greater may initiate a Transfer Payout Annuity (TPA) with TIAA to begin the liquidation of the Account holdings through installments over a fixed period of time. You will find more information about using TPAs under Section 60 in the FAQs, and by talking with your campus’ TIAA Representative.
Transfer Payout Annuity Liquidity: Assets held in a TPA may not be liquidated for the participant at any time. This means that the “Retirement Endorsement” mentioned above does not apply to funds held in a TPA.
6. Questions about the Retirement Plan Information Packages-
As noted above, the DHE has mailed 1,029 Retirement Plan Information Packages to participants, and have received 257 MSERS Elections. Based on this experience, here are the most common issues and questions we find related to the Information Packages and the enclosed forms:
7. Section 60 and GIC Insurance Coverages- Transferring your ORP participation to the MSERS does not affect your current GIC insurance benefits as an Active Employee.
The opportunity to change retirement plans under Section 60 is not an opportunity to change your GIC insurances – except that you may purchase the GIC’s long term disability insurance during a special Section 60 open enrollment.
8. Provider Source Allocations - "Employer & Employee" Assets- The three providers have been working very hard over the past six months to correct their record keeping of the different “sources” of assets in your ORP account(s). Much of this work is being completed now. This means that you may see dramatic transfers recorded within your provider account.
While your account balance will not change with these internal transfers, your provider’s system will soon show you all of the “sources” comprising your account. These sources can be:
Original MSERS Transfers: In many cases, the old “MSERS to ORP” transfers had not been accurately recorded on the Providers’ administrative systems. During last summer, the DHE staff researched the original transfers (amount, date of transfer and receiving Provider). We sent this information to the three Providers, which are now completing movement of the MSERS transfers into the “Rollover” source.
Lincoln Transfers in 2012: In most cases where participants using Lincoln Financial Group selected a new Provider in 2012 and then directed Lincoln to transfer their ORP assets to their new Provider, Lincoln did not provide any supporting information about the sources of funds they were transferring (how much was “employer” money; how much “employee”? rollover?). We have been working closely with Lincoln and the current Providers to compile this information and have your current provider implement the correct source allocations for the amounts that came from Lincoln. Again, most of this work is being finalized now.
1. Retirement Plan Information Packages & Forms
As the Retirement Board inputs service and cost numbers in the S60 database, the Department of Higher Education (DHE) has been mailing Information Packages to participants. Systems and workload issues have kept us running approximately one week behind schedule. However, we anticipate having the process on time in the near future.
Questions about the service and cost numbers on the Statement of Service must be directed to the Retirement Board via firstname.lastname@example.org. Please note that the DHE does not have access to information about the service and cost calculations, and therefore cannot respond to questions about these issues.
Questions about the Information Package in general, or about the Section 60 process should be directed to the DHE via ORP@bhe.mass.edu.
MSERS Enrollment Form: When completing the MSERS Enrollment Form, do not complete Section B. Simply leave Section B blank and return the form to the DHE. The DHE will have the form completed and sent to the Retirement Board. This approach allows the DHE to coordinate some of the “exit” activities for participants leaving the ORP to join the MSERS.
2. Section 60 Forfeiture Notices
The DHE will be mailing Section 60 Forfeiture Notices to the 1,673 participants who did not return a Notice of Interest form. We anticipate mailing the Forfeiture Notices during the next ten days.
3. Active MSERS Members
Active MSERS Members who are eligible to purchase their old ORP time as creditable service under the pension should have received the DHE’s Notice of Eligibility package in July. These employees have until the end of December to submit their Notice of Interest forms.
The DHE has received Notice of Interest forms from many of this group, and anticipates needing much if not all of the 180-day period allotted under the law for the Retirement Board to calculate the amount of available service and related cost. The DHE will mail Statements of Service to these members as soon as possible.
