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 Plan’s loan rules will revert to their original configuration.
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.
May 5, 2020 Covid-19 Information
The Department of Higher Education (DHE), the Plan’s Administrator, has completed implementation of the Coronavirus-Related Distributions (CRDs) and liberalized loan provisions under the 403(b) Supplemental Retirement Plan.
Please note that the DHE is currently acting to temporarily remove the limit of loans that can be outstanding under the Plan, which is currently two (2).
While the Plan will operate without an official limit on the number of loans a participant may hold, the three Providers will have the following limits on their record keeping systems:
Fidelity: 5 TIAA: 3 AIG Retirement: 5
The CARES Act liberalizations of the Plan’s provisions affect two benefits:
The CARES Act will treat distributions from the Plan as “Coronavirus-Related Distributions” (CRDs).
Briefly**, CRDs are distributions from the Plan to you, up to $100,000 during 2020. The $100,000 is the maximum, in aggregate, of all distributions you take from your retirement plans and IRAs
**For detailed information about CRDs, contact your Provider.
The CARES Act provides these two important areas of tax relief, which are intended to distribute the largest amount(s) to you.
The CARES Act liberalizes both the amount available to borrow from your Plan, and the repayment.
The following notes provide a brief overview of these provisions. For detailed information about loans from your plan(s), contact your Provider
The CARES Act doubles the amount available as a loan to you.
The maximum loan amount is the lesser of 100% of your account balance and $100,000.
The first repayment of your loan(s) can be delayed to 2021.
Please note that interest will accrue during the delay period.
Participants seeking CARES Act distributions and/or loans must be medically and/or financially affected by the Covid-19 pandemic.
Click here for an extract from the law which prescribes the eligibility requirements.
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 403(b) Plan, 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.
The IRS has announced new limits on contributions to the Plan for 2019:
The IRS has announced new, more liberal rules for Hardship Withdrawals from the 403(b) Plan. The new rules provide additional funds that are eligible for these withdrawals, and make it more likely for participants to maintain their contributions to the Plan.
Deleted Loan Requirement
The IRS has discontinued the requirement that participants seeking a Hardship Withdrawal first utilize all of the loan provisions available from their employer. This means that participants no longer have to take the maximum loans from the Plan before being eligible for a Hardship Withdrawal.
Additional Assets Eligible for Hardship Withdrawals
The IRS has expanded the money available for Hardship Withdrawals. Now, participant contributions and the investment gains/interest on contributions may be paid as a Hardship Withdrawal.
Prior to this rule change, only one’s contributions could be paid as a Hardship.
Six-Month Suspension Eliminated
The IRS eliminated the requirement to stop contributions to the Plan during the six months following receipt of a Hardship Withdrawal. This approach encourages participants to maintain their contributions, which the IRS sees as an important factor to increase voluntary savings to supplement participants’ core retirement benefits, and where available, Social Security benefits.
The Board of Higher Education recently amended the 403(b) Plan to include Roth, after-tax, contributions. Participants may begin using the Roth feature during the pay period that begins September 30, 2018.
The Roth approach provides a distinct alternative to the pre-tax savings. Participants should carefully consider which method will better suit their own financial and retirement plans.
Click here for details about the Roth provisions and a comparison of pre-tax and after-tax effect on distributions from the Plan.
The Board of Higher Education authorized a new name for the 403(b) Plan. Effective May 1, 2018, the Plan’s official name became the “Massachusetts 403(b) Supplemental Retirement Plan”.
The new name better reflects the role that plans like this play in each employee’s retirement planning: a supplement to one’s employer-funded retirement benefits, whether from the state pension (MSERS) or the Optional Retirement Program (ORP).
With expanding longevity, basic retirement incomes will face longer periods of time during which they must maintain their purchasing power. Use of the 403(b) Plan can help supplement core retirement incomes over the long term.
While the supplemental aspect of the Plan is our key focus, the Plan retains its original features that can meet short-term issues:
You can learn more about the Plan’s provisions and features in subsequent sections of this web site.
The IRS maintained the basic limit on tax-deferred contributions to the Plan for 2018: $18,000.
They increased the limit for participants who are age 50 or older in 2018: $24,500
As the Plan’s Administrator, the Dept. of Higher Education (DHE) terminated Lincoln Financial Group as a Provider under the Plan. The few remaining participants holding assets at Lincoln transferred to a new Provider (Fidelity, TIAA or VALIC). Those participants who did not move their assets were “swept” to VALIC, with current assets and future contributions being re-directed to VALIC.
As reported earlier, the Commonwealth is phasing Lincoln, MetLife and VOYA out of the 403(b) Elective Deferral Savings Plan. The final contributions to these companies will be made during the pay period that ends November 26, 2016.
If you have not elected a new Provider before November 26, the Department of Higher Education, as the Plan’s Administrator, will automatically open an account for you with VALIC, and direct your future contributions to your VALIC account.
We will allocate your contributions to a default investment fund at VALIC, which you can change at any time. The default investment is the “American Funds Target Date Fund” appropriate for your age.
Separately, the VALIC Adviser assigned to your department/campus will contact you to introduce themself, and review your new account.
