University Business Policies and Procedures Manual

3625
RETIREMENT
Effective Date: October 1, 1991
Revised: 12/06/93
Subject to Change Without Notice 

1. General

As of July 1, 1971, University employees are required by New Mexico State law to participate in the Educational Retirement System. The following categories of employees are excluded from this requirement:

• staff employees working .25 FTE (full-time equivalent) or less;
• faculty working during Summer Session only;
• student employees;
• graduate assistants;
• teaching assistants;
• working retirees;
• substitute employees; and
• summer session student employees hired through the University Department of Human Resources for the summer only.

The New Mexico Educational Retirement Plan is a qualified benefit plan, which limits the amount that a participating employee may invest in an IRA. Contact the Employee Services Office under the University Department of Human Resources for additional information not covered in this policy.

2. Alternative Retirement Program

An amendment to the Educational Retirement Act (ERA) permits the establishment of an Alternative Retirement Plan (ARP) for regular full-time or part-time faculty and other regular full-time or part-time professionals hired on or after July 1, 1991 with no prior service in the current Educational Retirement Act Plan. Eligible positions are listed in Sections 2.1. and 2.2. herein.

Any eligible University employee may select the plan that best fits their needs. The new employee has ninety (90) days from the day that employment begins to make the irrevocable decision whether to have his or her retirement deductions deposited with the Educational Retirement Board (ERB) or one (1) of the two (2) companies selected by the legislature. If no decision is reached within the ninety (90) days, then the retirement contributions will automatically be made to the ERB. Contact the Employee Service Office under the University Department of Human Resources for more information.

2.1. Regular full-time or part-time faculty positions eligible are listed below:

• Instructors or Lecturers
• Assistant Professors
• Associate Professors
• Professors (including Visiting Professors)
• Research Professors (including both Assistant and Associate Research Professors)

2.2. Regular full-time or part-time professional positions eligible are listed below.

• President
• Vice President
• Provost
• Dean
• Assistant or Associate Presidents, Vice Presidents, or Provosts
• Academic Department Chairs
• Directors or Managers who report directly to a Vice President, Provost, or President
• Medical Doctors
• Intercollegiate Athletic Coaches
• Senior Research Engineer I, II, III, IV, V
• Senior Research Scientist I, II, III, IV, V
• Research Associate I, II, III
• Senior Research Associate I, II, III
• Senior Institutional Developers and Fund Raisers

3. Contribution

The employee's contribution to the retirement fund is 7.6% of earnings. The University's contribution is 8.65%. Retirement contributions are not subject to Federal and State income tax in the year they are deducted, but they may be subject to these taxes if they are withdrawn.

3.1. Withdrawal of Contribution

Upon termination, employees covered under the New Mexico Educational Retirement Act may obtain refunds of their contributions only. University contributions are not refunded and remain in the retirement fund. The refunds will include interest earned on deposits made after July 1, 1971, but will not include interest on deposits made prior to July, 1971. Forms requesting the refund are available at the University Payroll Department and are necessary in order to process the refund.

Contributions since July, 1983, and total interest earned on your account have been tax deferred and are taxable when distributed. The taxable balance of the refund is eligible for a "rollover" and all or any portion of your payment can be taken in a "Direct Rollover" or a "Direct Refund". The choice of distribution method will affect the tax you owe. The following Sections summarize only the Federal/IRS (not State or local) tax rules, as of the date of this policy, that might apply to your payment. The rules described are subject to change without notice and are complex and contain many conditions and exceptions that are not included; therefore, you may want to consult with a professional tax advisor before taking a payment of their benefits from the ERB.

3.1.1. Direct Refund

If you choose a "Direct Refund", you will receive only eighty percent (80%) of the taxable balance in your account. ERB is required to withhold twenty percent (20%) of the taxable balance and to forward it directly to the IRS as income tax withholding to be credited against your taxes in the current year. You may have to pay a ten percent (10%) penalty tax if you are less than age fifty nine and a half (59 1/2) when you receive the refund. You can upon receipt of the refund payment of your taxable balance, rollover the payment to an IRA or qualified employer plan, provided this is done within sixty (60) days of receipt.

3.1.2. Direct Rollover

If you choose a "Direct Rollover" of any portion of your taxable balance, the portion rolled over will not be taxed until you take it out of the IRA or qualified employer plan. Your payment will be made directly to one (1) IRA or qualified employer plan. Your payment will be taxable when you later take it out of the IRA or qualified plan.

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