The idea came from someone who worked with the state of North Carolina’s retirement division and who also served on the advisory board at one of State Employees’ Credit Union.
Six months later, the $22 billion SECU and the Retirement Systems Division of the North Carolina Department of State Treasurer have a partnership in place that aims to provide a transfer benefit for retiring and retired state and local government employees. Members of the Teachers and State Employees’ Retirement System and the Local Government Employees Retirement System have a one-time opportunity to transfer all or part of their before-tax funds in the NC 401(k) or NC 457 to their NC Retirement System account, in return for a lifetime monthly benefit.
Retiring members who have a large NC 401(k)/457 balance and whose ongoing monthly expenses exceed their income may be ideal candidates for this new benefit, while members whose NC 401(k)/457 balance is small may wish to keep their funds in the current NC 401(k)/457 as an emergency fund, according to SECU.
Currently, actively employed members may transfer funds upon retirement. Effective July 1, retirees will have the option to transfer NC 401(k)/457 funds at any time during retirement, ideal for those who may wish to forgo the transfer benefit at the present time. The transfer benefit program allows for a one-time transfer option per account.
The way it works is the monthly benefit is calculated so that if a person lives exactly the expected number of years, they would receive the same payments with this benefit that they would have received by investing their NC 401(k) or 457 in U.S. Treasury Bonds and taking regular monthly withdrawals equal to the monthly benefit. The benefit is calculated to neither make money nor lose money for the retirement system, according to SECU and the retirement systems.
Joan McCool, SECU senior vice president of IRA and investment services, said there is a preretirement assessment tool that members can use on their own or with the assistance of a financial services officer to see if they are saving enough for retirement. The assessment can also help members determine how much they can withdraw each year during retirement while not outliving their income.
"Helping members of TSERS and LGERS determine if this benefit might be suitable fits in with retirement planning services our credit union provides–it’s a win-win situation for SECU members," McCool said.
SECU and the retirement systems have developed a website, www.nclifetimeincome.org, to complement the effort.