EMPLOYEE BENEFITS

Overview Supplemental 401(k) Basic Retirement Plan Preparing to Retire

Basic Retirement Plan

The MIT Basic Retirement Plan is a "defined benefit" plan which provides you with a benefit paid as monthly lifetime income at retirement. MIT pays the full cost of the Basic Plan. You may not contribute to the Basic Plan.

Eligibility

You are generally eligible to earn a benefit in the Basic Plan if you:

• Work at least 50% of the normal full-time work schedule in your department, laboratory, or center;
• Are appointed to work at MIT for three months or more; and,
• Are paid by MIT.

However, certain employees, such as visitors, students, postdoctoral fellows, affiliates, employees on the voucher payroll, and employees of the military assigned to MIT, are not eligible. Learn more about eligibility.

Participation/Earning Your Benefit

You become a participant in the Basic Plan and begin earning your benefit on the first day you become eligible; for most employees, this is the first day of work. Although your enrollment in the Basic Plan is automatic, you should complete a Basic Plan Beneficiary Designation Form (available at top right) to name a beneficiary who will receive your Basic Plan benefit in case of your death. It is important to keep your Basic Plan beneficiary information up-to-date.

Your Pay

Each year, federal law limits the amount of your pay that may be used for calculating your benefit. The limit in 2008 is $230,000.

Effective January 1, 2008, compensation cannot be contributed to your MIT Basic Retirement Plan if paid to you after the end of the calendar year in which you terminate employment with MIT or 75 days if later. An example of this type of compensation is late vacation pay. Also effective January 1, 2008, severance pay is not eligible for your MIT Basic Retirement Plan.

Vesting

You are vested in (i.e., have a right to) your benefit after you are employed by MIT for 3 years. Your employment includes certain periods when you are not actually at work, such as vacation, jury duty, military duty, illness, and approved leaves-of-absence.

In addition, you become vested if you are participating in the Basic Plan and you reach normal retirement age, become totally disabled, or die. If you leave before you become vested, you are not entitled to benefits from the Plan.

When Your Benefit Is Paid

Your benefit payments may begin at any time after your employment at MIT ends or you reach normal retirement age (age 65) and work no more than half-time. Federal law requires that payments begin by the later of:

• the April 1st following the year you attain age 70½; or
• the April 1st following the year your MIT employment ends.

Amount Of Your Benefit

Your benefit is determined in two ways, and you receive whichever is greater:

1. Cash Balance Benefit (the 5% Account Method)
Under this method, a bookkeeping account in your name is credited with an amount equal to 5% of your pay each month. This account is also credited with interest. When you elect to receive your benefit, the balance in your account is converted to a monthly lifetime income (known as a single life annuity), which is based on certain assumptions about interest rates and life expectancy.

2. Career Average Benefit (the 1.65% of Pay Method)
Under this method, you earn an annual benefit equal to 1.65% of your total pay received while participating in the Basic Plan. This annual benefit assumes your benefit payments will start at your normal retirement age and will be paid to you as a monthly income (single life annuity) for as long as you live with no survivor benefits.

Actual Benefit Payment

Once your accrued benefit has been determined, your actual benefit payments will depend on your actual age when payments begin and the form of payment you choose. After your normal retirement age, your benefit payments may increase every three years to reflect a cost-of-living adjustment.

Benefit Payment Options

If you have more than 10 years of MIT employment, your Basic Plan benefit must be paid to you in the form of monthly lifetime income (an annuity). If you have been an MIT employee for 10 years or less; or, if your cash balance account is $10,000 or less at the time you receive a distribution, your Basic Plan benefit may be paid to you as either a monthly lifetime income (an annuity) or a single lump sum payment. However, if your Basic Plan benefit has a lump sum value of less than $1,000, it must be paid to you as a single lump sum payment.

