RETIREMENT & BENEFIT SERVICES DIVISION MEMORANDUM

July 1, 1997

TO THE HEADS OF ALL STATE AGENCIES

1. INTRODUCTION

   Comptroller's Memorandum No. 97-23 entitled "SEBAC V", dated May 12, 1997, introduced "cash withdrawals", the new retirement payment choice for retiring members of the Alternate Retirement Program (ARP).
   
   Further, legislation passed as part of the 1997-1999 biennial budget amended the ARP minimum retirement service requirements as well as clarified ARP participants entitlement to the state-sponsored retiree health plans.
   
   The purpose of this memorandum is not only to discuss the separate and distinct requirements of the issues cited above but also to describe the correlation between an ARP retiree's choice of payment options and the entitlement of their survivors to participation in the state-sponsored retiree health plans.
   
   

2. ARP CASH WITHDRAWALS
   
   The ARP is designed to provide eligible participants (and their spouse/annuitant, if elected) with lifetime retirement income. Currently ARP "retirees" may choose to commence receipt of their annuity in monthly payments either immediately following their termination or on a future date in accordance with the program provisions. Effective July 1, 1997, a cash withdrawal option will be included in the ARP as an additional retirement payment choice which may be selected in lieu of lifetime payments (if eligible) or in conjunction with receipt of lifetime income. Cash withdrawals are available on amounts that have not already been annuitized.
   
   This cash withdrawal feature is available to ARP members who terminate their service on and after July 2, 1997 and (1) after attaining age fifty-five (55) with a minimum of ten (10) years of participation in this defined contribution plan based on Connecticut State employment or (2) on or after age sixty-two (62) with at least five (5) but less than ten (10) years of Connecticut ARP participation. Cash withdrawals are governed by applicable provisions of the State of Connecticut and TIAA-CREF, the company which underwrites the ARP.
   
   - For ARP contracts issued before July 1, 1992, cash withdrawals are available from the TIAA Traditional Accounts in ten (10) annual installments through a Transfer Payout Annuity (TPA); lump sum withdrawals are available at any time from the CREF Accounts and the TIAA Real Estate Account.
   
   - For ARP contracts issued on and after July 1, 1992, cash withdrawals are available from TIAA Traditional Accounts in a lump sum within 120 days after termination of employment subject to a 2.5% surrender charge or over ten (10) annual installments through a TPA. Fixed periods, annuity options, and TPA's are available without charge. Lump sum withdrawals are available at any time from the CREF Accounts and the TIAA Real Estate Account.
   
   Cash withdrawals from the ARP are subject to federal and state laws which may restrict lump sum payouts; it is the responsibility of the ARP participant to determine such restrictions. Taking a cash withdrawal may have tax implications; the participant should check with his/her tax advisor before making this decision. Specific questions concerning the availability of cash withdrawals should be addressed to TIAA-CREF or to the Retirement & Benefit Services Division.
   
   
3. STATE-SPONSORED RETIREE HEALTH PLAN ELIGIBILITY REQUIREMENTS FOR RETIRED ARP PARTICIPANTS
   
   The following information applies exclusively to retiring ARP participants who are either eligible for the normal, active group coverage immediately prior to termination or were vested in the ARP as of June 30, 1992. Refer to the Retirement Division Memorandum entitled, "Retiree Eligibility for State-Sponsored Health Insurance" dated April 15, 1993 for more details.
   
   

1. ARP Age and Service Requirements
   
   Assuming one of the two preceding eligibility requirements is satisfied, effective July 1, 1997 employees covered by the ARP will be entitled to health insurance upon retirement on the same basis as an employee covered by the State Employees Retirement System (SERS) with the same hire date. Additionally, effective July 1, 1997, with terminations on and after July 2, 1997, the minimum service requirements as referenced herein can be composed of a combination of ARP and SERS participation in accordance with the SERS break in service provisions.
   
   The terminated ARP member's entitlement to state-sponsored retiree health coverage is based upon age and service requirements linked to date of termination as follows:
   
   Termination on or before July 1, 1997:
   
   ARP members age fifty-five or older at termination with at least ten years of Connecticut ARP participation are entitled to state-sponsored retiree health coverage.
   
   ARP members who terminate prior to age fifty-five with at least ten years of Connecticut ARP participation are entitled to the state-sponsored retiree health coverage at age fifty-five.
   
   Termination on or after July 2, 1997:
   
   ARP members age fifty-five or older at termination with at least ten years or age sixty-two with five but less than ten years of Connecticut ARP membership or a combination of participation in ARP and SERS, in accordance with break in service provisions, are entitled to state-sponsored retiree health coverage.
   
   ARP members who terminate prior to age fifty-five with at least ten years of Connecticut ARP membership or a combination of participation in ARP and SERS, subject to break in service provisions, are entitled to the state-sponsored retiree health coverage at age fifty-five.
   
   
2. ARP Pension Arrangements
   
   The following references to spouses/annuitants/eligible dependents assume that such individuals cohabit with or are dependents of the ARP retiree at the time of the retiree's death.
   
   

1. During the Lifetime of the Retired Participant
   
   Participants in the ARP who terminate state service after meeting the above cited service and age requirements are eligible for the state-sponsored retiree health coverage for themselves and their spouses and eligible dependents without respect to their annuity arrangements with TIAA-CREF. The terminated ARP participant may elect to continue health coverage through the State retiree group at termination regardless of whether or not such participant elects to immediately annuitize their ARP accumulations, defers receipt of the lifetime annuity in accordance with TIAA-CREF/Internal Revenue Service regulations or receives a lump sum cash withdrawal of all (if eligible) or part of the annuity in accordance with TIAA-CREF regulations.
   
   
2. Following the Death of the Retired Participant
   
   If the participant wishes to preserve entitlement to the state-sponsored retiree health plans for their surviving spouse/annuitant and eligible dependents, following the participant's death, the participant must have an annuity arrangement in place with TIAA-CREF on the date of his or her death that provides lifetime payments to the survivor.
   
   Participants seeking such coverage access for their eligible survivors must set up a two-life annuity option in at least the minimum amount ($10,000) required by TIAA-CREF; such annuity must be in effect on the participant's date of death in order for the surviving spouse/annuitant and eligible dependents to be entitled to the state-sponsored retiree health coverage following the death of the participant.
   
   The nature of the ARP requires that the retiree health plan information be imparted by the employing agency; the ARP lifetime annuity or cash withdrawal issues will be addressed by TIAA-CREF in accordance with their regulations. TIAA-CREF will not provide information on the service, age, and annuity arrangements needed to secure coverage under the state retirement health plans for the participant and/or the surviving eligible dependents upon the death of the participant.

4. CONCLUSION
   
   It is imperative that Agency Personnel/Payroll Officers provide the information contained herein to all prospective ARP "retirees". ARP participants contemplating retirement should also be encouraged to attend periodic seminars and counseling sessions conducted by TIAA-CREF. Questions concerning this memorandum may be directed to James Schnell, Coordinator of the ARP, at (860) 702-3508. Additionally, inquiries regarding cash withdrawals and other ARP payment options may be addressed to TIAA-CREF at 1-800-842-2776.

Very truly yours,

STATE EMPLOYEES RETIREMENT COMMISSION
NANCY WYMAN, SECRETARY EX OFFICIO

BY:

Steven Weinberger, Director
Retirement and Benefit Services Division

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