4. TIAA Endorsement – 120 Day Restriction
TIAA has mailed an Endorsement to each participant’s TIAA Certificate. The Endorsement codifies TIAA’s offer to waive the 2.5% surrender charge on lump sum distributions from the TIAA Traditional Account for ORP participants who join the MSERS and retire upon entry in the state pension. The Endorsement refers to TIAA’s standard policy about requesting the distribution within 120 days of one’s termination of employment.
PLEASE NOTE that for those entering the MSERS and retiring, the DHE will coordinate the movement of the TIAA traditional funds on behalf of participants, using their entry to the MSERS as the trigger date to start the 120-day period. This approach has been negotiated with TIAA, allowing all assets in the Traditional Account to be liquidated – freeing more “employee” assets to purchase service with the Retirement Board.
Information Package Mailings- Delay
We are sorry to report that we are delayed in mailing Retirement Plan Information Packages this week. The ORP staff is working on only this effort and expects to have packages currently due, mailed this week.
As always, we appreciate your patience with this process.
Notice of Interest Deadline - Confirmations
The official deadline for submitting Notices of Interest is Monday, October 27. The ORP staff is preparing for a surge in Notices of Interest at that time. Due to the increase in Notice of Interest form receipts and working to deliver nearly 400 retirement plan information packages next week, please be patient in waiting for our confirmation of receipt of your Notice of Interest form.
Multiple Submissions: Please refrain from sending your Notice of Interest form to the DHE more than once. The effort to record and reply to multiple receipts detracts greatly from the substantial Section 60 work efforts the DHE staff currently face. To ease participant concerns about receipt of their Notice of Interest, the DHE will consider any special circumstances attending a form arriving next week after the official deadline of October 27.
TIAA-CREF Customers - Special Mailing
TIAA-CREF is preparing to mail endorsements to each of their ORP customers. The endorsement codifies their offer to waive the 2.5% surrender charge for participants who have money in the TIAA traditional account, change their retirement plan coverage to the MSERS under Section 60 and retire immediately upon entering the MSERS.
The endorsement does not apply to ORP participants who:
The endorsement is an important legal document that you should keep with your TIAA Certificate.
The DHE and Retirement Board experienced substantive data problems over the past few weeks which have delayed progress in identifying service and the cost to purchase it for ORP participants choosing to enter the MSERS under Section 60.
These problems affected the Full Time Equivalencies (FTEs) in participants’ ORP payroll histories. The FTEs are critical to the calculation of creditable service because MSERS members accrue this service proportionately to their work load.
The FTE issues affected more than half of the 970,000 ORP payroll history records.
Separately, the FTE data problems also delayed testing and implementation of the system that will update each participant’s ORP payroll history records on the Section 60 database (after each pay period ends). This creates further delays in identifying service and calculating cost.
While repairs to the FTE-related problems are nearly completed, the DHE and Retirement Board are using an interim “fix” that allows service research to continue for those participants who reported their intent to retire in the next twelve months.
The two departments remain committed to providing an accurate Statement of Service for use by employees, within the time requirements of Section 60. To that end, the Retirement Board has allocated additional resources to complete the necessary research into each person’s work history.
“Source” Record Keeping by Providers
The DHE is working closely with the three Providers to ensure that their records of the “sources” of the funds in each Eligible Participant’s account are correct. This means that we segregate Employee Plan Contributions and the investment gain thereon from other sources of assets (e.g. Employer Plan Contributions; Transfer-In).
There are two situations that require our attention:
1. Transfers into the ORP from the MSERS (noted in our June 3 update below); and
2. Transfers between Providers where the company sending the money did not provide data about the source of funds to the receiving company. These transfers are primarily an issue for participants who individually elected to transfer out of Lincoln to either VALIC or Fidelity. We believe these records at TIAA-CREF are accurate.
Lincoln recently provided this information for the DHE, and we are working to assess the information, organize it and get it to VALIC and Fidelity as quickly as possible.
In the absence of “source” data for incoming funds, investment companies typically record all of the money as “Employer Contribution”, as a default. Hence, many of you may have found a disproportionately high amount of “Employer” funds in your account.
