New Jersey Alternate Benefit Program (ABP)

What is the New Jersey Alternate Benefit Program?

What is an annuity?
New Jersey ABP and ING

What is the New Jersey Alternate Benefit Program?

The Alternate Benefit Program (ABP) is a defined contribution retirement program that is offered to eligible employees of New Jersey's public institutions of higher education as an alternative to the State Defined Benefits Pension Plan. ABP provides retirement benefits, life insurance and disability coverage, which, when combined with Social Security and other tax-deferred plans, can help provide income in retirement.

With ABP, you contribute a percentage of your base or contractual salary as determined by state law to a variable annuity, matched by an employer contribution. These contributions are made on a pretax basis -- you defer paying taxes on those contributions and any earnings until the money is distributed from the annuity.

What is an annuity?

A contract sold by an insurance company (ILIAC) to provide payments to the holder at specific intervals, usually, after retirement. All annuities are tax deferred, meaning that the earnings grow tax deferred until withdrawn.

Fixed annuities guarantee a certain payment amount while variable annuities do not, but variable annuities do have the potential for greater returns.

With an annuity you can accumulate a sum of money, which you have set aside for retirement, and then convert that money into either one or more larger payments, or ongoing smaller payments that can last your lifetime. A tax-deferred annuity has two periods: accumulation and annuity (payout).

During the accumulation period:

You direct contributions to the investment options you have chosen

The amounts you contribute accumulate earnings based on the returns of the investment options chosen, less contract and fund-level charges

Your contributions and earnings accumulate tax-deferred and are taxed when you make a withdrawal, start receiving annuity payments or fail to make a required withdrawal.

During the Annuity (payout) period:

• The annuity period is the time when you actually receive your annuity payments.

• Annuity payout is the periodic payment of income for:

a) The life of one or two persons

b) A stated period or

c) Some combination of both a) and b)

New Jersey ABP and ING

When you choose ING, you and your employer each contribute a certain percentage of your total compensation to the Retirement Master variable annuity contract, issued by ING Life Insurance and Annuity Company (ILIAC). Those contributions are invested among the investment options you selected for the plan.

Retirement Master is a group variable annuity customized to meet the needs of public higher education employees. With this annuity, you have the opportunity for:

Asset building - A great way to invest for future needs and supplement your retirement income.

Tax-deferred investing – under the Internal Revenue Code, with this program your contributions and any earnings on those contributions are taxed only when you begin to take distributions, at which time you may be in a lower tax bracket.

Diversified investment options - You have the opportunity to select from the investment options that are available to you, through the plan, where your contributions are allocated.

Periodic payments for the future - Under the annuity provisions, you choose the payout option that best fits your future needs.

Portability of your account to other eligible retirement plans.

Unlimited transfers between variable investment options via Internet and phone, subject to ING’s policy on market timing and excessive trading.

No surrender/withdrawal charges (investment management fees and a 1.0% mortality and expense risk charge will apply)

Eligibility requirements

Eligibility:

Full-time faculty, officers, visiting professors, and certain professional administrative Staff required to possess a bachelor's degree or its equivalent may participate in the ABP.

"Full-time" has been defined to include individuals receiving 50% or more of base salary, including those on sabbatical or paid leave of absence.

Ineligibility:

Individuals who are not eligible for enrollment in the system include:

Part-time faculty members

Adjunct faculty members (Note: Adjunct faculty are eligible for membership in PERS. However, an individual cannot be enrolled in the ABP and the PERS on the basis of employment in two positions with the same employer.)

Employees in a career service title as defined by the State Department of Personnel

Faculty members who are temporarily in the United States under a F or J visa

Any employee receiving a retirement benefit from a pension system of the State of New Jersey, including an individual collecting an annuity or cash distribution from the ABP

An employee who is appointed in a temporary capacity (for one semester or less), with the exception of visiting professors

Contributions

Mandatory Pension Contribution Rates

The employee's mandatory rate of contribution is established at a flat rate of 5% of base or contractual salary. The employer's rate is currently 8% of a member's base salary.

Effective September 1, 1995, pension deductions became mandatory from the employee's eligible enrollment date, and therefore subject to the rules of IRC Section 414(h).

See the Supplemental Savings Plan/403(b) section for information about Voluntary Additional Contributions.

Withdrawals

There is no deferred sales charge upon withdrawal. Withdrawals may be subject to an IRS 10% premature distribution penalty tax, and certain distributions are also subject to a mandatory 20% federal withholding. Withdrawals from the fixed interest option are subject to certain restrictions and may be subject to a Market Value Adjustment. Please refer to your plan document and your contract prospectus for details, or speak with your ING representative.

You should consider the investment objectives, risks, charges and expenses of the variable product and its underlying fund option carefully before investing. The contract and fund prospectuses contain this and other information, which can be obtained by contacting your local representative. Please read the prospectuses carefully before investing.

Variable annuities offered through a retirement plan are long-term investments designed for retirement purposes. Early withdrawals taken prior to age 59½ may be subject to an IRS 10% premature distribution penalty tax. Money distributed from the annuity will be taxed as ordinary income in the year the money is distributed. Account values fluctuate with market conditions, and when surrendered the principal may be worth more or less than its original amount invested. Tax deferral is provided by your employer’s plan and the annuity does not provide any additional tax deferral benefit. Annuities may be subject to additional fees and expenses to which other tax-qualified plan funding vehicles may not be subject. However, annuities provide features and benefits such as lifetime income payments and death benefits which may be valuable to you.

Neither ING or its affiliated companies or representatives provide tax or legal advice. Please consult a tax adviser or attorney before making a tax-related investment/insurance decision.

Insurance products issued by ING Life Insurance and Annuity Company. Financial planning and securities offered through ING Financial Advisers, LLC (member SIPC), One Orange Way, Windsor, CT 06095-4774, or other broker/dealers with which it has a selling agreement.