Where to find more information
Click here to find information about each of the Contract Providers’ products, services, investment funds and costs.
Consolidating Assets – 2 Key Issues
You are not compelled to consolidate your Plan assets at Lincoln, MetLife or VOYA with your new Provider.
However, if you are thinking about a consolidation, then it is very important that you understand the contractual provisions of your old account and the potential costs of consolidating. This is especially important if you are holding annuity contracts.
Interest Rates: The annuity contracts under the Plan typically offer a “stable value” investment fund, where a minimum rate of interest is guaranteed (implying protection of principal as well). The old contracts likely have minimum interest guarantees of 3% to 4%. Participants with assets in these accounts must very carefully balance the perceived advantages of liquidating and consolidating these funds at their new Provider with the loss of the relative high interest guarantees.
Please note that these old annuity contracts are also likely to have high interest rate guarantees during the payout period where the participant elects to draw those funds as lifetime annuity income.
So, the high interest rates can apply to your account as you accumulate assets, and at retirement if you draw those funds as lifetime monthly income.
Exit Fees/Charges: The old annuity contracts typically impose surrender fees and/or deferred sales charges on funds that are withdrawn from the contract. The deferred charges generally disappear over fixed time periods (e.g. 5 years).
You should work with your current Provider to identify the existence and impact any exit/deferred charges will have on your account balance if you want to liquidate the account and transfer funds to your new Provider. It is incumbent on your current Provider to make these matters clear to you, their customer.
Click here for contact information for Lincoln, MetLife and VOYA.
Only you can determine the value of paying fees in order to consolidate your assets with your new Provider.
Important Note About Loans
The Plan prohibits Former Providers (Lincoln, MetLife, VOYA) from issuing new loans. This means that if you want a loan from the Plan, you must take it from your new Provider’s account. You may need to transfer some or all of the assets in your old account to your new account to ensure sufficient funds are available for your loan. This transfer may incur an exit fee or deferred charge.
The Department of Higher Education (DHE) completed a public procurement for providers under the 403(b) plan earlier this year. The DHE's Retirement Plans Group is currently implementing the substantive changes required by the procurement.
The procurement Evaluation Committee identified four important issues:
The Committee, which was comprised mostly of department and campus Benefits Administrators, overwhelmingly agreed that the current line-up of six providers was excessive and onerous for employees - occasionally deterring some employees from enrolling in the plan.
Committee members agreed that a stable of three providers would present reasonable opportunities for choice of company, products, investment fund line-ups, cost and service delivery models.
The new contracts are effective as of July 1, 2016. All three firms are introducing new products with streamlined investment fund line-ups, additional services and lower costs.
IF YOU CURRENTLY CONTRIUBTE TO FIDELITY, TIAA AND/OR VALIC then click here for detailed information about how these changes will affect you.
The contracts with Lincoln, MetLife and VOYA were terminated July 1, 2016.
IF YOU CURRENTLY CONTRIUBTE TO LINCOLN, METLIFE AND/OR VOYA then click here for detailed information about how these changes will affect you.
Investment guidance has proven very popular among participants in plans like our 403(b) plan. Studies show that participants using guidance services are much more satisfied with their outcomes than participants who do not use such services.
Each of the three providers (Fidelity, TIAA and VALIC) will offer guidance services beginning in September. You should review each firm’s investment fund line-up, guidance service and pricing before deciding which firm’s offerings best suit your circumstances.
If you currently contribute to one or more of these three providers, then your future contributions will automatically be directed to your provider’s new product in September.
The investment of your assets held in your current account will reflect the unique provisions of each firm’s product and contractual provisions. See the details about the changes for each company below.
The new investment fund line-ups for each provider were crafted to meet these objectives:
Fidelity’s fund line-up is being revised from nearly 200 funds under the old portfolio to 17 funds (including the full offering of Freedom Funds as a single entry). Click here for information about the new fund line-up, which becomes effective September 1, 2016.
The DHE will direct all of your future contributions and current assets in the plan to the new fund line-up during the pay period that ends September 17, 2016.
Working closely with Fidelity, the DHE has devised a “mapping” program that identifies the investment funds under the new fund line-up to which your current assets and future contributions will be allocated. Where necessary, the mapping default is to the Freedom Fund that reflects your current age. Download the mapping chart to see where your assets will go.
Your Control: Once the mapping of contributions and assets from the old funds to the new fund line-up is completed, you can always change the allocation of both future contributions and current assets by logging onto NetBenefits.com or calling the Fidelity Retirement Service Center at 1-800-343-0860.
All other aspects of your account under the new investment lineup remain unchanged under the original Individual Custodial Agreement.
Special Reminder: While your beneficiaries will remain the same, this may be a good time for you to review your beneficiary designations. You can designate your beneficiaries by logging on to NetBenefits.com or calling Fidelity at 1-800-343-0860 for help or to request a beneficiary form.
Get Help: Your campus/department benefits administrator may arrange for Fidelity representatives to be available for counseling appointments on-site. You should watch for any announcements about these meeting opportunities.