Where current Providers have incorrectly recorded transfers into the Plan, we instruct them to “re-characterize” the original transfer amount (plus investment earnings-to-date) as the correct source.
Example: If a participant transferred $9,000 from the MSERS to the ORP, and their Provider mistakenly recorded the funds as either ORP Employer Contribution or ORP Employee Contribution, we would instruct the company to determine the current value of the $9,000, and re-characterize the total as “Transfer-In” (or “Rollover”).
Final Control: The DHE will ensure that each participant’s records are correct prior to making any transfers to the Retirement Board to purchase service under the MSERS; and any Employer Contributions to the Pension Reserve Fund.
1. Provider Notices of Account Activity
Eligible Participants may expect notices of changes to their ORP accounts from their Provider(s) over the next few months. These notices will reflect corrections to the recordkeeping of transfers into the Plan (e.g. original “MSERS to ORP” transfers) and between Providers.
The DHE is currently working with the three ORP Providers to ensure the original “MSERS to ORP” transfers are recorded as either “Transfers In” or “Rollovers”, and not “Employee Contributions”. Each correction will generate a notice of the change from your Provider.
These changes do not affect the amount of money in accounts, but better recognizes the source of the funds. This is especially important when drawing (only) ORP Employee Contributions for remittance to the Retirement Board to purchase Qualifying Service under Section 60.
Participants may voluntarily direct the DHE to also use their “MSERS to ORP” transfers to purchase Qualifying Service.
Any comingling of the original “MSERS to ORP” transfers with regular ORP Employee Contributions does not affect the calculation of cost to purchase Qualifying Service because the Providers' records are not used to determine the cost of purchasing service.
2. Active MSERS Members
The DHE and Retirement Board have identified the population comprised of currently Active MSERS members who are also Inactive ORP participants. The Departments are reviewing the final list to ensure its accuracy.
Once the list of these eligible participants is complete, the DHE will mail a Notice of Eligibility package to each person. These are forthcoming. Thank you for your patience with this matter.
Notice of Interest Form – “Other Service”
When completing the Notice of Interest form, please report whether you have had service with any public employer other than the Commonwealth. This may include employment with a county or municipality here in Massachusetts, or service with another state.
Active MSERS Members with ORP Time
The DHE and Retirement Board are currently working to identify those Active MSERS members who are also Inactive ORP participants. This group is eligible to purchase their old ORP time as creditable service under the MSERS.
The two departments are developing a procedure to notify this group of their eligibility to purchase the old ORP time; provide a calculation of the service available for purchase; and the cost to buy the time.
While we are working on this population, we have initiated a procedure for current ORP participants to change their retirement coverage to the MSERS. These procedures are not intended for current MSERS members who can purchase their ORP time.
Delayed Delivery – Notices of Eligibility
We are very sorry to report the unexpected delay in mailing the Section 60 “Notice of Eligibility” packages. The printing company reports putting them in the mail on Monday night, April 21, instead of last Tuesday (April 15).
The printer explained that most people will receive their package in the mail either today (April 22) or tomorrow (April 23). Please accept the Department’s sincerest apology for this delay.
Section 60 Effective Date – Seminar Schedule
The Department of Higher Education, as the ORP Plan Administrator, along with the Retirement Board and the Mass. Teachers Association, is pleased to report that implementation of Section 60 of the state’s 2011 Pension Reform Act will be effective on Thursday, May 1, 2014. This means that the procedure supporting Eligible Participants’ opportunities to transfer their ORP participation to the Mass. Employees’ Retirement System (MSERS) will be operational and in place.
Notices of Eligibility will be sent to Eligible Participants in mid-April. These Notices will include an overview of the Section 60 Procedures, and a form for participants’ use in requesting a calculation of their Qualifying Service under Section 60 and the cost to purchase that service.
The DHE and Retirement Board have scheduled three Section 60 Seminars during April and early May. Click here to access the schedule.