Retirement Hybrid Plan - Tennessee Board of Regents

1 Retirement Hybrid plan Effective Date: The effective date of the new Hybrid pension plan is July 1, 2014. Employees hired on or after July 1, 2014 will be enrolled into the new plan Current employees or retirees are not affected by the changes Current plan will be referenced as the Legacy plan going forward Breaks in Service: Options returning TCRS and ORP members will have available to them: Vested in old plan with break in service may return to old plan upon reemployment with state agency.

2 Not vested in old plan and return to service in less than 7 years may return to old plan . Not vested in old plan and return to service after 7 years must enroll in new Hybrid plan . Summary of plan : The new TCRS pension plan has two components, a defined benefit plan and a defined contribution plan , and accordingly is referred to as the Hybrid plan . The defined contribution component will be administered through the State of Tennessee s 401(k) plan with record keeping by Empower Retirement .

3 The charts pictured on the following page assist in visualizing the various components and elements of the plan . For instance, in the TCRS Hybrid plan the Defined Benefit component has two elements, one is the employer contributions and the other is the employee contributions . The Defined Contribution is another component, which will always have the 5% employer contribution element and may or may not have the 2% employee contribution element depending on whether the employee opted out of the auto enroll.

4 In addition to the TCRS Hybrid plan , an ORP option is available to eligible Higher Education employees. The ORP option is pictured in the second chart. contributions : Contribution Levels TCRS Hybrid TCRS Hybrid plan Participant Defined Benefit Defined Contribution Total Employer contributions 5% Employee contributions : Required 5% 0% 5% Employee contributions : Auto Enroll n/a 2% 2% Total 7% Contribution Levels ORP Optional Retirement plan (ORP) plan Participant ORP Defined Contribution Total Employer contributions 9% 0% 9% Employee contributions : Required 5% 0% 5% Employee contributions .

5 Auto Enroll n/a 2% 2% Total 14% 2% 16% Vesting: contributions to the plan (s) are subject to the established vesting rights. The TCRS Defined Benefit plan requires five (5) years of service for vesting. All other contribution types are immediately vested, including the employer contribution under the Defined Contribution plan which is administered through Empower Retirement . Note: While loans are permitted under the Hybrid plan , they are allowed on the employee contributions only they are not allowed on the employer contributions .

6 The chart on the following page outlines the vesting rights of each plan and contribution types within those plans. Vesting Rights Contribution Rate Vesting Rights TCRS Defined Benefit plan Benefit Accrual n/a 5 years of service for a monthly annuity only Employee contributions : Required 5% Immediate including credited interest by TCRS Defined Contribution plan Employer contributions 5% Immediate including earnings (loans excluded) Employee contributions : Required 0% Immediate including earnings Employee contributions .

7 Auto enrolled 2% Immediate including earnings ORP plan Employer contributions 9% Immediate including earnings Employee contributions : Required 5% Immediate including earnings Match As long as an employee does not opt out completely, the match of up to $50 per month will continue. Agency Benefit Coordinator s will need to communicate this effectively to new employees hired on or after July 1st. If the employee opts out completely he/she will also be opting out of receiving the match.

8 Should a situation occur in which an employee does not opt out and wishes to contribute less than the 2% the auto enroll requires, he/she can change that percentage to a lower amount and receive the match up to $50 per month. Match Hybrid plan Participant DB DC Total Employer contributions 5% Employee contributions : Required 5% 0% 5% Employee contributions : Auto enrolled (1) na 2% 2% Employee contributions : Voluntary (2) na Fed Limit Fed Limit Employer contributions : 401k (3) na $50 match $50 match Total (excluding $50 match) 7% Optional Retirement plan (ORP) Participant ORP DC Total Employer contributions 9% 0% 9% Employee contributions : Required 5% 0% 5% Employee contributions .

9 Auto enrolled (1) na 2% 2% Employee contributions : Voluntary (2) na Fed Limit Fed Limit Employer contributions : 401k (3) na $50 match $50 match Total (excluding $50 match) 14% 2% 16% Notes: (1) Employees may opt out of the auto enrolled contributions . (2) Employees may make additional voluntary contributions to the 401k, 457, and 403b plan up to limits set by Federal law. (3) Employer match up to $50 per month for employees contributing to 401k. Implementation: Remember the effective date: The effective date of the new Hybrid pension plan is July 1, 2014.

10 Employees hired on or after July 1, 2014 will be enrolled into the new plan . Remember who is not affected: Current employees (hired before July 1, 2014) and retirees Remember eligibility: Exempt and Non TCAT employees will continue to have an option to select TCRS or ORP. Non Exempt and TCAT employees may only select TCRS. Auto Enroll Feature: The auto enroll feature is mandated by the legislation and applies to both TCRS and ORP. 30 day window to opt out: o The employee will receive a letter and instructed on how to opt out of the enrollment 90 day permissible withdrawal from date of first payroll received at EMPOWER Retirement : o In the event the employee fails to opt out and an employee contribution is directed into a Empower Retirement account, the employee can request to withdraw the funds.