UNM Policy 3625

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University Business Policies and Procedures Manual

3625
RETIREMENT
Effective Date: October 1, 1991
Revised: 12/06/93, 03/01/11
Subject to Change Without Notice

Authorized by Regents' Policy 6.3 "Privileges and Benefits"
Process Owner: Vice President of Human Resources

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:

employees working .25 FTE (full-time equivalent) or less annually;
faculty working during Summer Session only;
student employees;
graduate assistants;
teaching assistants; and
working retirees.

The New Mexico Educational Retirement Plan has two (2) components:

1.1. Defined Benefit Plan

The Defined Benefit Plan is a retirement system in which the benefit on retirement is determined by a set formula based on final average salary, number of years of service credit earned and allowed, and a multiplying factor.

1.2. 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 certain 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. The ARP is a defined contribution plan in which contributions are paid into an individual account for the employee. The contributions are invested and the returns on the investment (which may be positive or negative) are credited to the individual’s account. Investment risk and investment rewards are assumed by the individual and not the retirement plan. The total individual’s benefit on retirement is calculated on and limited to the cumulative dollar value of the contributions and the returns on the investments. Eligibility is designated by the Education Retirement Board.

2. Selection of Plan Component

ARP-eligible University employees may select the plan that best fits their needs and have ninety (90) days from the day that employment begins to decide whether to enroll in the Defined Benefit Plan or the Alternative Retirement Plan (ARP). If no decision is reached within the ninety (90) days, then the retirement contributions will automatically be made to the Defined Benefit Plan.

Any employee who has made contributions to the ARP for a cumulative total of seven (7) years will have a one-time option of electing to switch to the ERB defined benefit plan. If an employee switches to the ERB defined benefit plan, the employee will have to participate in the ERB plan for a minimum of five (5) years to be vested in the plan. The employee may not purchase service for the time that he or she participated in the ARP.

3. Contribution

The employee's contribution to the retirement fund and the University's contribution are set by New Mexico state law. 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.

4. Reemployment after ERB Retirement

Retirees may return to full-time employment covered by the ERB at any time. When this occurs, the member must notify the ERB in writing. Unless the reemployment qualifies for the Return to Work Program described in Section 4.1. below, the retirement benefit is canceled and the member becomes an active contributing member again. Upon re-retirement the benefit is re-computed giving consideration to the additional service credit and salary acquired during reemployment. In no case will the benefit be less than it was at the time of first retirement.

4.1. Return to Work Program

Return to Work (“RTW”) was created pursuant to a statute that the New Mexico Legislature adopted in 2001 and amended in 2003. The RTW program allows ERB retirees to resume working for an ERB employer after completing a layout of twelve (12) consecutive months without having to suspend retirement benefits. Members who apply for the RTW program can choose to work full time or part-time, with no restrictions on the income they can earn.

4.2. $15,000 or .25 FTE Rule

A ERB retiree may work with an ERB covered employer and earn up to $15,000 or an amount calculated under the .25 or less FTE (full-time equivalency) provision, whichever is greater, without affecting retirement benefits. The salary is calculated on a fiscal year basis, (July 1 through June 30). The determination of whether a position equals .25 FTE is made by the employer. The FTE salary is based on what the employee would make if they were working full time and is not related to their salary before retirement. If the member exceeds the established limits in a fiscal year, he or she shall be considered to be removed from retirement status and shall forfeit the retirement benefits starting on the first day of the month in which cumulative earnings exceed $15,000 or the 25% FTE provision. It is the member’s responsibility to monitor their earnings from an ERB sponsored employer so that they do not exceed the maximum earnings

4.3. Non ERB Employment

There is no limit on a retired member’s earnings if the employer is not covered by the provisions of the Educational Retirement Act.

5. Related Information

Contact the Retirement Employee Services Office under the University Division of Human Resources for additional information not covered in this policy.

Comments may be sent to UBPPM@UNM.edu
http://www.unm.edu/~ubppm

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