Comptrollers' Retirement Division Memoranda
2019-02: Tier 4 Substitute Plan
Date: August 30, 2019
RETIREMENT SERVICES DIVISION MEMORANDUM 2019-02
August 30, 2019
TO ALL HEADS OF STATE AGENCIES
ATTENTION:
All Human Resources and Payroll Officers
SUBJECT:
Tier 4 Substitute Plan
The purpose of this memorandum is to introduce you to a new retirement plan in the State Employees Retirement System (“SERS”), known as “Tier 4 Substitute,” or “Tier 4S.” Tier 4S was established by a Stipulated Agreement between the State of Connecticut and the State Employee Bargaining Agent Coalition (“SEBAC”).
As explained below, enrollment in Tier 4S is mandatory for certain substitute instructors in the State Department of Education’s Connecticut Technical Education & Career System (“CTECS”) who were, or shall be, hired on or after July 31, 2017. In some cases, this will mean that a substitute instructor will have to be transferred from Tier IV to Tier 4S. Please note, however, that employees other than substitute instructors hired by the State Department of Education may not be enrolled in Tier 4S.
In most respects, Tier 4S is identical to Tier IV. There are two major differences.
First, while members of both Tier IV and Tier 4S must contribute to a defined contribution plan, members of Tier 4S must make a larger contribution.
Second, members of Tier 4S will have a one-time, irrevocable option of transferring to the Teachers Retirement System (“TRS”), if and when they attain non-substitute status as an instructor in CTECS.
I. Who Must Be Enrolled in Tier 4S?
Enrollment in Tier 4S is mandatory for two groups of substitute instructors in CTECS:
- 1. Individuals who were, or shall be, first hired as substitute instructors on or after July 31, 2017, without having previously been employed by the State of Connecticut; and
- 2. Former state employees hired as substitute instructors, but only if all of the following apply:
- a. the employee is not vested in any SERS plan of which he or she was previously a member;
b. the employee was separated from state service before being hired as a substitute instructor;
c. the period of the employee’s separation from state service lasted at least (i) five years or (ii) the length of the period of the member’s vesting service before the separation – whichever is greater; and
d. the employee was hired as a substitute instructor in CTECS on or after July 31, 2017.
II. Enrollment in Tier 4S and Relation to Other SERS Plans
Substitute instructors who are not already members of a SERS retirement plan must complete the new CO-931-4S enrollment form for Tier 4S, a copy of which accompanies this memorandum. The form must then be forwarded to the Member Accounts Unit of the Retirement Services Division (the “MAU”). Substitute instructors who were formerly members of a SERS plan, but who satisfy all the conditions for Tier 4S membership that are identified in Point I, above, must also complete the CO-931-4S form.
In both cases, the State Department of Education (or, in unusual cases, another agency that employs the Tier IV member) must open the appropriate Tier 4S contribution deduction codes for the member in CORE-CT. The Tier 4S codes are set forth in Point III, below.
In most other cases, if an individual is or was a member of a SERS plan when hired as a substitute instructor, that individual will remain in the plan of which he or she is already a member.
However, some employees were (1) first hired as substitute instructors in CTECS on or after July 31, 2017, and (2) enrolled in Tier IV at the time they were hired. Those employees must now be transferred to Tier 4S.
To transfer one of those employees from Tier IV to Tier 4S, the member’s agency must simultaneously (1) open the Tier 4S contribution deduction codes for the employee in CORE-CT and (2) turn off the Tier IV contribution deduction codes. The member must also complete the form CO-931-4S, and the completed form must be forwarded to the MAU.
If a substitute instructor who has become a member of Tier 4S subsequently obtains some other form of state employment, that member will (subject to one exception) remain in Tier 4S. The one exception occurs if the member transfers from Tier 4S to TRS, in the manner described below.
III. What Employee and Employer Contributions are Required in Tier 4S?
- A. Defined Benefit Contributions
The Tier IV plan combines a defined benefit plan (the “DB Plan”) with a defined contribution plan (the “DC Plan”). Members of Tier IV and Tier 4S contribute to the DB Plan at the same level: 5% of income.
- B. Employee Contributions to the DC Plan
Members of Tier IV must also contribute 1% of income to the DC Plan; that contribution is matched by the State. Members of Tier 4S must make a larger contribution. The contribution of Tier 4S members to the DC Plan must exceed the contribution of Tier IV members by not less than 1% of income. Thus, Tier 4S members currently contribute 2% of income to the DC Plan.
The required contribution of Tier 4S members to the DC Plan is also subject to being increased. It will be increased, as necessary, to make the total contribution of each Tier 4S member (including contributions to both the DC Plan and the DB Plan) equal to the total employee contributions that are required of members of TRS.
- C. Employer Contributions to the DC Plan
The employer’s contribution to the DC Plan is the same for members of both Tier IV and Tier 4S: an amount equal to 1% of the employee’s income.
- D. Contribution Deduction Codes
The contribution deduction codes for Tier 4S are:
RSER4S (SERS Tier 4 Substitute) Before Tax deduction
(Employer share RSERER)
R4SDC (SERS Tier 4 Sub DC EE) Before Tax deduction
(Employer Share RSERDR)
IV. Transfer to the Teachers Retirement System
If and when a member of Tier 4S attains permanent status as an instructor in CTECS, the member will become eligible to elect to transfer to TRS.
A. A One-Time, Irrevocable Election
Transfer from Tier 4S to TRS is not mandatory; the member may elect to remain in Tier 4S.
However, the transfer option is offered one time only, and the member’s choice is irrevocable. Once the member’s decision has been made, the member must either (1) remain in Tier 4S for his or her entire state career or (2) transfer permanently to TRS.
B. The Transfer Process
If a member of Tier 4S who has attained permanent status as an instructor in CTECS elects to transfer to TRS, the employee must (1) obtain the proper form or forms from TRS, (2) complete the TRS forms, and (3) forward the completed form for processing to the MAU.
TRS will determine the effective date of the transfer.
The MAU will update the member’s information on the USA-Pension Plan Page in CORE-CT (the “USA-PPP”), to indicate that the member is now a member of TRS.
As of the effective date of the transfer, the State Department of Education (or, in unusual cases, another agency that employs the Tier 4S member) must simultaneously (1) turn off the Tier 4S contribution deduction codes in CORE-CT and (2) open the appropriate TRS contribution deduction codes.
C. Paying for TRS Membership
TRS will determine the cost, if any, of the employee’s membership in TRS. Where applicable, that cost will include the cost of service credit in TRS for the employee’s period of membership in Tier 4S. (A condition on the availability of TRS service credit is discussed below.) Subject to limitations that are discussed in Point V, below, these costs may be paid by rolling over to TRS the contributions that the employee has previously made to Tier 4S. If those contributions are insufficient, the member may be charged an additional amount by TRS as a condition on the transfer of his or her membership.
For purposes of these payments, the MAU will process a refund of the member’s contributions to the DB Plan, and it will issue a check in the amount of that refund, payable to TRS.
If the member chooses to roll over funds from his or her account in the DC Plan, it will be the member’s responsibility to direct the Plan Administrator (currently Prudential) to transfer those funds to TRS.
V. Effect of Timing on a Transfer to TRS
Under Tier 4S, as under Tier IV, an employee’s contributions to the DC Plan (together with any earnings on those contributions) are considered to be fully vested at all times. Employer contributions, however, do not become vested until the employee has completed three (3) years of vesting service in Tier IV and/or Tier 4S (the “3-Year Vesting Date”).
If a member of Tier 4S elects to transfer to TRS, certain of the member’s rights will be affected by the time at which the transfer is made. Specifically, TRS has interpreted the governing law to require that the member’s rights depend on whether the transfer is made before or after the 3-Year Vesting Date.
- A. Before the 3-Year Vesting Date
If the Tier 4S member makes the transfer election before his or her 3-Year Vesting Date, then:
(1) All of the member’s contributions to the DB Plan will be forwarded to TRS.
(2) The member’s contributions to the DC Plan, along with any investment earnings on those contributions, may be forwarded to TRS.
(2) The employer’s contributions to the DC Plan will be returned to the State.
The funds forwarded to TRS will, subject to TRS rules, be applied to the cost of credited service in TRS for the period of the member’s membership in Tier 4S.
B. On or After the 3-Year Vesting Date
A Tier 4S member who makes the decision to transfer to TRS on or after his or her 3-Year Vesting Date may not purchase credited service in TRS for the period of his or her Tier 4S membership. Consequently, if the Tier 4S member makes the transfer election on or after his or her 3-Year Vesting Date, then:
- (1) The member’s contributions to the DB Plan will remain in Tier 4S. The member’s ongoing interest in these funds will be governed by the rules of that plan.
- (2) The member’s contributions to the DC Plan, the employer’s contributions to that Plan, and any investment earnings will all remain in the DC Plan.
C. Plan Ahead
Because of these rules, if a Tier 4S member intends or expects to elect to transfer to TRS, it is in the member’s interest to do so, if possible, before his or her 3-Year Vesting Date. You should advise members about this important aspect of the Tier 4S plan.
VI. Conclusion
We encourage agencies to review the new CO-931-4S enrollment form for Tier 4S, the transfer forms available from TRS, and other retirement information available on the websites of the Office of the State Comptroller and the Connecticut Teachers’ Retirement Board. We welcome any suggestions about how to help SERS members and the agencies that employ them better understand the retirement system. Questions or suggestions may be sent to the Retirement Services Division by email, at osc.rsd@po.state.ct.us.
It is the responsibility of each state agency to advise employees of this information.
Very truly yours,
STATE EMPLOYEES RETIREMENT COMMISSION
KEVIN LEMBO, SECRETARY EX OFFICIO
By:
John Herrington, Director
Retirement Services Division
|
RETIREMENT SERVICES DIVISION MEMORANDUM 2019-02
August 30, 2019
TO ALL HEADS OF STATE AGENCIES
| ATTENTION: | All Human Resources and Payroll Officers |
|---|---|
| SUBJECT: | Tier 4 Substitute Plan |
The purpose of this memorandum is to introduce you to a new retirement plan in the State Employees Retirement System (“SERS”), known as “Tier 4 Substitute,” or “Tier 4S.” Tier 4S was established by a Stipulated Agreement between the State of Connecticut and the State Employee Bargaining Agent Coalition (“SEBAC”).
As explained below, enrollment in Tier 4S is mandatory for certain substitute instructors in the State Department of Education’s Connecticut Technical Education & Career System (“CTECS”) who were, or shall be, hired on or after July 31, 2017. In some cases, this will mean that a substitute instructor will have to be transferred from Tier IV to Tier 4S. Please note, however, that employees other than substitute instructors hired by the State Department of Education may not be enrolled in Tier 4S.
In most respects, Tier 4S is identical to Tier IV. There are two major differences.
First, while members of both Tier IV and Tier 4S must contribute to a defined contribution plan, members of Tier 4S must make a larger contribution.
Second, members of Tier 4S will have a one-time, irrevocable option of transferring to the Teachers Retirement System (“TRS”), if and when they attain non-substitute status as an instructor in CTECS.
I. Who Must Be Enrolled in Tier 4S?
Enrollment in Tier 4S is mandatory for two groups of substitute instructors in CTECS:
- 1. Individuals who were, or shall be, first hired as substitute instructors on or after July 31, 2017, without having previously been employed by the State of Connecticut; and
- 2. Former state employees hired as substitute instructors, but only if all of the following apply:
- a. the employee is not vested in any SERS plan of which he or she was previously a member;
b. the employee was separated from state service before being hired as a substitute instructor;
c. the period of the employee’s separation from state service lasted at least (i) five years or (ii) the length of the period of the member’s vesting service before the separation – whichever is greater; and
d. the employee was hired as a substitute instructor in CTECS on or after July 31, 2017.
