ORP News

UPDATE January, 2023

New Minimum Retiree Income – Retiree Insurance

The Department of Higher Education has revised the requirements for a Retiree Income for those participants who retire and purchase Retiree Insurance coverage from the Group Insurance Commission.

The change in the minimum requirement is effective as of January 1, 2023.

The New Retiree Income Requirements

Effective January 1, 2023, the ORP’s required minimum monthly Retiree Income will be:

  1. an amount equal to the greater of:
    - the sum of the Retiree’s monthly Retiree Insurance premiums, and
    - $100.00
  2. AND the amount must be supported by sufficient underlying, liquid* assets in the Retiree’s ORP account. Those assets must support the amount of Retiree Income for the participant’s life expectancy. The DHE’s Retirement Plans Group will make this determination using the Internal Revenue Service’s mortality tables. Moreover, the Retirement Plans Group will conduct audits and reviews of individual participants’ Retiree Incomes; ensuring compliance with these requirements.
*This EXCLUDES assets held in funds such as TIAA’s Traditional Account.

Who is affected by the new requirement?

The new required minimum Retiree Income is applicable to those retirees who purchase Retiree Insurance from the Group Insurance Commission AND whose monthly income from the ORP is paid in the form of systematic monthly payments.

Separately, those initiating a Retiree Income from the Plan in the form of an annuity must establish their initial annuity amount in conformance with the requirement for a Retiree Income.

Retirees who currently draw their Retiree Income as an annuity ARE NOT AFFECTED by this change.


UPDATE September, 2022

Spousal Consent Grandfathering

All non-annuity systematic/recurring withdrawals* being paid from the ORP that are in effect prior to October 1, 2022 will not require a spousal waiver. These withdrawals will be grandfathered by the Plan.

HOWEVER.....any existing systematic/recurring payment from the Plan that is changed on or after October 1, 2022 will be subject to spousal consent.

Please note that the “consent” language will be on each Provider’s forms. So, you and your spouse may establish your new income amount, and record the spouse’s consent on the same application.

For example:

  1. You are married and are currently receiving $1,000 each month from your systematic/recurring monthly income. You want to increase the amount. The change will be effective on or after October 1, 2022. You must provide your spouse’s consent for the new amount to be paid from the Plan. This will be considered a new SWAT/SWP.
  2. You are married and are currently receiving $1,000 each month from your SWAT/SWP. You want to decrease the amount. The change will be effective on or after October 1, 2022. You must provide your spouse’s consent for the new amount to be paid from the Plan. This will be considered a new SWAT/SWP.
*These are sometimes referred to as SWATs (TIAA) and SWPs (Fidelity).

Members of the Board of Higher Education, who serve as the Plan’s Trustees, voted to incorporate spousal protections to benefits from the ORP during their meeting on May 3, 2022.

These protections, which are described below, are intended to reflect marriage as a partnership with equal rights and protections under the Plan.


UPDATE July, 2022

New Spousal Protections

Members of the Board of Higher Education, who serve as the Plan’s Trustees, voted to incorporate spousal protections to benefits from the ORP during their meeting on May 3, 2022.
These protections, which are described below, are intended to reflect marriage as a partnership with equal rights and protections under the Plan.

The Spousal Protections

The new provisions to the Plan include three components

  1. Beneficiary Designations
    Upon the effective date of these new provisions (Oct. 1), all spouses will automatically be considered the beneficiary of 50% of the participant’s benefits. This presumption will supersede the current beneficiary designation where a spouse is beneficiary for less than half of the account.
  2. Distribution Of Benefits From The Plan
    The default payment method to a married participant for any funds distributed from the Plan will be in the form of a Joint and Survivor Annuity, where the spouse is the “Survivor” for at least 50% of the benefit upon the participant’s death.
  3. Spousal Consent
    Spouses may waive their rights to pre-retirement death benefits and distributions in the form of a Joint and Survivor Annuity.