For more information please call the Fidelity Retirement Service Center toll-free at 1-800-343-0860, Monday through Friday (excluding New York Stock Exchange holidays) between 8:00 a.m. and midnight Eastern time, to speak with a Service Center Representative who is familiar with the 403(b) plan.
TIAA’s fund line-up has been revised to include more funds, and to provide a combination of annuity and mutual funds. Click here to review the new fund line-up, which becomes effective in September 2016.
The new line-up is being offered under the Retirement Choice Plus (RCP) annuity contract.
The DHE will direct all current participants’ future contributions to TIAA’s Retirement Choice Plus contract during the pay period that ends September 17, 2016. We will allocate your future contributions to the plan's default investment: the new TIAA-CREF Life Cycle Fund that is appropriate for your age.
Your Control: Once the DHE’s mapping of contributions to the TIAA-CREF Life Cycle Funds is completed, your investment allocation will remain the Life Cycle fund until you change it. You can change the allocation of future contributions and transfer any assets accumulated in the TIAA-CREF Life Cycle fund at any time, either on-line at TIAA.org/massorp or by telephone: 800-842-2252 weekdays 8 a.m. to 10 p. m., Saturdays 9 a.m. to 6 p.m. (ET)
Current Assets: You should consider consolidating your current assets in TIAA’s legacy products under their new Retirement Choice Plus Annuity contract. Your review of this option should include a careful comparison of interest rates and guarantees offered under the TIAA Traditional Account before making your decision to move any assets in that fund.
All other aspects of your account under the new product remain the same as under the old product.
Reminder: While your beneficiaries will remain unchanged, this may be a good time for you to review your beneficiary designations (go to TIAA.org). New users will have to register on the site before being able to change beneficiaries on-line.
Get Help: Your campus/department benefits administrator may arrange for TIAA representatives to be available for counseling appointments on-site. You should watch for any announcements about these meeting opportunities
You can always contact TIAA’s representatives who are familiar with the plan, directly at: 800-732-8353.
VALIC’s fund line-up has been revised to a smaller, more manageable list of funds, and to include more Index Funds. More information about the new fund line-up is available vie VALIC’s website:
The DHE will direct all current participants’ future contributions to this new Mutual Fund Platform during the pay period that ends September 3, 2016. We will allocate your future contributions to the plan’s default investment: the American Funds Target Date fund that reflects your age.
This change of products and the automatic allocation of your contributions to the Mutual Fund Platform will require a “Quiet Period” – a period of time during which you will not have access to your account.
The Quiet Period will be from Wednesday August 24, 2016 through Wednesday August 31, 2016.
Your Control: Once the DHE’s mapping of contributions to the new fund line-up is completed, your investment allocation will remain the Target Date fund until you change it. You can change the allocation of future contributions and transfer any assets accumulated in the Target Date fund at any time, either on-line at VALIC.com or by telephone: 888-569-7055.
Current Assets: You should consider consolidating your current assets in VALIC’s legacy annuity product under their new product. Your review of this option should include a careful comparison of interest rates and guarantees offered under the Fixed Account before making your decision to move any assets out of that fund.
Beneficiaries: You must contact VALIC to establish the beneficiaries for your new Mutual Fund Platform account. You can do this on-line at VALIC.com or by submitting a VALIC beneficiary designation form
Get Help: Your campus/department benefits administrator may arrange for VALIC advisors to be available for counseling appointments on-site. You should watch for any announcements about these meeting opportunities.
You can always contact the VALIC advisor for your campus/department directly by clicking here for the list of advisors and their assignments.
The Commonwealth is phasing these three companies out of the 403(b) plan. As of July 1, 2016, all three firms became Former Providers under the plan. This means that the companies cannot:
*Participants requesting Hardship Withdrawals and/or loans from the three Former Providers must first move their assets from Lincoln, MetLife and VOYA to one of the three Contract Providers: Fidelity Investments, TIAA, or VALIC. Such an “intra plan” transfer does not require an "employer authorization."
Contribution End Date: Your contributions to the three Former Providers will stop after November 26, 2016. Participants will have the months of September, October and November to find a new provider under the plan.
If you do not select a new provider before the end of November, the Department of Higher Education (DHE), as the Plan Administrator, will automatically enroll you in VALIC. Your contributions will be allocated to the plan’s default investment: the target date fund that is appropriate for your current age.
The DHE will contact you via USPS when the Commonwealth enrolls you with VALIC.
1. Meet with your current provider’s representative to learn about your current holdings. Before transferring any of your current assets to one of the three Contract Providers, you should know if your current account has any restrictions on such transfers, or fees for surrendering your account.
Your department/campus administrator is prepared to schedule time for the former providers' representatives to be available on-site during the autumn months in order to help you manage these changes.
2. Meet with a representative from the three Contract Providers. You should ask your campus/department Benefits Administrator about upcoming scheduled visits by representatives from Fidelity, TIAA and VALIC. It is important for you to understand the services each company provides, the features of their products, the investment funds they offer, their investment advice service and the costs associated with their account.
3. You can learn about each of the three Contract Providers’ accounts, investment funds, services and cost on-line, by going to the Eligibility & Enrollment page.
How to change your Provider: Once you have selected a new provider under the 403(b) plan, you must do two things: