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Northern Arizona University
Voluntary Separation and Retirement Incentive Program (VSRIP)
November 16, 2009 to January 15, 2010
Questions & Answers
TABLE OF CONTENTS
- Who is eligible to enroll in the VSRIP?
- My appointment is less than a 1.0 FTE. Am I eligible for the VSRIP?
- What are the benefits of VSRIP for me?
- Do the VSRIP benefits include health insurance coverage?
- How do I ensure continuation of my health (medical, dental and/or vision) insurance?
- What is the deadline for enrolling in the VSRIP?
- Will I be able to immediately draw retirement benefits if I enroll in the VSRIP?
- How do I get information on retirement benefits?
- Will my VSRIP payment be taxed?
- If I am a member of the Arizona State Retirement System, will I be able to include the incentive amount as compensation for the purpose of calculating my retirement under the ASRS plan?
- If I am a member of the Optional Retirement Program will my incentive payment have mandatory retirement contributions withheld and contributed by NAU to my retirement plan?
- Can I direct part of my incentive payment toward a supplemental retirement savings plan such as a 403(b) or 457 deferred compensation plan?
- How can I minimize the tax implications of the incentive payment?
- Can I split my incentive payment into two payments, one in calendar 2010 and one in calendar 2011?
- May I have my VSRIP payment made through direct deposit into a bank account?
- Can I purchase past service credit in ASRS and increase my retirement benefit?
- Do my years of service to another university under the jurisdiction of the Board of Regents or State of Arizona agency count in determining eligibility to participate in VSRIP?
- I am on an academic year appointment, but my salary is paid over twelve months. Will this impact the VSRIP payment that I am eligible to receive?
- I am on an academic year appointment, but my salary is paid over twelve months. How will leaving employment at NAU before the end of the twelve months affect my remaining payment?
- When would I receive my last paycheck if I enroll in the VSRIP?
- What happens to accrued and unused vacation leave under the VSRIP?
- What happens to accrued and unused sick leave under the VSRIP?
- How can I determine if I am eligible to receive a payout under the RASL program?
- How can I find out about my social security benefits and the effect of my VSRIP payments on social security?
- Can I come back and work for NAU again after I retire or resign?
- I have grants that run past end of spring semester 2010 or have agreed to teach summer school. Can my retirement date be extended beyond May 8, 2010 (AY) or July 1, 2010 (FY)?
- Will my future VSRIP payments be payable to my heirs or beneficiaries if I die before receiving them?
- I’m not certain that I want to participate in the VSRIP this year. Can I wait until next year?
- I would like to retire under different terms. Is that something I can discuss with my dean?
- I am currently on sabbatical. COFS 1.7.1.9 states that I am required to “return to the university for one year following the leave.” Will that policy be waived for those who choose to participate in VSRIP?
- If I participate in the VSRIP, will I be eligible to join the NAU Retirees Association?
- Are there any other considerations I should take into account when deciding if I want to participate in the VSRIP?
- If I decide to enroll in the VSRIP, when will I know if I've been accepted?
1. Who is eligible to enroll in the VSRIP?
Board-appointed NAU tenured faculty and academic professionals with continuing status (librarians) whose appointments are for .50 FTE or greater, and who meet the following requirements on or before June 30, 2010, are eligible for participation in the VSRIP:
Completion of 10 or more net years of service to NAU and attainment of age 62.
Net years of service: NAU subtracts any periods of time when the employee was not actively employed by NAU, such as leaves without pay or other forms of break in service. Sabbatical leaves with pay are still periods of service to NAU. NAU will calculate net years of service to determine eligibility for VSRIP in the same manner as, the Arizona Board of Regents Optional Retirement Plan (ORP) and the Arizona State Retirement System (ASRS).
2. My appointment is less than a 1.0 FTE. Am I eligible for the VSRIP?
Yes, as long as an appointment is at least .50 FTE and the other VSRIP requirements are met.
3. What are the benefits of VSRIP for me?
The primary benefit to an eligible employee who chooses to voluntarily relinquish his or her employment, tenure, and/or continuing status at the university, either through resigning or retiring, is that he or she will receive a cash incentive payment that otherwise would not be available. The decision to participate in the VSRIP is solely that of the eligible employee subject to certain limitations stated in the VSRIP Policy Statement.
