IU retirement plan

A plain-English guide to how Indiana University’s retirement benefits actually work — and what IU staff should be doing with them.

Indiana University offers one of the more generous retirement benefit packages in Indiana’s public sector. The university contributes to your retirement account from your first day of eligible employment — no waiting for a match, no opt-in required. For many IU staff members, that employer contribution is quietly building a significant balance in the background while they go about their careers.

But here’s what most IU employees don’t fully understand: the plan is made up of several overlapping components — a base plan that varies by your job classification and hire date, two separate supplemental plans you can layer on top, a legacy TIAA structure for long-tenured employees, and an IRS contribution architecture that’s genuinely complicated once you start trying to maximize everything.

This post walks through the entire system from the ground up — who’s in which plan, what IU contributes, how vesting works, what your investment options are, and how to use the supplemental plans to build on top of your base benefit.

Step One: Which Base Plan Are You In?

IU runs multiple base retirement plans, and which one you’re in depends almost entirely on your job classification and when you were hired. This is the first thing to get clear, because the employer contribution rate and plan mechanics differ between them.

The IU Retirement Plan — For Academic, Exempt, and PAO/PAU Staff

If you’re an exempt staff member (salaried, not eligible for overtime), an academic appointee, or a non-exempt staff member in a PAO or PAU position, and you’re appointed at 50% FTE or more, you’re almost certainly in the IU Retirement Plan — a Section 403(b) defined contribution plan administered through Fidelity Investments.

The employer contribution rate under this plan depends on your hire date and classification. For most exempt and academic staff hired after June 30, 1999, IU contributes 9% of budgeted base salary. Some longer-tenured employees at higher grade levels receive higher rates — 10.25%, 11%, or in legacy cases up to 15% — based on when and how they were hired. If you’re not sure of your rate, check your Fidelity NetBenefits account or contact IU HR.

The IU Retirement & Savings Plan — For Non-Exempt Staff (Hourly)

If you’re a non-exempt, hourly staff member (excluding PAO and PAU positions) hired on or after July 1, 2013, you’re in the IU Retirement & Savings Plan — a Section 401(a) defined contribution plan, also administered through Fidelity.

The mechanics are similar to the IU Retirement Plan: IU makes all the contributions, you direct the investments, and a 3-year cliff vesting schedule applies. The key difference is the contribution rate. IU contributes 9% of base wages — base wages only, not supplemental pay — with each regular pay period.

What about staff hired before July 1, 2013? Non-exempt staff hired before July 1, 2013 may be enrolled in PERF — the Indiana Public Employees’ Retirement Fund — rather than the IU Retirement & Savings Plan. PERF is a hybrid plan with both a defined benefit (pension) component and a defined contribution account. If you’re not sure which plan you’re in, check with IU HR or log into your Fidelity NetBenefits or INPRS account.

Vesting: When IU’s Contributions Become Yours

Both the IU Retirement Plan and the IU Retirement & Savings Plan use a three-year cliff vesting schedule for employees enrolled on or after September 1, 2010. “Cliff vesting” means nothing is yours until you hit the threshold — and then 100% is yours all at once.

In practical terms: if you leave IU before completing three years of employment, you walk away with nothing from IU’s contributions. Your own supplemental contributions (in the TDA or 457(b) — covered below) are always 100% yours immediately. But the employer base contributions require you to stay.

If you were enrolled in the plan before September 1, 2010, you’re already fully vested — all balances and future contributions are yours regardless of how long you stay.

The vesting clock and job changes: If your position changes and you move between the IU Retirement Plan and the IU Retirement & Savings Plan (for example, moving from an exempt to a non-exempt role), your vesting does not restart. You carry your vesting credit with you. However, your balance stays in the previous plan and no new contributions go into it — contributions instead flow into whichever plan matches your new role.

How Your Money Is Invested

Both base plans are “participant-directed” — meaning you decide how your IU contributions are invested. This is important and often overlooked. IU puts the money in; you choose where it goes.

If you never make an investment election, your contributions default to an age-appropriate Vanguard Institutional Target Retirement Date Fund based on the year you turn 65. That’s a reasonable default — target date funds are diversified, automatically rebalance as you approach retirement, and carry very low expense ratios. But defaulting into any investment without understanding it is never a great strategy.

The IU Investment Menu

IU’s investment menu through Fidelity is organized into four tiers, designed to accommodate investors at every level of engagement:

For most IU staff, Tier 1 or Tier 2 is the right answer. The Vanguard target date funds in Tier 1 average around 0.08% in expenses — a fraction of what most investors pay elsewhere. Tier 4 (BrokerageLink) opens the door to almost any investment, but the plan fiduciary does not monitor those options, so you’re fully on your own.

