Retirement Plan: Defined Benefit Pension

Updated September 1, 2013

Berklee's retirement plan is a "defined benefit" (DB) pension plan that provides you with a benefit payable as lifetime monthly income (i.e., a lifetime annuity) at retirement. The plan is commonly referred to as the DB plan. Berklee pays the full cost of the DB plan and enrollment in the plan is automatic. You are partially vested in ownership of your benefit after three years of eligibility, and fully vested after seven years of eligibility, or after reaching age 55, whichever occurs earlier.

Who Participates in This Plan?

The following faculty and staff hired before January 1, 2012 participate in this plan:

  • Full-time faculty and staff
  • Faculty with a transition contract appointment
  • Certain part-time faculty who convert to full-time faculty, per the 2013-2016 faculty contract agreement.
  • Part-time staff who work at least 600 hours per year

Temporary employees and any employees hired January 1, 2012 or later do not participate in this plan.

When Benefits Are Paid

Availability of benefit payment depends on your age and Berklee employment status.

Age Berklee Employment Status Benefit Payment Available?
Under 65 Not working at Berklee Yes
Working at Berklee (part-time* or full-time) No*
65 or older Not working at Berklee or working part-time Yes
Working at Berklee full-time No

*Faculty members in Phase 2 (part-time) of the transition contract appointment program who are at least age 62 may begin benefit payment.

How Benefits Are Paid

Annuity Method

Under this method, your benefit is paid monthly for as long as you live. You may also choose to receive decreased payments during your lifetime to have annuity payments continue after your death to your survivor(s). If you are married (according to federal law) when benefit payments begin, your spouse must consent in writing to your election of certain survivor annuity options. Just like a salary, annuity benefit payments are subject to ordinary income taxes. You may elect to have income taxes withheld from your payments.

Lump Sum Method

In lieu of annuity payments, the present value of all these future annuity payments may be calculated and paid to you in a single lump sum. Since the calculation of this present value uses assumptions about current interest rates and life expectancy prescribed by the IRS, calculation results may change over time. Federal tax law may limit the availability of the lump sum option for certain highly paid employees. Contact the Office of Human Resources for information on this limitation. If you are married (according to federal law) 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.

Your lump sum payment is subject to ordinary income taxes. If you withdraw money from your account before you reach the age of 59 and 1/2, your withdrawal is generally subject to an additional federal early withdrawal tax equal to 10 percent of the amount of the withdrawal. Your withdrawal will be subject to mandatory 20 percent federal income tax withholding unless the entire withdrawal is rolled over directly to another qualified retirement plan or IRA. If federal income tax is withheld, state income tax withholding is required for residents of Massachusetts and certain other states.

Value of Your DB Plan

One way of understanding the value of the DB plan benefit is to ask the question, "How much extra would Berklee have to contribute to a 403(b) in the future to replace the defined benefit if we didn't have the DB plan?"

Assuming reasonable rates of return, contributions until age 65 of approximately four percent of salary for younger employees to 12 percent of salary for older employees would be necessary to replace the defined benefit. The older employees would require a larger contribution because of the shorter time they have to let their investments grow. For the average eligible Berklee employee, the answer is approximately six percent of salary. As a result, for the average eligible Berklee employee, the college is providing a total retirement plan package equal to nine percent of pay (three percent match to the 403(b) plus six percent to provide the value of the DB plan benefit).

For more information, use the self-service online calculator at my.trsretire.com. Or, contact the DB plan administrator, Transamerica Retirement Solutions, for personalized estimates of the current and/or future value of your benefit or to discuss personal retirement benefit reports.

Timing of Benefits Payment

Allow six to eight weeks from the time you contact Transamerica about payment to the actual date your payment begins.

In Case of Your Death

Before Benefits Payments Begin

  • If you are married (including state-recognized same-sex marriage) when you die, your surviving spouse will receive a benefit that equals the survivor benefit under the 50 percent survivor annuity payment option.
  • If you are not married when you die, no survivor benefit is payable.

After Benefit Payments Begin

  • If you elected a reduced annuity with survivor continuation, your elected survivor benefit will be paid.
  • If you elected the lump sum payment option, any payment to your survivors depends on the account holding the remaining proceeds of your lump sum payment.

In Case of Divorce

Under the terms of a special court order known as a qualified domestic relations order (QDRO), the DB 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. If you are preparing for a divorce, be sure to obtain a copy of the plan's QDRO procedures and model documents from the DB plan administrator, Transamerica. Call 1-800-755-5801 and ask to be transferred to the defined benefit pension department. Representatives will spend as much time with you as you require. As such, the initial hold time to reach them is often five to seven minutes. If the plan receives a QDRO pertaining to your benefit, you will be notified.