The cash incentive payment will equal one year’s base salary (AY or AY equivalent salary paid in FY10 or FY salary for academic professionals). It does not include any one-time or other payments made in FY10, such as overload, summer salary, administrative appointment stipend or temporary salary increases. Tenured faculty holding an academic administrative appointment of more than 9 months t will receive a cash incentive payment equivalent to 9 months of his or her fiscal year salary. The cash incentive will be paid in the pay period following the pay period in which the participant receives his or her final regular check, on or about June 4, 2010 (AY employees) and on or about July 30, 2010 (FY employees).
VSRIP participants who choose to retire from NAU may be recommended for emeritus faculty or emeritus academic professional status. The Conditions of Faculty Service 1.6.2 describes the nomination and review process as well as the benefits associated with emeritus status.NAU is actively pursuing additional opportunities for retirees to remain connected to the university community, if they so choose. Such opportunities might include mentoring, tutoring, advisory committee contributions, and other academic associations. Participants who choose to resign from NAU are not eligible to receive emeritus status.
4. Do the VSRIP benefits include health insurance coverage?
No. The university is prohibited under Arizona state law from expending any public funds for the payment of all or any part of the premium of group health and accident insurance for its retirees. The only exception, as noted below in question 5, is where monies are authorized to be paid for an insured from the retirement plan from which the insured is receiving benefits. ASRS provides a monthly premium benefit to its retired members to be used towards the cost of health insurance.
5. How do I ensure continuation of my health (medical, dental and/or vision) insurance?
- If resigning (without retiring immediately) from NAU:
Health benefits will continue until May 31, 2010 for an employee who leaves employment effective May 8, 2010. Health benefits will continue until July 31, 2010 for an employee who leaves employment effective July 1, 2010.
Like all benefit eligible employees terminating employment with the university, participants in the VSRIP will be eligible under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) to participate in the university’s health plan for a period of 18 months following the final day of employment. Under COBRA, the former employee is responsible for paying both the employer’s share of the monthly premium and the employee’s share of the monthly premium, plus 2% of the total monthly premium, paid as an administrative fee. COBRA enrollment information and forms will be mailed to the employee’s home address by NAU HR following the last day of active employment with NAU. Additional information can be found at: http://hr.nau.edu/m/content/view/49/58/ .
At the conclusion of 18 months, VSRIP participants who are members of ASRS and begin drawing retirement benefits from the ASRS, may participate in the health insurance plans administered by ASRS and may receive a monthly health insurance premium benefit. A description of the current health plans and premiums can be accessed on the web at https://www.azasrs.gov/web/GroupInsuranceInformation.do
At the conclusion of 18 months of COBRA coverage, VSRIP participants who are members of the ORP (Optional Retirement Plan), must obtain their own medical insurance whether they begin drawing retirement benefits from the ORP plan or not.
- If retiring from NAU:
Health benefits will continue until May 31, 2010 for an employee who leaves employment effective May 8, 2010. Health benefits will continue until July 31, 2010 for an employee who leaves employment effective July 1, 2010.
Arizona State Retirement System (ASRS) Plan - VSRIP participants who are members of ASRS and begin drawing retirement benefits from the ASRS immediately upon separation from the university have two health insurance plan options. First, they may participate in the health insurance plans administered by ASRS and may receive a monthly health insurance premium benefit. A description of the current health plans and premiums can be accessed on the website at: https://www.azasrs.gov/web/GroupInsuranceInformation.do
Under the second option, a VSRIP participant who is a member of ASRS may elect coverage under the ADOA (Arizona Department of Administration) health insurance plans. These plans are the same plans offered to active employees. The NAU BCBS plan is an additional ADOA option for NAU retirees. ASRS will offer the same premium benefit if electing this medical insurance as they would under the ASRS plan. Plan and retiree premium rate details can be found on the ADOA website. NAU BCBS plan and premium rate details, can be found on the NAU HR website.
ORP (Optional Retirement Plan) - VSRIP participants, who participate in the optional retirement program, may elect health insurance under either the ASRS or ADOA retiree plans as described above. However, ORP participants are not eligible to receive the monthly health insurance premium benefit through ASRS. Participation in an ASRS health insurance plan does not enroll an ORP retiree as a member of ASRS.
