New benefits eligible employees have two options to save for retirement. The deadlines for choosing an option depend on your employee group. The New Employee Retirement Flyer is a great way to start learning how to save for retirement.
New benefits-eligible employees* have two options to save for retirement. All benefits-eligible employees with a .5 FTE or more must elect a retirement plan, Option 1 or Option 2, within the first 30 days of their employment. The significant difference between Option 1 and Option 2 is in how you plan to save your own money for retirement. In Option 1, you agree to save your money by contributing to the Oklahoma Teachers' Retirement System (OTRS) throughout your career at OU. You can also save additional money in a Voluntary Retirement Savings Plan. By choosing Option 2, the only available methods through which you can save your own money are the Voluntary Retirement Savings Plans. These plans yield account balances that are available during your retirement. OU contributes 9% of your base salary on your behalf to a 401(a) Defined Contribution Plan.
Any employee may start or stop participation in the 403(b) and 457(b) Voluntary Retirement Savings Plan at any time.
Benefits-eligible salaried and hourly employees can participate in Option 1 or Option 2 and must decide between these options within the first 30 days of employment eligibility. They are automatically enrolled in Option 1 after 30 days if a choice has not been made. This is a one-time, non-reversible choice. Employees may begin or stop participation in the 403(b) and 457(b) Voluntary Retirement Savings Plans at any time.
*Employees classified as student employees, academic, or medical "residents" or "post-doctoral fellows," or with any job title of scholar or fellow are not eligible for Option 1 or Option 2.
Benefits eligible salaried and hourly employees can participate in Option 1 or Option 2 and must decide between these options within the first 30 days of employment eligibility. They are automatically enrolled in Option 1 after 30 days, if a choice has not been made. This is a one-time, non-reversible choice. Employees may begin or stop participation in the 403(b) and 457(b) Voluntary Retirement Savings Plans at any time.
Employees classified as student employees, academic, or medical "residents" or "post-doctoral fellows," or with any job title of scholar or fellow are not eligible for Option 1 or Option 2. Any employee may start or stop participation in the 403(b) and 457(b) Voluntary Retirement Savings Plan at any time.
Oklahoma Teachers’ Retirement System (OTRS) provides a defined lifetime income to participating members who become eligible for retirement. OTRS is administered by the State of Oklahoma and Oklahoma laws establish the rules and procedures governing OTRS. All benefits-eligible* university employees who have a .5 FTE appointment (20 hours or more per week) are eligible to participate. Your Savings: If you choose Option 1, you will be enrolled in the Oklahoma Teachers' Retirement System (OTRS). You contribute 7% of your total compensation to OTRS. NOTE: You can save even more of your own money by enrolling in a Voluntary Retirement Savings Plan.
**Employees classified as student employees, academic, or medical "residents" or "post-doctoral fellows," or with any job title of scholar or fellow are not eligible.
The Oklahoma Teachers' Retirement System (OTRS) is a defined benefit plan like a pension plan. Your retirement benefits continue throughout your retirement and are calculated based on a formula instead of an account balance. See Plan Descriptions for more details. Contributions: You contribute 7% of your total compensation. Retirement Benefit: Your retirement benefit is calculated using a formula that considers your total service credit and your average total compensation during your five highest-paid years: (years of service credit x 2% x average total compensation for your five highest-paid years = your retirement benefit). Contribution Start Date: Your membership and contributions to OTRS begin on your date of hire or eligibility date. NOTE: OU contributes 8.55% of your total compensation to the OTRS general fund for your participation. You do not receive a distribution of OU's contributions if you retire or leave OU.
Your participation in OTRS provides a benefit using a formula; your benefit under this plan is stable and will not change based on the plan’s investment returns. It is a lifetime benefit once you are eligible to retire. However, if you change employers, it is not as portable as some other types of retirement arrangements. Your contributions to OTRS continue throughout your career at OU and cannot be stopped. Everyone's personal situation is different and some people find this continuous, required savings an advantage while others may see it as a disadvantage. Consider discussing your choices with a personal financial planner.
The OU Contributory Retirement Plan and the OU Retirement Plan are 401(a) defined contribution plans that are tax-qualified plans under Section 401(a) of the Internal Revenue Code. These plans consist of a four-tier structure of investment options administered by Fidelity Investments and designed to fit a range of investment styles. OU's contribution to these plans depends on whether the employee has chosen to participate in OTRS.
All benefits-eligible* employees must decide within the first 30 days of employment if they wish to elect Option 1 which consists of the Oklahoma Teachers’ Retirement System (OTRS). This is a one-time irrevocable election for these employees. If an election is not made within the first 30 days of employment, employees will be automatically enrolled in Option 1 with the Oklahoma Teachers’ Retirement System. Use these plans: 401(a) Defined Contribution Plan + Voluntary Retirement Savings Plan If you're not participating in Oklahoma Teachers' Retirement System (OTRS), then you're not automatically saving any of your own money for retirement. OU's Contributions: If you're benefits-eligible, the university contributes 9% of your base salary on your behalf to a 401(a) defined contribution plan. If you're salaried, that plan is the OU Retirement Plan and, if you're hourly, that plan is the OU Contributory Retirement Plan. All new employees must complete a 12-month waiting period before the university's contributions begin.