Effective Date of these New Provisions

These changes to the Plan will become effective on October 1, 2022
The delay in implementing these changes allows time for participants and their families to consider the effect the new provisions may have on their financial and/or estate plans, and prepare any necessary changes to those plans.

Especially important - Implementation:
participants whose spouses will be waiving their rights under the new beneficiary requirement may record their spouse’s consent and implement (or retain) their beneficiary designations only on or after October first. This is when TIAA and Fidelity will have updated their systems to reflect the new requirements.
Please use the time between now and October first to review your financial and estate plans and prepare for any beneficiary-related changes you might need to make in October.

How may beneficiary designations be changed?

Participants may revise their beneficiary designations directly with their Provider: Fidelity and/or TIAA. As noted above, the Providers’ systems will be updated and ready to accept Spousal Waivers on and after October 1, 2022.
Both firms have on-line beneficiary platforms which will include the spousal waiver for cases where a spouse agrees to forego their entitlement to the participant’s pre-retirement death benefits.

PROVIDER WEB SITES FOR PARTICIPANTS
  1. Fidelity’s Net Benefits: https://login.fidelity.com/ftgw/Fidelity/NBPart/Login/Init
  2. TIAA: TIAA.org

Applications To Draw Benefits From The Plan

Both Providers’ web sites include platforms on which to apply for distributions from the Plan. These platforms will be updated to reflect the required Qualified Joint and Survivor Annuity payment method for married participants.
Spousal Waiver: These platforms will also provide a Spousal Waiver for the required annuity.

General Questions and Issues

  1. What if am not married now but become married in the future?
    You should report your marriage to your Provider and assess the need for changes to your beneficiary designation(s).
  2. Must my retirement income be paid solely in the form of a Qualified Joint and Survivor Annuity?
    No. Your spouse may waive their rights to the annuity; thereby enabling use of other payment methods: Systematic Withdrawals; lump sums; etc...
  3. Does the beneficiary requirement of at least 50% also apply to the Group Term Life Insurance provided by the Plan for Participants?
    No it does not.
    The spousal preretirement protection under the Plan IS NOT APPLICABLE to the Group Term Life Insurance policy that covers Active Participants. There are no restrictions in naming beneficiaries under the life insurance policy.
  4. When is the soonest these changes can be made?
    October 1, 2022 is the soonest that participants may make changes to their accounts at Fidelity and TIAA relating to these new spousal protections.
    We are providing a three-month advance notice of these changes in order to allow sufficient time for participants to assess the impact of these changes on their current financial and estate plans, especially the beneficiary designation.
    We intend to mail two additional notices to participants, to remined every one of the imminent changes to the Plan in October.

UPDATE August 16, 2021

Retiree Income Requirements - Update

The DHE is planning a review of its requirements for Retiree Incomes from the ORP. Our intent is to revisit the tenets of the current requirements and determine if changes are either needed or warranted.

We anticipate beginning the review during the later summer months.

Without regard of any changes being made, the DHE will post the outcome(s) of its review here on the Plan’s web pages and via direct communication with each Retiree.

January 1, 2021

Pandemic-Related Amendments

Commissioner Carlos Santiago, through delegated authority, on behalf of the Board of Higher Education, has amended the Optional Retirement Program in response to the pandemic’s impact on ORP participants who have been and may be furloughed.

The amendments will provide two important benefits for participants who experience days on furlough without any compensation (i.e. no personal time; vacation time; no sick pay; etc.).  To the extent possible, the structure of these benefits has been coordinated with the state employees’ pension (MSERS).

Here are details of the “furlough” amendments:

Employer Contributions

The Commonwealth will make an Employer Contribution for each day, up to twenty (20) days, that a participant is on furlough without any compensation during the twelve-month period beginning with the first day a participant is furloughed without any compensation.  The Employer Contribution will be calculated on the participant’s normal amount of salary.

NOTE: In the absence of any regular compensation (while furloughed with no pay), Employee Contributions to the ORP cannot be calculated by the payroll systems.  Under the terms of these ORP amendments, the Commonwealth will make only furlough-related Employer Contributions to affected participants.