6. What is the deadline for enrolling in the VSRIP?
Friday, January 15, 2010 is the last day the university will accept an agreement and full and final release of all claims from eligible employees. The signed release (with the employee’s original signature) needs to be submitted to the provost’s office before 5:00 pm. Participants should follow the instructions for enrolling in the VSRIP that were included in the packet of information. Participants should have discussed enrollment with the chair or director, and obtained that signature and that of the appropriate dean before the enrollment deadline.
Also, enrolling in the VSRIP is different than participating in the VSRIP. A person will not be fully eligible to participate in the VSRIP until the agreement and release has been accepted by President Haeger. This is anticipated to occur in mid January, 2010.
7. Will I be able to immediately draw retirement benefits if I enroll in the VSRIP?
The rules affecting how much and when a participant may begin receiving retirement payments are completely independent of the VSRIP. This is true for all retirement plans. Before enrolling in the VSRIP, participants are strongly encouraged to contact a retirement plan representative and the NAU HR Benefits office to find out more about retirement benefits.
8. How do I get information on retirement benefits?
An estimate of retirement benefits can be obtained by contacting a representative with the selected retirement plan. The NAU HR Benefits staff cannot provide this information. Retirement plan information is listed on employee pay stubs.
Members of the Arizona State Retirement System (ASRS) may view information at its web site: http://www.azasrs.gov or schedule an appointment with an ASRS representative at its offices, which are located at:
3300 North Central Avenue
Phoenix, AZ 85012-0250
(602) 240-2000
Optional Retirement Program (ORP) contact information for the approved companies follows:
Valic
Steve Shelton (928) 600-3176
Dan Berglund (928)380-3006
1020 East Missouri Avenue
Phoenix, AZ 85014
(800) 892-5558
Fidelity Investments
Damond J Petersen, Retirement Counselor
15445 N Scottsdale Rd
Scottsdale, AZ 85254
(866) 588-2612
(480) 284-1847
Scheduling Confidential Consultations:
(800) 642-7131 or http://fort.fidelity.com
TIAA-CREF
Nicholas Hileman, Consultant
2398 E. Camelback Rd Suite 1000
Scottsdale, AZ 85016
(866) 548-3705 Ext 7777
(602) 553-7777
nhileman@tiaa-cref.org
9. Will my VSRIP payment be taxed?
Yes. VSRIP payments are generally considered and will be reported as W-2 income in 2010 for those retiring May 2010 through July 2010 under this program by the Internal Revenue Service and subject to all federal, state and FICA (social security and medicare) income-related taxes and deductions. We strongly encourage participants to consult with a tax or financial advisor and a representative of his or her retirement plan to assess the participant’s financial situation.
Except for the right to receive the VSRIP payment, a participant’s entire employment relationship with the university and all related benefits ends upon his or her separation at the end of the current contract. Stated another way, NAU will withhold all applicable federal income tax, Arizona state income tax, and FICA (Medicare and Social Security) taxes, from the VSRIP payment, but payments following resignation or retirement do not make the VSRIP participant eligible for employment related benefits such as health benefits, accrual of vacation leave, sick leave, retirement contributions or deductions, or additional credit for length of service.
VSRIP participants can make changes to both federal income tax withholding rates and Arizona state income tax withholding rates through LOUIE self-service should his or her tax advisor recommend such a change.
10. If I am a member of the Arizona State Retirement System, will I be able to include the incentive amount as compensation for the purpose of calculating my retirement under the ASRS plan?
No. Because the cash incentive payment is paid after the member’s final day of employment, the incentive cannot be considered “compensation” for purposes of determining average monthly compensation and therefore, ASRS contributions from the employee or employer cannot be withheld for the incentive payment.
For ASRS members who began participation after 12/31/1983, termination payments (including incentive payments) are not considered compensation according to Arizona Revised Statute 38-711.7(a).