*Employees classified as student employees, academic, or medical "residents" or "post-doctoral fellows," or with any job title of scholar or fellow are not eligible.
Option 2 includes university contributions to a 401(a) defined contribution plan. If you're salaried, that plan is the OU Retirement Plan and, if you're hourly, that plan is the OU Contributory Retirement Plan. In this plan, OU contributes to an investment savings account on your behalf. Contributions: OU contributes 9% of your base pay to the 401(a) defined contribution plan. You do not contribute to this plan. Retirement Benefit: You direct the investment of your account. The amount you receive at retirement depends on how much has accumulated in your account over the years you have participated in the plan. Contribution Start Date: If you choose Option 2, the plan becomes effective on your date of hire or your eligibility date, and contributions will begin after you complete a one-year waiting period. NOTE: The 401(a) defined contribution plan does not accept employee contributions. You should consider adding to your retirement savings by making contributions to the Voluntary Retirement Savings Plans.
Unlike in Option 1 with OTRS, you're not automatically saving any of your own money for retirement in Option 2. But, it's still recommended that you do. You can save money from your paycheck by enrolling in a Voluntary Retirement Savings Plan. The benefits you will receive upon retirement depend on how much money has accumulated in your account—based on OU’s contributions and your account’s investment returns— at the time you retire. This is an investment account that is affected by variations in the stock market. If you leave OU, this savings is portable and you are entitled to take the value of your account if you are vested.
When you choose Option 1, you’re saving 7% of your total compensation from the start. You can save even more for retirement by participating in one of OU's Voluntary Retirement plans. In Option 2, the university is contributing 9% of your base pay to a 401(a) defined contribution plan. To maximize your retirement, it's recommended that you also save your own money in a Voluntary Retirement Savings Plan.
In Option 1, you commit to retirement readiness by making ongoing contributions to OTRS. These contributions cannot be changed or stopped. Consider this long-term commitment to being ready for retirement when you're reviewing Option 1. While it is not required in Option 2 to make an employee contribution, it is highly recommended that you also save your own money. You can do this in a Voluntary Retirement Savings Plan. You can start, stop, and change the amount of contribution to a Voluntary Retirement Savings Plan at any time in both Option 1 and Option 2.
In Option 1, you will receive a lifetime benefit from OTRS that is independent of any account balance. You cannot withdraw money from OTRS unless you no longer work at OU or another OTRS-participating institution. If you’re saving your own money through a Voluntary Retirement Savings Plan, you can make withdrawals under certain circumstances.
Generally, for older employees, a defined benefit pension plan such as OTRS in Option 1 builds benefit value faster than a defined contribution plan alone like in Option 2. However, there are many complex issues to consider, such as the age you plan to retire and your life expectancy at retirement. Consider discussing your options with a personal financial planner.
In Option 1, OTRS combines your contributions with the contributions from all other members and invests them. You do not direct investments in the OTRS plan. Instead of having an account balance that may fluctuate with variations in the stock market when you retire, OTRS guarantees a defined benefit amount for your lifetime. In the Voluntary Retirement Savings Plans and the 401(a) defined contribution plan in Option 2, you direct the investments of your accounts. The amount you have for retirement depends on the investment choices you make during your career and your account balance.
It is highly recommended that you save your own money for retirement, whether you choose Option 1 or Option 2.
If you anticipate having many different employers over your career or you do not expect to stay with OU at least seven years, you would want to look more closely at Option 2 because it is more portable to other employers and it has a shorter vesting period. However, if you continue to participate in OTRS or another Oklahoma state retirement program after you leave OU, your participation in Option 1 may be credited or transferred.
If you do not take a distribution of your OTRS contributions, you become a non-participating member. At retirement age (age set by OTRS), you will be entitled to collect retirement benefits based on the benefit you had accrued under OTRS during your years of service with OU.
The longer you are in OTRS or another Oklahoma state retirement program, the better choice it becomes. OTRS is designed primarily to reward long-service employees. Your service credit may transfer to other Oklahoma state retirement programs.
For example, if you are unmarried and would not have the cushion of a second retirement income in your home, you may feel more secure choosing Option 1 because you can more easily predict the retirement benefit it will provide. Consider discussing your choices with a personal financial planner.
If you do not anticipate staying with OU long enough to become vested in OTRS, it may be better for you to choose Option 2 and also save your own money in a Voluntary Retirement Savings Plan. NOTE: You must have three years of service credit to become vested in the 401(a) defined contribution plan.