Part of FPPA’s recent legislation included a change to the way we handle Member Separate Retirement Accounts. For the most part, this change is administrative only: SRA funds are simply moving from one account type at Fidelity to another account type at Fidelity. However, there will be some updates to things like beneficiary elections, vesting, and distribution options that might need attention. This post will describe these changes in detail.
To recap, effective in January 2023, Separate Retirement Account funds at Fidelity will transfer to money purchase accounts under the new Statewide Retirement Plan. Accounts will still be managed through Fidelity, and investment options will remain the same.
As a result of this action, a number of administrative changes will impact the way Members manage their accounts. The most notable update, which affects all SRA holders, is that while the funds are transferring, Members will be unable to view their account balances for a few days. This is expected to occur between December 30, 2022 and January 3, 2023. While the transfer is in progress, please be assured that your funds are safe, and that you’ll regain access as soon as possible.
Other changes linked to the SRA transfer affect smaller groups as detailed below.
Beneficiary Elections
Having up-to-date beneficiaries for your retirement accounts helps ensure your loved ones are protected if anything were to happen to you. That’s why it’s important to note that the pending SRA transfer may impact the beneficiaries assigned to your account.
Depending on what type of Fidelity accounts a Member has prior to the SRA transfer, their beneficiaries may or may not transfer to the new account as desired. As a result, you may need to update your beneficiary elections in early 2023.
For Members who DO NOT already have a Money Purchase Account in the Statewide Hybrid Plan: your existing SRA beneficiary will transfer over to the new Money Purchase account. Therefore, no action will be necessary for these Members.
For Members who currently DO have a Hybrid Money Purchase Account: when the SRA funds transfer into the Money Purchase Account, the default beneficiary for all funds in the account will be the beneficiary listed on the existing Money Purchase Account. This will eliminate the assigned SRA beneficiary. If you have the same beneficiary for both accounts, then no action will be needed as your beneficiary will remain the same. However, if you have a different beneficiary for both accounts, the SRA beneficiary will be dropped in favor of the Money Purchase account beneficiary. These Members will want to review and possibly adjust their beneficiaries after the transfer occurs.
Rollover Transfers
Please do not submit any rollover-in contributions for the two weeks prior to the account transfer. If trying to rollover funds after December 16th, please wait until the SRA transfer has finished to complete your rollover.
Withdrawal Changes
The coming SRA transfer will eliminate an existing hurdle in the withdrawal process. Currently, Members can withdraw SRA funds after they terminate service and have their FPPA retirement application approved. However, once the SRA transfer is complete, Members will be able to take distributions as soon as they separate service, before applying for retirement. Please note that in such cases, you might be subject to early withdrawal penalties, just like with other types of retirement accounts.
Pre- and Post-Tax Funds in BrokerageLink
Members who currently manage any part of their Separate Retirement Account through BrokerageLink are able to see what portion of their funds were contributed pre- or post-tax. After the transfer occurs, Members will be unable to see the pre- and post-tax breakdown of their funds for a certain, yet-to-be-determined length of time. FPPA will follow up with affected Members when further updates are available.
Vesting Schedule
When the transition occurs, the transferred SRA funds will be subject to the money purchase account’s five-year vesting schedule. But, since most of the SRA accounts involved in the transfer already meet this requirement, most Members will be fully vested in their SRA funds on day 1 in the new account.
If you have additional questions about the coming SRA transfer, please get in touch with us.
Ryan Woodhouse is the Content and Publications Manager for the Fire & Police Pension Association of Colorado. When not managing 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.