For ASRS members who began participation on or prior to 12/31/1983, these incentive payments are not ASRS eligible compensation based on Attorney General opinion I01-004 from 01/23/01. http://www.azag.gov/opinions/2001/I01-004.html . This opinion states “early retirement program (ERP) benefits paid at or before termination of employment are “compensation” for purposes of the ASRS plan, but ERP benefits paid thereafter are not.”
11. If I am a member of the Optional Retirement Program will my incentive payment have mandatory retirement contributions withheld and contributed by NAU to my retirement plan?
No. According to the Arizona Board of Regents Optional Retirement Plan (ORP) an employee shall not be an active participant in the Plan and may not continue to participate in the Plan and shall not be entitled to accrue any benefits or make a contribution if he/she is retired or separated from all employers [as defined under the Plan].
12. Can I direct part of my incentive payment toward a supplemental retirement savings plan such as a 403(b) or 457 deferred compensation plan?
No. Incentive payments paid after separation or retirement, such as the VSRIP pay, are not eligible for deferral under either type of plan.
13. How can I minimize the tax implications of the incentive payment?
Earnings received while still employed by NAU are eligible to be deferred into 403(b) or 457 plans. By beginning to defer employment income early in 2010, the year when the VSRIP payments will be taxable, a VSRIP participant may be able to offset some of the increased tax liability. Beginning 1/1/2010, one may defer the maximum allowable to a 403(b) plan (up to $22,000) and a 457 deferred compensation plan (up to $22,000). An IRS ‘catch up’ provision also allows employees age 50 and over to contribute additional amounts each year. Based on an employee's particular circumstances and levels of past years' contributions, each of the 403(b) and 457 plans have catch up rules which may allow for even greater contributions. Seek tax and/or financial advice before doing so. The authorized representatives for these plans can provide assistance with questions about deferring income into these plans and help determine qualifications for ‘catch up’ provision. http://hr.nau.edu/m/content/view/136/146/
14. In Order to reduce my tax liability, can I split my incentive payment into two payments, one in calendar 2010 and one in calendar 2011?
No, under the rules of Section 457(f) of the Internal Revenue Code of 1986, compensation for items such as the VSRIP incentive is considered taxable income of the VSRIP participant at the time when the participant’s right to the compensation is no longer subject to a substantial risk of forfeiture. A substantial risk of forfeiture exists if the entitlement to the compensation is conditioned upon the future performance of substantial service. A substantial risk of forefeiture no longer exists at the time the payment is made, so even if one payment was made in 2010 and the other in 2011, the full amount would be taxable in calendar year 2010. Accordingly, once the VSRIP participant has performed all required service and retired or resigned as of the May 8, 2010 or July 1, 2010 dates, the VSRIP incentive payment is considered fully taxable at that time.
15. May I have my VSRIP payment made through direct deposit into a bank account?
Yes. If a participant’s current paychecks are being handled through direct deposit, the university will automatically send the participant’s VSRIP payment to the same direct deposit account. If a participant has not used direct deposit before, he or she may enroll through LOUIE self service. If a participant’s bank account changes after the resignation or retirement date, but before receipt of the incentive payment the participant must notify Human Resources of the change in direct deposit information.
16. Can I purchase past service credit in ASRS and increase my retirement benefit?
Yes. Subject to the stated conditions of the ASRS plan, active members may be able to purchase service credit for either past active military duty with an honorable discharge, for service worked under another public employer in the United States and/or previously forfeited ASRS service credit. To learn more, go to https://www.azasrs.gov/web/index.do
17. Do my years of service to another university under the jurisdiction of the Board of Regents or State of Arizona agency count in determining eligibility to participate in VSRIP?
No. Any years of service to either University of Arizona or Arizona State University or another state of Arizona agency will not count toward completed 10 years of service to NAU.
18. I am on an academic year appointment, but my salary is paid over twelve months. Will this impact the VSRIP payment that I am eligible to receive?
No. The calculation of the VSRIP cash incentive is based on the participant’s FY10 base salary for the academic year regardless of which pay option has been chosen. The base salary rate does not include summer salary, overload, administrative stipends, or temporary salary increases.
19. I am on an academic year appointment, but my salary is paid over twelve months. How will leaving employment at NAU before the end of the twelve months affect my remaining payment?