- a. the employee is not vested in any SERS plan of which he or she was previously a member;
II. Enrollment in Tier 4S and Relation to Other SERS Plans
Substitute instructors who are not already members of a SERS retirement plan must complete the new CO-931-4S enrollment form for Tier 4S, a copy of which accompanies this memorandum. The form must then be forwarded to the Member Accounts Unit of the Retirement Services Division (the “MAU”). Substitute instructors who were formerly members of a SERS plan, but who satisfy all the conditions for Tier 4S membership that are identified in Point I, above, must also complete the CO-931-4S form.
In both cases, the State Department of Education (or, in unusual cases, another agency that employs the Tier IV member) must open the appropriate Tier 4S contribution deduction codes for the member in CORE-CT. The Tier 4S codes are set forth in Point III, below.
In most other cases, if an individual is or was a member of a SERS plan when hired as a substitute instructor, that individual will remain in the plan of which he or she is already a member.
However, some employees were (1) first hired as substitute instructors in CTECS on or after July 31, 2017, and (2) enrolled in Tier IV at the time they were hired. Those employees must now be transferred to Tier 4S.
To transfer one of those employees from Tier IV to Tier 4S, the member’s agency must simultaneously (1) open the Tier 4S contribution deduction codes for the employee in CORE-CT and (2) turn off the Tier IV contribution deduction codes. The member must also complete the form CO-931-4S, and the completed form must be forwarded to the MAU.
If a substitute instructor who has become a member of Tier 4S subsequently obtains some other form of state employment, that member will (subject to one exception) remain in Tier 4S. The one exception occurs if the member transfers from Tier 4S to TRS, in the manner described below.
III. What Employee and Employer Contributions are Required in Tier 4S?
- A. Defined Benefit Contributions
The Tier IV plan combines a defined benefit plan (the “DB Plan”) with a defined contribution plan (the “DC Plan”). Members of Tier IV and Tier 4S contribute to the DB Plan at the same level: 5% of income.
- B. Employee Contributions to the DC Plan
Members of Tier IV must also contribute 1% of income to the DC Plan; that contribution is matched by the State. Members of Tier 4S must make a larger contribution. The contribution of Tier 4S members to the DC Plan must exceed the contribution of Tier IV members by not less than 1% of income. Thus, Tier 4S members currently contribute 2% of income to the DC Plan.
The required contribution of Tier 4S members to the DC Plan is also subject to being increased. It will be increased, as necessary, to make the total contribution of each Tier 4S member (including contributions to both the DC Plan and the DB Plan) equal to the total employee contributions that are required of members of TRS.
- C. Employer Contributions to the DC Plan
The employer’s contribution to the DC Plan is the same for members of both Tier IV and Tier 4S: an amount equal to 1% of the employee’s income.
- D. Contribution Deduction Codes
The contribution deduction codes for Tier 4S are:
RSER4S (SERS Tier 4 Substitute) Before Tax deduction
(Employer share RSERER)
R4SDC (SERS Tier 4 Sub DC EE) Before Tax deduction
(Employer Share RSERDR)
IV. Transfer to the Teachers Retirement System
If and when a member of Tier 4S attains permanent status as an instructor in CTECS, the member will become eligible to elect to transfer to TRS.
A. A One-Time, Irrevocable Election
Transfer from Tier 4S to TRS is not mandatory; the member may elect to remain in Tier 4S.
However, the transfer option is offered one time only, and the member’s choice is irrevocable. Once the member’s decision has been made, the member must either (1) remain in Tier 4S for his or her entire state career or (2) transfer permanently to TRS.
B. The Transfer Process
If a member of Tier 4S who has attained permanent status as an instructor in CTECS elects to transfer to TRS, the employee must (1) obtain the proper form or forms from TRS, (2) complete the TRS forms, and (3) forward the completed form for processing to the MAU.