1. Monthly Lifetime Income Option (Annuity Option)

Under this option, your benefit is paid monthly for as long as you live. This payment form is known as an annuity. Once annuity payments begin, they continue for as long as you live. You may also choose to have annuity payments continue after your death to your survivor(s).

2. Single Lump Sum Payment Option

While the Plan assumes that your benefit will be paid as a single life annuity, the present value of all these future annuity payments may be calculated, and paid in lieu of annuity payments. Since the calculation of this present value uses assumptions about current interest rates and life expectancy, calculation results may change over time. If you have been an MIT employee for 10 years or less; or, effective January 1, 2006, if your cash balance account is $10,000 or less at the time you receive a distribution, you will be eligible for this option.

If you are married when benefit payments begin, your spouse must consent in writing to your election of this option.

If your benefit has a lump sum value of less than $1,000, it must be paid to you as a single lump sum payment.

Applying For Benefit Payments

Contact us for forms to request payment. Application for benefits must be completed and returned to the Benefits Office, in good order, no earlier than 90 days, but no later than 45 days before pension benefit payments begin.

Annuity payments are paid by direct deposit to your bank account. The Plan may require that lump sum payments be paid by direct deposit.

Taxes and Your Benefit Payments

Monthly Lifetime Income Option (Annuity Option)
The full amount of annuity payments is taxable as regular income upon receipt. You may decide to have income taxes withheld from your annuity payments.

Single Lump Sum Payment Option
The full amount of a lump sum payment is taxable upon receipt. If you receive a lump sum payment, 20% will be automatically withheld toward the federal income taxes you will owe. If you are a Massachusetts resident at the time of payment, state income taxes will also be withheld.

To avoid the income tax withholding and defer income taxes, you may roll over your lump sum payment to a Traditional IRA, another retirement plan, or the MIT Supplemental 401(k) Plan. Once rolled over, your money will be subject to the rules associated with the IRA or other plan.

Leave-of-Absence/Sabbatical

You will not earn benefits during any period in which you are not paid. However, benefits already earned will not be affected by a leave-of-absence or a sabbatical.

Leaves-of-absence and sabbaticals generally count towards your years of employment for vesting purposes. Learn more about your benefits while on leave.

In Case of Death, Disability, or Divorce

In Case of Your Death
If you die before benefit payments begin, the value of your benefit is payable to your beneficiary. If you are married, your sole beneficiary will be your spouse. If you are married and you designate another person as your beneficiary, your spouse must consent in writing to the designation.

Death after benefit payments begin
If you received a single lump sum payment in lieu of monthly lifetime income prior to your death, no payments are due after your death. If you are receiving monthly lifetime income at your death, a death benefit will be paid only if your form of annuity payment provides for payment after your death.

In Case You Become Disabled
If you become totally disabled and receive disability income benefits under a long-term disability plan of MIT, you will continue to earn your Basic Plan benefit until you are no longer disabled or you reach your normal retirement date, whichever is earlier.

In Case You Become Divorced
Under the terms of a Qualified Domestic Relations Order (QDRO), the Basic Plan may be required to transfer all or part of your benefit to your former spouse as part of a marital property settlement. In addition, a QDRO may require that all or part of your benefit be used to satisfy your child support obligations.

Copies of the Basic Plan's procedures and model documents pertaining to QDROs are available to you and your (former) spouse or children from the MIT Benefits Office.

The Benefits Office will notify you in writing if the Basic Plan receives a QDRO that affects your Basic Plan benefits.

Benefits Protected from Creditors
Except for the requirements of a Qualified Domestic Relations Order, your Basic Plan benefit may not be attached, garnished, or levied by any creditor or court.

Need More Information?

If you need additional information on the Basic Retirement Plan, please contact us.

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This information is intended to be a summary of the Plan. The Plan document (available as a PDF) contains all the details. If there is a conflict between this summary and the Plan document, the Plan document will control.

MIT expects to continue the Plan as a benefit to employees, but reserves the right to change or terminate the Plan should this become necessary or advisable.

Forms & Publications