Some employees who are employed for an academic year elect to be paid over the 12 month fiscal year. This means that salary paid in July and early August will not be earned until the employee begins work in August. Additionally, salary paid in the last month of the year, June, was earned prior to the pay period covered by the payment. When an academic year employee retires, or otherwise ends the employment relationship with the university, it is normal practice to calculate whether NAU owes the employee salary or whether the employee owes NAU reimbursement for payments made but not earned. For academic year appointees who have elected to be paid over 12 months, a lump sum payment of the remaining FY 10 pay will be included in the May 21, 2010 payroll.
20. When would I receive my last paycheck if I participate in the VSRIP?
Participants who resign or retire effective May 8, 2010, will receive a final paycheck in the pay period for May 21, 2010 (this check would be payment for one week) if on an academic year appointment. Fiscal year appointees, resigning or retiring on July 1, 2010 will receive their final paycheck on July 16, 2010 (this check would be for one day, Friday, June 28).
21. What happens to accrued and unused vacation leave under the VSRIP?
Faculty on AY appointments do not accrue vacation hours. FY appointees may earn vacation hours per the provisions of ABOR Personnel Policy 6-801. Employees who have a balance of vacation hours upon retiring or resigning will receive a lump sum payment of the accrued balance up to the stated cap of the policy (176 hours for full-time), less all applicable federal and state withholding, in the final paycheck. Payment is made at the individual’s current rate of pay.
22. What happens to accrued and unused sick leave under the VSRIP?
The cashing out of sick hours when a benefit-eligible employee retires from the university is a separate and independent program from the VSRIP and is governed by statutory provisions, administered by the Arizona Department of Administration. This program is called the RASL (Retiree Accumulated Sick Leave), authorized by ARS §38-615 and 38-616. The university does not administer this program, but will provide you with the appropriate instructions and will send information to the Arizona Department of Administration on a retiree’s behalf.
23. How can I determine if I am eligible to receive a payout under the RASL Program?
Eligibility to receive a payout under the RASL Program is dependent upon an employee (a) retiring from the university and (b) having a balance of accrued and unused sick hours of not less than 500 at the date of retirement. To determine the current balance of accrued and unused sick hours, a participant can view his or her sick accruals online through LOUIE Self Service>Payroll and Compensation> View Leave Balances. Individuals who have 499 hours of sick time or less forfeit those hours upon either resignation or retirement.
Eligible participants who retire from the university (must be drawing benefits from ASRS or annuitize not less than $10,000 from ORP) and who have an accrued and unused balance of 500 to 1500 sick hours are eligible to participate in the RASL program that is administered by the Arizona Department of Administration. Under RASL, the individual receives a cash payout for the unused sick hours. The total dollar value is calculated at:
Current hourly rate of pay x actual number of unused hours x applicable % rate
500 to 749 hours = 25%
750 to 999 hours = 33%
1000 to 1500 hours = 50%
Note: the statute places a $30,000 cap on the payout, limiting the annual payout to $10,000 over not more than 3 years. For more information about this program, see
http://www.gao.az.gov/rasl/default.asp For specific information on the RASL payment calculation, contact state of Arizona General Accounting Office (602) 542-6222 or (602) 542-5699, or NAU HR Benefits at (928) 523-0002 for an estimate.
A retiree may wish to explore the Tax-Deferred Compensation Plan (457) option for his or her first RASL payout.
24. How can I find out about my social security benefits and the effect of my VSRIP payments on social security?
Contact the Social Security Administration via the Internet or at the address shown below. http://www.ssa.gov/ (You can locate the office nearest you at this web site). The general toll-free phone number for the Social Security Administration is 1-800-772-1213. Flagstaff office location is:
1585 SO PLAZA WAY
SUITE 130
FLAGSTAFF, AZ 86001
HOURS: Monday – Friday 9:00 a.m. - 4:00 p.m.
The Social Security Administration provides information on-line. This information can be accessed by going to http://www.socialsecurity.gov/pubs/index.html
Special payments after retirement are addressed here http://www.socialsecurity.gov/pubs/10063.html
Special rules for the first year of retirement are addressed here http://www.socialsecurity.gov/pubs/10069.html#count
We recommend participants review all the information posted and/or contact a Social Security Administration official to verify the impact of this plan on social security benefits.