TRS will determine the effective date of the transfer.
The MAU will update the member’s information on the USA-Pension Plan Page in CORE-CT (the “USA-PPP”), to indicate that the member is now a member of TRS.
As of the effective date of the transfer, the State Department of Education (or, in unusual cases, another agency that employs the Tier 4S member) must simultaneously (1) turn off the Tier 4S contribution deduction codes in CORE-CT and (2) open the appropriate TRS contribution deduction codes.
C. Paying for TRS Membership
TRS will determine the cost, if any, of the employee’s membership in TRS. Where applicable, that cost will include the cost of service credit in TRS for the employee’s period of membership in Tier 4S. (A condition on the availability of TRS service credit is discussed below.) Subject to limitations that are discussed in Point V, below, these costs may be paid by rolling over to TRS the contributions that the employee has previously made to Tier 4S. If those contributions are insufficient, the member may be charged an additional amount by TRS as a condition on the transfer of his or her membership.
For purposes of these payments, the MAU will process a refund of the member’s contributions to the DB Plan, and it will issue a check in the amount of that refund, payable to TRS.
If the member chooses to roll over funds from his or her account in the DC Plan, it will be the member’s responsibility to direct the Plan Administrator (currently Prudential) to transfer those funds to TRS.
V. Effect of Timing on a Transfer to TRS
Under Tier 4S, as under Tier IV, an employee’s contributions to the DC Plan (together with any earnings on those contributions) are considered to be fully vested at all times. Employer contributions, however, do not become vested until the employee has completed three (3) years of vesting service in Tier IV and/or Tier 4S (the “3-Year Vesting Date”).
If a member of Tier 4S elects to transfer to TRS, certain of the member’s rights will be affected by the time at which the transfer is made. Specifically, TRS has interpreted the governing law to require that the member’s rights depend on whether the transfer is made before or after the 3-Year Vesting Date.
- A. Before the 3-Year Vesting Date
If the Tier 4S member makes the transfer election before his or her 3-Year Vesting Date, then:
(1) All of the member’s contributions to the DB Plan will be forwarded to TRS.
(2) The member’s contributions to the DC Plan, along with any investment earnings on those contributions, may be forwarded to TRS.
(2) The employer’s contributions to the DC Plan will be returned to the State.
The funds forwarded to TRS will, subject to TRS rules, be applied to the cost of credited service in TRS for the period of the member’s membership in Tier 4S.
B. On or After the 3-Year Vesting Date
A Tier 4S member who makes the decision to transfer to TRS on or after his or her 3-Year Vesting Date may not purchase credited service in TRS for the period of his or her Tier 4S membership. Consequently, if the Tier 4S member makes the transfer election on or after his or her 3-Year Vesting Date, then:
- (1) The member’s contributions to the DB Plan will remain in Tier 4S. The member’s ongoing interest in these funds will be governed by the rules of that plan.
- (2) The member’s contributions to the DC Plan, the employer’s contributions to that Plan, and any investment earnings will all remain in the DC Plan.
C. Plan Ahead
Because of these rules, if a Tier 4S member intends or expects to elect to transfer to TRS, it is in the member’s interest to do so, if possible, before his or her 3-Year Vesting Date. You should advise members about this important aspect of the Tier 4S plan.
VI. Conclusion
We encourage agencies to review the new CO-931-4S enrollment form for Tier 4S, the transfer forms available from TRS, and other retirement information available on the websites of the Office of the State Comptroller and the Connecticut Teachers’ Retirement Board. We welcome any suggestions about how to help SERS members and the agencies that employ them better understand the retirement system. Questions or suggestions may be sent to the Retirement Services Division by email, at osc.rsd@po.state.ct.us.
It is the responsibility of each state agency to advise employees of this information.
Very truly yours,
STATE EMPLOYEES RETIREMENT COMMISSION
KEVIN LEMBO, SECRETARY EX OFFICIO
By:
John Herrington, Director
Retirement Services Division