January 18, 2011
Retirement plan options announced
With all due respect to the midterm elections, 2011 will be the year of choice for thousands of JHU support staff employees.
The university announced today a new defined contribution plan for its support staff retirement benefits package that will go into effect on July 1.
In 2009, under the direction of the board of trustees, the university undertook a comprehensive study of support staff retirement benefits. Many different retirement designs were considered, with university leadership integral to the decision-making process.
As a result of the study, the university committed to a defined contribution 403(b) plan, the most common type of retirement package offered in higher education and one that encourages shared responsibility in saving for retirement.
The creation of the Johns Hopkins University 403(b) will present a choice to current support staff. They can stay in the existing support staff pension plan and continue to participate in the staff voluntary 403(b) plan, or opt to enroll in the new defined contribution 403(b). Eligible employees will be offered a one-time opportunity to choose how they wish to accrue future retirement benefits during a “Retirement Choice” period that runs from March 18 to April 15.
The opportunity for choice is available to roughly 6,000 university employees: support staff who are pension plan eligible and not part of the bargaining unit. Not immediately affected by the new plan are employees at the Applied Physics Laboratory and the Johns Hopkins Health System.
Charlene Hayes, vice president for human resources, said that the new plan will allow the university to phase out its pension plan gradually and with as little disruption as possible to the retirement
plans of current employees. It will also offer more-predictable retirement plan costs for the university, she said.
“Most employers have moved away from pension plans, so we wanted to do that but give our people the choice,” she said. “Government pension regulations are so complex and constantly changing. They represent greater risk. The new plan will make it a lot easier for employees to understand their retirement benefit. They will know how much the university is putting in and will have more control over the money that is available to them at retirement.”
The new 403(b) plan will provide an automatic university contribution of 4 percent of base pay for eligible support staff members under age 35, and 8 percent of base pay for those age 35 or over. It will become the default retirement plan for all university support staff hired after July 1.
Staff who choose to stay in the voluntary 403(b) plan will continue to receive a university dollar match—up to 20 percent on the first 3 percent of base pay. Those who select the new 403(b) plan will receive the university’s contribution and retain pension benefits accrued through June 30, 2011.
Those under age 35 with less than two years of service as of June 30, 2011, will not be offered this choice. Instead, they will automatically become eligible for the new 403(b) plan once they reach two years of service or they reach age 35, whichever comes first.
The new 403(b) plan is closely modeled after the current faculty and senior staff plan. “Support staff have long asked for a defined contribution like that offered by the faculty and senior staff plan,” Hayes said. “The new plan has a set university contribution and not a match. It takes out the guesswork.”
Hayes said that another benefit is the plan’s portability.
“Once Johns Hopkins contributes dollars to the plan, it’s the employees’ money, and if they leave the university, they can take it with them. It’s their money to manage,” she said.
The university’s 403(b) plan allows employees to make pretax contributions to the plan each pay period, from a minimum of $15 per month up to the annual maximum established by the IRS, which is $16,500 for 2011. Those enrolled in the plan choose from a pool of financial and investment vendors, such as Vanguard and TIAA-CREF.
In the coming weeks and months, university employees will receive extensive information online, in meetings and in mailings to their homes. The comprehensive communication campaign will include newsletters, website updates, town hall meetings, Retirement Choice fairs, one-on-one meetings with representatives from retirement vendors and more.
Heidi Conway, senior director of benefits, said that the university will offer a comprehensive set of tools to help employees with their Retirement Choice decision. She said that the Mychoices website (www.benefits
.jhu.edu/mychoices) will help employees choose the best option for them. The site will contain a modeling tool that will allow people to see how their money will grow under each plan.
“We don’t want to make the decision for people; they can crunch the numbers and talk to benefits specialists,” Conway said. “What plan employees ultimately choose will depend on a number of factors, such as age, years vested and risk threshold.”
Hayes said that the university considered making the retirement choice part of the open enrollment benefits period but decided that the retirement decision needed to stand on its own.
“We wanted to give people enough time to consider how their accounts work and the implications of a defined contribution, and the impact on their retirement and future,” she said. “We also didn’t want them to worry about other benefits [at the same time] but just focus on this one important decision.”
To access up-to-date information about the retirement changes and Retirement Choice, go to www.benefits.jhu.edu/mychoices. For questions, contact the Benefits Service Center at 410-516-2000 or e-mail the university’s benefits team at email@example.com.