During these times of economic stress, it is reassuring to know that flexible financial options are available if needed. As of Jan. 1, 2009, your CUA TIAA-CREF retirement plan offers additional options to assist you in protecting your current and future financial resources.
Historically, plan participants have been able to make withdrawals from their own contributions to the plan at age 59 ½. These withdrawals have been allowed from all TIAA-CREF accounts — i.e., both Retirement Annuity (RA) and Group Supplemental Retirement Annuity (GSRA) accounts — even if the participant is still actively employed with CUA. This option is not changing.
What’s new: As of January 2009, participants may withdraw funds from CUA’s contributions to their RA account at age 65, even if they are still employed by CUA. Prior to 2009, those still working at CUA had to be age 70 ½ to withdraw funds from CUA contributions.
Hardship withdrawals have always been available from a plan participant’s own funds, no matter how old the participant is. This will continue. However, beginning in 2009, participants may only apply for a hardship withdrawal after having utilized all available provisions to take out loans from their plan, which must then be repaid with interest.
There’s also a change in the policy toward loans from the retirement plan. Prior to 2009, loans were only available from the GSRA account — the voluntary supplemental part of TIAA-CREF that consists of employee funds only. Effective January 2009, loans are also available from the RA account, which includes both employee-contributed and CUA-contributed funds, both of which can be borrowed from.
The minimum loan amount available to participants is $1,000. The maximum loan amount is the lesser of $50,000 or 45 percent of the combined RA and GSRA accumulation. This rule ensures that at least 110 percent of the loan value will be held in your TIAA account as collateral. Repayment is required within five years (except when the loan is used to purchase a principal residence, in which case repayment is required within 10 years).
Interest on loan repayments is set at a variable rate tied to the monthly average corporate bond yield as published by Moody’s Investors Service. The monthly interest remains the same for the first year. Thereafter, the interest rate can change each year if Moody’s corporate bond yield rate changes by one half of one percent or more.
A key point: If loan repayments are not made as scheduled, TIAA-CREF is required to report the defaulted amount to the IRS as a taxable distribution. The participant may have to pay a penalty tax in addition to ordinary income tax on the defaulted amount.
Of course, you should explore all other financial options before deciding to borrow funds from your retirement account.
Some Caveats and Contact Information
Any withdrawals or loans from your account balances will have an impact on your available retirement funds once you are ready to retire. Obtaining and repaying a loan from your account will have less impact on your total accumulation than will a plan withdrawal. Plan participants are strongly encouraged to seek advice from a trusted financial adviser prior to making withdrawals or loans.
If you do decide you want to borrow from your plan, you will need to contact the Telephone Counseling Center of TIAA-CREF at 800-842-2776. TIAA-CREF representatives will be available to direct you through the loan application process. If you have general questions about your TIAA-CREF plan, please contact the CUA Office of Human Resources, extension 5050.