Months of Participation*

Participants who are furloughed and do not make any Employee Contribution to the ORP during an entire calendar month will still be credited with a Month of Participation.  Participants may not accrue more than twelve (12) such Months of Participation during the effective period of the amendments.

*Months of Participation are accrued in order to attain 120 Months, meeting the participation requirement for eligibility for Retiree Insurance coverages.

Effective Period of the Amendments

The amendments became effective on November 25, 2020, retroactive to March 10, 2020, which is the date the Governor’s State of Emergency relating to the Covid-19 pandemic became effective.

The amendments’ provisions will end on June 30, 2022.  This termination date reflects the DHE’s expectation that the economic effects of the pandemic, including possible furloughs, may ripple through the 2021 and 2022 fiscal years.

Implementation

The DHE’s Retirement Plans Group (RPG) is poised to implement the amendments now.  The RPG has created a database that captures relevant furlough information for ORP participants retroactively to March 10, 2020.

The Commonwealth will make a one-time retroactive Employer Contribution for all affected furloughed participants.

Prospectively, furlough-related Employer Contributions will be made to the Plan on a quarterly basis.

Additionally, the RPG’s database identifies furlough-related Months of Participation and captures them for addition to Months of Participation already accrued for each affected participant.

No Participant Action Required:  Participants do not have to take any action to receive the furlough-related Employer Contributions and accrual of Months of Participation.


UPDATE December 29, 2020

CARES Act Update – Special REMINDER: CV19 Distributions
The special CARES Act “Corona-Related Distributions” (CRDs) will end on December 31, 2020.


UPDATE December 11, 2020

The Commonwealth of Massachusetts is committed to periodically reviewing the Optional Retirement Plan to help you meet your retirement and financial goals. As part of this commitment, the plan was recently reviewed for a number of factors including; the range of investment options available through the plan, investment performance and fees. As a result of the review, the Commonwealth has decided to make changes to the Plan’s investment fund lineup. In addition, some changes will also be made to lower the plan’s fees. You will be receiving a communication from your investment provider, either TIAA or Fidelity, which will provide more detail on these changes. 


December 10, 2020

CARES Act Update – Special REMINDER: CV19 Distributions
The special CARES Act “Corona-Related Distributions” (CRDs) will end on December 31, 2020.

Participants* interested in taking a CRD should contact their ORP Provider (Fidelity and/or TIAA) to submit their request in the next few weeks.

Information about CRDs is available in the May 11, 2020 COVID-19 Update below.

*Remember that CRDs are currently available only to participants who have terminated employment with the Commonwealth, or if still employed, who have attained age 59 ½.


September 23, 2020

CARES Act Update – Special REMINDERS: Loans

This brief update is a reminder that the CARES Act’s liberalized loan provisions will end today: Sept. 23, 2020. Beginning tomorrow, Sept. 24, the ORP will revert to its original design: no loans are available under the Plan.

For those who have taken advantage of the “CARES Act loans” please remember that while repayment schedules can be delayed, the interest accrual on the outstanding balances is not deferred…the accrual continues.

Another reminder is that when a participant defaults on a loan, the entire outstanding balance becomes taxable income in the year of the default.


June 30, 2020

COVID-19 Update

ORP Amended to Accommodate CARES Act Benefits

The Board of Higher Education amended the Optional Retirement Program (ORP) to allow for in-service withdrawals* and loans from the Plan.  Details about these changes are below.

These new features for the ORP are:

  1. effective now, and
  2. will remain in effect while the CARES Act provisions relating to in-service withdrawals and loans are effective.  The special loan provisions are scheduled to close on September 23, 2020. The special provisions for in-service withdrawals are scheduled to close on December 31, 2020.

*In-service withdrawals are distributions from the Plan to participants who have not terminated employment with the Commonwealth AND are at least age 59 ½.  This includes all actively contributing participants and those who have been either furloughed or laid-off with or without pay.

