403b Supplemental Retirement Annuity Plan?

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eagerinvester
Posts: 12
Joined: Sun Mar 03, 2019 6:43 pm

403b Supplemental Retirement Annuity Plan?

Post by eagerinvester » Thu Mar 21, 2019 7:20 pm

Hello most awesome and knowledgeable bogleheads,

I posted a few weeks ago and got some great advice regarding my asset allocation so I’m back with a question regarding one of my retirement account options.

The university I work for provides employees with 3 403b retirement options, of which I can participate in all 3.

The first is a basic plan, which the university contributes a pre-tax percentage of pay based on my age. Employees don’t contribute to this plan.

The second is a matching plan, which the university will match up to 5% of my pre-tax salary contributions. The plan language is clear though that I can’t contribute more than 5% into this plan. So this plan only holds my contributions up to 5% and the university match dollars.

The third is what they call a supplemental retirement annuity plan. They describe this as similar to the matching plan and my option if I want to contribute more to retirement beyond the other two plans.

Details are here:
https://www.hr.upenn.edu/PennHR/benefit ... ings-plans

Am I correct in assuming this supplemental plan is where I should be putting my additional contributions to max out the balance of my $19000 limit? The word “annuity” in the name makes me feel like perhaps I’m missing something as to how this plan may be treated differently than the other two. I am just looking for reassurance that this is the correct place to park the rest of my monthly contributions and the term annuity is not referring to the other types of annuities discussed on the forum, or something else that I’m missing.

Thanks!
Last edited by eagerinvester on Thu Mar 21, 2019 7:58 pm, edited 1 time in total.

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grabiner
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Location: Columbia, MD

Re: 403b Supplemental Retirement Annuity Plan?

Post by grabiner » Thu Mar 21, 2019 7:45 pm

The key to the quality of an investment is not what it is called, but how much it costs. An investment with 0.50% expenses will underperform the market by 10% if you hold it for 20 years, whether you hold it in a mutual fund or an annuity.

While the plan is technically treated as an annuity, it is likely to be a very low-cost option since you have TIAA and Vanguard available. Historically, all TIAA accounts were structured as annuities because of the rules on 403(b) plans; now, many plans have TIAA or Vanguard mutual funds at low cost. (I still hold a similar plan from a former employer which has institutional shares of a Vanguard fund.)
Wiki David Grabiner

Topic Author
eagerinvester
Posts: 12
Joined: Sun Mar 03, 2019 6:43 pm

Re: 403b Supplemental Retirement Annuity Plan?

Post by eagerinvester » Thu Mar 21, 2019 9:24 pm

Great thank you! Sounds like it’s a safe option for my extra retirement contributions beyond my match.

megabad
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Re: 403b Supplemental Retirement Annuity Plan?

Post by megabad » Thu Mar 21, 2019 10:36 pm

Just to be clear, this appears to me to be only one plan. Part of it is employer contribution and part of it is matched but they are not separate plans (though they are likely separate sub accounts). In other words, it all looks like it goes into your 403b.

Also It does not appear that any employee would be eligible for all three “plans”. One appears to be for part time folks (“supplemental..”).

In short, I wouldn’t overthink this as you will likely not have to choose a “plan” from the 3 options you have indicated, you will just contribute and it will automatically go where it needs to.

Topic Author
eagerinvester
Posts: 12
Joined: Sun Mar 03, 2019 6:43 pm

Re: 403b Supplemental Retirement Annuity Plan?

Post by eagerinvester » Thu Mar 21, 2019 10:49 pm

Hmmm...I just logged in to my vanguard account and it lists each plan separately, with a separate balance. There are also separate summary plan descriptions and I do have to elect separate contribution percentages for the matching and supplemental plans, so from what I can see, they are in fact separate. Full time staff are eligible for all 3, part time are only eligible for supplemental, which in essence appears to be a pre-tax retirement plan that simply has no employer contribution.

You do bring up an interesting point, which is I have 1 403b with three plans contained within it so perhaps they are treated as sort of sub accounts as you mention. The supplemental has slightly different withdrawal parameters while employed so while I’d assume once I retire or leave get a job somewhere else, I’d be pulling from the total of all plans, it appears there are some differences as to how I would interact with them while still employed.

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