25. Can I come back and work for NAU again after I retire or resign?
As a condition of participating in the VSRIP, each participant agrees to relinquish, as applicable, all tenure rights, all right to continued employment, and all right to re-employment or future employment by the Board, including employment as a part-time faculty member. The VSRIP does not, however, prohibit an eligible participant from applying for future employment at the university after one year. Any decision to re-employ an individual would be at the discretion of NAU and based on the needs of the university. Rehire decisions, including part-time employment, will be subject to the approval of the university provost and president or designee. The VSRIP prohibits any university representative from making any informal or formal agreement or arrangement to rehire an individual in the future.
If a participant is drawing retirement benefits, his or her plan may limit the ability to receive those benefits if re-employment with the university occurs; or if the employee and the university enter into an express or implied contract for future re-employment the university (ORP retirees see Optional Retirement Plan Document). For ASRS members, please see the ASRS Getting Ready for Retirement Handbook . Before considering re-employment participants are strongly advised to consult with the appropriate retirement plan representative.
26. I have grants that run past end of spring semester 2010 or have agreed to teach summer school. Can my retirement date be extended beyond May 8, 2010 (AY) or July 1, 2010 (FY)?
No. Agreement to participate in the VSRIP requires that resignation or retirement must be effective no later than the participant’s contract end date, and requires that the participant not work for NAU in any capacity for one year beyond that date.
27. Will my future VSRIP payments be payable to my estate if I die before receiving them?
Yes. The VSRIP agreement obligates the university to make the payments under the program. Should a participant die prior to receiving all or part of the benefits, the university will make the cash incentive payable to the participant’s estate.
28. I’m not certain that I want to participate in the VSRIP this year. Can I wait until next year?
No. VSRIP is a “window plan” and is only being offered for the time period of November 16, 2009 through January 15, 2010. This program will not become an ongoing feature of NAU employment, so there will not be a plan offered next year.
29. I would like to retire under different terms. Is that something I can discuss with my dean?
No. Eligible participants may not negotiate a different retirement agreement while the VSRIP is in effect, with the exception of the Phased Retirement Option for ORP participants (subject to appropriate approvals).
30. I am currently on sabbatical. Conditions of Faculty Service (COFS) 1.7.1.9 states that I am required to “return to the university for one year following the leave.” Will that policy be waived for those who choose to participate in VSRIP?
Yes.
31. If I participate in the VSRIP, will I be eligible to join the NAU Retirees Association?
Yes, if retiring, but not if resigning. NAURA membership is open to all NAU retirees and those planning to retire in the near future, their spouses and the surviving widows and widowers of NAU retirees.
32. Are there any other considerations I should take into account when deciding if I want to participate in the VSRIP?
Consultation with a financial planner and/or tax advisor is very important. The VSRIP offers a very significant financial incentive, and the university is committed to maintaining opportunities for voluntary on-going academic, social, and intellectual connections for retirees. At the same time, it is critical that each eligible employee consider the financial and personal impact of this date of retirement or resignation rather than a later date. Such impacts include a potential change in retirement and social security income and possibly significantly higher premiums for health and dental coverage. For many eligible employees, these changes would have taken place in the near future, regardless of an incentive plan. The plan therefore provides an opportunity to enhance resources for an imminent retirement or resignation. For those individuals who had not planned to retire or resign in the next few years, these impacts need to weighed against the opportunities presented by a significant income infusion and full control of one’s time and direction.
33. If I decide to enroll in the VSRIP, when will I know if I've been accepted?
The President is likely to make all final decisions about VSRIP on or about January 15, 2010. You will be notified by a copy of the signature page from the Agreement and Full and Final Release of All Claims, whether or not you've been accepted as a VSRIP participant.
In the event of a conflict between the Frequently Asked Questions and official documents, statutes, and policies such as the VSRIP Policy Statement, Retiree Accumulated Sick Leave (RASL) documents,the Arizona Board of Regents Optional Retirement Plan, and the Arizona State Retirement System documents, the RASL, ORP and ASRS documents will govern. These FAQ's are intended to provide accurate and authoritative general information in regard to the VSRIP. They are not intended to provide legal, financial, tax, accounting, or any other type of advice.
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