CARES Act Distributions

Corona-Related Distributions (CRDs) are payments from the Plan to participants who are affected by the Corona Virus medically and/or financially.  Click here for eligibility requirements.

You must self-certify to your Provider that you meet these conditions.

Active Participants - Eligibility

If you are currently employed by the Commonwealth, you must be at least age 59 ½** to take a distribution from the ORP.

This includes participants who have been furloughed without pay and not currently contributing to the Plan.

Terminated Participants – Eligibility

If you have terminated employment with the Commonwealth, then you are eligible for Corona-Related Distribution from the ORP.  There are no other limitations or requirements applicable to you in order to take money from the Plan.

CARES Act Distribution Features & Application

The best source of detailed information about CARES Act distributions is your Plan Provider.  Click here for contact information for your Provider.

You will apply for any CARES Act distributions from the ORP directly with your Provider.

**The Internal Revenue Code restricts distributions from Plans like the ORP to active participants who are at least 59 ½ years old. Active participants are those who have not terminated employment with the Commonwealth.  Active participants include those who have been furloughed without pay and (therefore) not currently contributing to the Plan.

CARES Act Loans

Eligibility – All Participants

All participants, those who have terminated employment with the Commonwealth and those who have not, are eligible to utilize the CARES Act loan provisions.

Participants seeking to use the CARES Act loans must self-certify, to their Provider, that they meet the Act’s requirements of being medically and/or financially affected by the Corona Virus.  Click here for the Act’s requirements to be eligible for the CARES Act loans.

CARES Act Loan Features & Application

The best source of detailed information about CARES Act loans is your Plan Provider.  Click here for contact information for your Provider.

You will apply for any CARES Act loans from the ORP directly with your Provider.


May 11, 2020

COVID-19 Update

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

Commissioner Santiago, empowered by the Board of Higher Education’s inter-meeting authority, amended the Optional Retirement Program (ORP) to make the CARES Act (the “Act”) features available to ORP participants.  These include:

  1. A loan provision, and
  2. In-service withdrawals.

The addition of these features will provide access to ORP funds during the current Covid-19 emergency.

Effective Dates

The amendments are effective now.

However, they are aligned with the CARES Act, and its deadlines for these features.  In its current form, the Act’s loan provisions will end on September 23, 2020.  The in-service withdrawals will end on December 31, 2020.

If the Act’s provisions are extended, then the ORP features will similarly be extended; reflecting changes to the Act.

ORP Loans

Who is eligible?

Loans under the ORP are available to all participants, without regard to their employment status (active/leave/terminated).

CARES Act Eligibility: Participants must meet the CARES Act requirements  for the special loan provisions.  You must certify your eligibility to your ORP Provider.

Detailed Information

Contact your Provider  to learn about the details of the CARES Act loan provisions and requirements.  Some of the basic features are:

  1. The amount of funds available for CARES Act loans has been doubled to the lesser of: 100% of your account balance and $100,000.00
  2. Loan repayment has been delayed to next year

CAUTIONARY NOTE: The interest accrual on loans begins immediately, and is NOT delayed.

Each Provider’s record keeping system has been set to a maximum of five (5) loans outstanding.

ORP In-Service Withdrawals = Coronavirus-Related Distributions

Who is eligible?

In-service Withdrawals, which will be treated as “Coronavirus-Related Distributions” (CRDs) under the CARES Act, are available to participants who are actively employed by the Commonwealth (including those on a Leave) and are age 59 ½ or older.  This age requirement is established by the Internal Revenue Service for in-service withdrawals for plans like the ORP.

CARES Act Eligibility: Participants must meet the CARES Act requirements  for the special CRDs.  You must certify your eligibility to your ORP Provider.

Detailed Information

Contact your Provider  to learn about CRD details. Some of the basic features are:

  1. The aggregate of your CRDs cannot exceed $100,000.00
  2. The IRS’ mandatory 20% withholding of federal income tax is waived for CRDs.
  3. You may spread the income tax payment on CRDs over three years.
  4. You may elect to repay your CRDs; helping restore the assets in your ORP account.

