Signed on April 1, 2020, Colorado House Bill 20-1044 made numerous changes to FPPA’s plans and plan features. Among these changes was an adjustment to the way members’ Separate Retirement Accounts (SRAs) are handled.
But what exactly is changing? And what next steps do SRA holders need to take? Read on to learn more.
What was the impact of House Bill 20-1044 on Separate Retirement Accounts?
As signed into law, HB 20-1044 includes a provision converting member SRAs, or Separate Retirement Accounts in the Statewide Defined Benefit Plan, into self-directed investment accounts in the member’s name, held by Fidelity. Members will now control the investment of their SRA accounts, which will then be available for withdrawal when the member retires. Up until the passage of this legislation, SRA funds were managed and invested by FPPA.
In addition, HB20-1044 ends the Board’s ability to use active member SRAs as a plan safeguard. Previously, the Board had the ability to use SRA funds to shore up the plan in the event it became actuarily unsound. However the Board has never used this safeguard.
When do these changes go into effect?
FPPA-held Separate Retirement Accounts will transfer to Fidelity on or about January 27, 2021.
Does this apply to all Separate Retirement Accounts?
Yes, all active member SRAs held by FPPA are included in this action. This includes both Base (or Standard) SRAs and Reentry SRAs. However, these two SRA types will be handled in slightly different ways, as detailed below.
I have an SRA (or SRAs) transferring to Fidelity. What are the next steps I need to take?
Next steps for SRA holders vary slightly depending on which SRA you have… Base SRA (a.k.a. Standard SRA) holders will see their account balance transfer to an SRA account at Fidelity, while Reentry SRAs will transfer to the Statewide Hybrid Plan – Money Purchase Component, also at Fidelity.
Once the funds have moved to Fidelity, it is important for members to log in to Fidelity Netbenefits® to view their SRAs, check beneficiaries and select investments. The default investment choice is a Target Date Fund corresponding with the year in which you turn 65. However, after the funds have transferred, members are free to control account investments as they wish (subject to plan rules). There are also a number of resources available to members at FPPAco.org/Fidelity.html.
When can I withdraw funds from my SRA?
Members are eligible to withdraw funds from their SRAs upon approval of a Normal, Vested, Early or Deferred Retirement.
Am I able to combine the SRA funds with an existing 457 or other defined contribution account?
Yes, it is possible to roll SRA funds into certain other defined contribution accounts. However, such rollovers are only possible after a member has separated service from their FPPA employer and has an approved retirement.
Why was this change to SRAs necessary?
As explained in greater detail here, “This legislation directs FPPA to convert all existing SRAs into self-directed Defined Contribution accounts controlled by the member. Members are eligible to withdraw funds from these accounts when they retire.
“Additionally, Base Separate Retirement Accounts can no longer be used to shore up unfunded liabilities. Historically, the FPPA board had the ability to use all or a portion of SRA funds from active members if they were necessary to shore up the plan. However, FPPA has never used this safeguard.
“Allowing each reentry department the option of reducing the required reentry surcharge of 4% not only reflect the actual cost of reentry, but provides options for each department. Contributions in excess the actual cost of reentry will be allocated to the member’s self-directed account.
“By giving members control of their SRA balances, they are better equipped to make sound decisions regarding their financial future.”
To learn more about the changes coming to Separate Retirement Accounts, you may watch a replay of our SRA-specific webinar here. If you have further questions regarding the transfer of SRA funds to Fidelity, please contact FPPA or Fidelity directly.
Ryan Woodhouse is a Digital Content Specialist for the Fire & Police Pension Association of Colorado. When not authoring content for FPPA, Ryan can be found fly fishing in the Colorado high country or shouting at the TV during University of Wisconsin football and basketball games.