What is Your Supplemental Retirement Annuity Account?
As the name indicates, a Supplemental Retirement Annuity (the “SRA”) operates as an adjunct to your Retirement Annuity. If your employer offers an Supplemental Retirement Annuity, you have the opportunity to augment your retirement stash on a tax-deferred basis through a salary deferral agreement, provided you are within the contribution limitations stipulated by law. Again, your benefits office will be able to advise you as to how large a percentage of your salary you may contribute to your Supplemental Retirement Annuity. Not all institutions offer the SRA. If your employer is one who does, try your hardest to take advantage of this feature of your employer’s plan. It typically allows you to contribute the gap between the maximum contribution you can make under the Code and the permissible deferral of salary under the employer’s plan. If you have the funds, for obvious reasons you want to save as much as possible in the tax-favored setting of a qualified plan. Let’s look at the other characteristics of an Supplemental Retirement Annuity.
The SRA is, like the RA, a contract between you and TIAA-CREF. The Supplemental Retirement Annuity does not fall under the employer’s stipulations and limitations in the RA part of the plan. In the SRA, you may choose among the full range of TIAA-CREF investment vehicles. Furthermore, you may transfer any part or all of the accumulations in your Supplemental Retirement Annuity to an alternative investment. This includes any accumulation you may have in TIAA. This constitutes one of the few exceptions to the rule that traditional TIAA assets may only be transferred by using the TPA or a life annuity.
You contribute to an SRA through pretax salary deductions. You may decide how much you would like to contribute within the limitations established by the Internal Revenue Code regarding defined contribution plans. For the most part, the easiest way to determine the maximum contribution you may make is to confer with your benefits office. They should have the relevant numbers close at hand.
SRA funds are not subject to employer-imposed withdrawal or rollover restrictions, which may be the case with RA funds. They are, however (surprise!), subject to the rules of the Internal Revenue Code governing withdrawals from tax-deferred retirement assets. You may withdraw any Supplemental Retirement Annuity retirement asset regardless of the employer sponsor retirement plan, and you may roll the assets out to another retirement account trustee (investment firm, bank, and so forth) and a different tax-deferred account. If you do so, you may have the funds managed or make your own retirement investment advice and decisions. You may also take taxable distributions without penalty as long as you are in compliance with applicable Code provisions, to be discussed later. To summarize the most important rules at this time, you should remember that, as a rule of thumb, any distributions taken before 59 1/2 will trigger a 10% penalty and distributions that fall below the level of mandatory distributions after 70 1/2 will trigger a 50% penalty on the shortfall.
As mentioned before, you should be taking advantage of a chance to set aside more funds on a tax-deferred basis if your employer does in fact offer an SRA option. As we delve further into retirement and estate planning retirement, you will see how valuable tax-deferred assets can be. Given the compounding effect of time and a steady rate of return, even the smallest amount set aside on a regular basis can provide a tidy nest egg for retirement. Large retirement accounts do not come into being instantaneously, but grow like trees over time. The Supplemental Retirement Annuity invites you to save and to let the time value of money and compounding returns work in your favor.