If you are actively employed or on leave and are younger than age 59 ½

If you are younger than age 59 ½, actively employed by the Commonwealth and you meet the Act’s eligibility requirements, you are eligible for the CARES Act loans, not the in-service withdrawals.

If you have terminated employment with the Commonwealth

If you meet the Act’s eligibility requirements, then you may use both the CARES Act loans and/or Coronavirus-Related Distributions (CRDs).

The CRDs are available to you because as a participant who has terminated employment with the Commonwealth, you are already eligible to take money from the Plan.  In this case, for those eligible, the distributions with be treated as CRDs.

 

May 5, 2020

COVID-19 Update

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

The CARES Act, which was passed by the Congress and signed into law on March 27, 2020, provides expanded access to retirement plan assets during 2020 for those who suffer either medically and/or financially under the COVID pandemic.  The access is made through liberal loan provisions and Corona-Related Distributions (CRDs).

The Commissioner of Higher Education, using inter-meeting authority granted by the Board of Higher Education, is preparing to amend the ORP in order to allow the greatest possible access to ORP assets under the CARES Act.

The effective date of the amendments will be posted here as soon as possible.

In anticipation of these ORP amendments, the Department’s Retirement Plans Group has been working with Fidelity, TIAA and AIG Retirement (fka VALIC)** to position the Providers to enable the CARES Act’s provisions on their record keeping systems for the ORP, as soon as possible.

Please monitor this ORP “News” page for updates on the progress of amending the Plan and then implementing these changes at the three Providers.

**While AIG Retirement holds only ORP assets invested in its Fixed Account Plus, and Fixed Interest Option, neither of which can (generally) be transferred to another investment medium in a single sum, these assets are available to pay benefits.  So, when the ORP is amended to reflect the CARES Act’s provisions, AIG Retirement will be poised to support both the CRDs and loans under the ORP.


March 31, 2020

With the passage of the federal CARES Act (the Act) on March 27, the Department of Higher Education is currently working to determine how the Act affects the Optional Retirement Program, and what processes must be established to ensure the compliant administration of the Coronavirus-Related Distributions enabled by the Act.

At this time, we ask for your patience while we consider these important changes to the Plan and determine how best to address them.

Please monitor this website for updates on our progress.

Thank you.


February 13, 2019

VALIC Termination

The Dept. of Higher Education (DHE), as the Plan’s Administrator, will not extend VALIC’s contract as a Provider under the Optional Retirement Program (ORP).  While the termination is effective immediately, VALIC’s role under the ORP will be phased-out over the course of 2019.

The Plan will not accept any new ORP enrollments for VALIC.

However, all other aspects of VALIC’s role in the ORP will remain unchanged as we make our way through this process.

Participants may continue current contributions to their ORP account with VALIC.

The DHE’s decision to release VALIC from the ORP is the first major step in the Commonwealth’s efforts to gradually revise the ORP’s structure away from the “multi-Provider” approach of the 1980s and 1990s, to an efficient contemporary approach.

The DHE is working with VALIC on an exit plan that will be implemented over the course of this year.

Formal notice of this change will be mailed directly to all VALIC participants  under the ORP in the near future.

Details of the exit plan and its implementation will be reported via direct correspondence with participants, and on this web site, as a common resource for everyone.

SPECIAL 403(b) NOTE: VALIC remains a vibrant partner in the Commonwealth’s 403(b) Supplemental Retirement Plan. The DHE’s action under the ORP has no effect on participants’ elections for VALIC under the 403(b) plan.

Retirees Who Purchase GIC Retiree Insurances

The Department of Higher Education will contact you directly to work-through this transition; ensuring there is no interruption in your insurance coverages.  The DHE has already begun working with the GIC on this matter.

As noted above, details of these changes are forthcoming.

 

 

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