The TIAA Legacy: What Long-Tenured Staff Need to Know

If you’ve been at IU for many years, you may have account balances held at TIAA — not just Fidelity. IU previously used TIAA as its primary retirement platform before transitioning to Fidelity. TIAA accounts from that era are considered “legacy accounts” and are still maintained by TIAA, though no new contributions flow to them.

This matters for several reasons. TIAA’s signature product is the TIAA Traditional Annuity — a fixed annuity that guarantees a minimum interest rate and can be converted to a lifetime income stream at retirement. It’s a different animal from a mutual fund, and it comes with restrictions on how and when you can move money out.

The TIAA Traditional liquidity issue: TIAA Traditional Annuity balances are not freely transferable. Depending on when you contributed, withdrawals may be subject to a “Transfer Payout Annuity” (TPA) process, which spreads the transfer of funds out over a period of years rather than allowing a lump-sum move. Before making any decisions about TIAA legacy balances — rollovers, conversions, or distribution strategies — understand the specific restrictions on your account. Contact TIAA directly at 800-842-2252 or schedule an in-person counseling session through IU HR.

For employees who are actively building toward retirement, the relevant question isn’t just “what’s my balance” — it’s “what are my options for this money and what are the constraints?” A TIAA Traditional balance that can’t be easily liquidated or rolled over needs to be planned around, not ignored.

The TDA: Your First Supplemental Tool

On top of your base employer contribution, IU offers two voluntary supplemental retirement plans. The first is the Tax Deferred Account (TDA) — a 403(b) plan that lets you contribute pre-tax or Roth after-tax dollars from your paycheck.

Contributions to the TDA go into your Fidelity account alongside your base plan. You have access to the same investment menu. You’re always 100% vested in your own TDA contributions. And you can start, stop, or change your contribution amount at any time by submitting an optional benefit change through IU’s Employee Center.

Important: The TDA and IU Base Plan share an IRS limit. The IRS 415(c) limit caps the combined total of employer contributions (your base plan) plus your TDA contributions at $70,000 for 2025 (or 100% of your compensation, whichever is lower). If IU contributes 9% of your salary to your base plan, that counts against this ceiling. For most staff this isn’t an issue, but higher earners should be aware. Age 50+ catch-up contributions to the TDA do not count toward the 415(c) limit.

The 457(b): The Underused Plan That Deserves More Attention

IU also offers a 457(b) deferred compensation plan — and it’s genuinely underused by most staff. The 457(b) runs completely parallel to the TDA. You can contribute up to the full IRS limit in the 457(b) in addition to maxing out your TDA. That means an IU employee who maximizes both supplemental plans can contribute $47,000 per year in voluntary deferrals — on top of whatever IU is contributing to the base plan.

More important than the contribution limits is a unique distribution feature: unlike the TDA (a 403(b) plan), the IU 457(b) has no 10% early withdrawal penalty when you separate from service, regardless of your age. This makes it exceptionally valuable for anyone planning to retire before age 59½. With a 403(b) or 401(k), taking distributions before 59½ means paying a 10% penalty on top of income taxes. With the 457(b), once you leave IU, the money is accessible without that penalty.

The 457(b) catch-up for ages 62–64: Under SECURE 2.0, IU employees who are ages 62, 63, or 64 may be eligible for an enhanced catch-up to the 457(b) of up to an additional $23,500 in 2025 (in place of the standard $7,500 catch-up — not in addition to it). The actual amount is a calculation based on your prior under-utilized contributions. Not all employees qualify and the calculation is specific to each person. Contact Fidelity at 800-343-0860 to find out if you’re eligible and what your maximum catch-up amount is.

Pre-Tax vs. Roth: Which Should You Choose?

Both supplemental plans — the TDA and the 457(b) — allow you to make contributions on a pre-tax or after-tax Roth basis, or a combination of both. This is one of the decisions that most IU employees make once (at enrollment) and never revisit.

• Pre-tax contributions reduce your taxable income now. You pay tax when you withdraw in retirement. Best if you expect to be in a lower tax bracket in retirement than you are today.
• Roth contributions are made with after-tax dollars. Your qualified withdrawals in retirement are completely tax-free. Best if you expect to be in the same or higher tax bracket in retirement, or if you want tax diversification in your retirement income.
• Roth qualified withdrawals require a 5-year holding period from your first Roth contribution and that you be age 59½, disabled, or deceased. The 5-year clock starts January 1 of the year you make your first Roth contribution — so starting earlier matters.

The right answer depends on your current income, expected retirement income, state tax situation, and time horizon. If you’re unsure, contributing a mix of both gives you flexibility — you’ll have both taxable and tax-free buckets to draw from in retirement, which creates planning options regardless of how tax laws change.

IU Retiree Status: The Benefits Worth Planning Toward

One of the most meaningful but least discussed parts of IU’s retirement package is IU Retiree Status — a formal designation that unlocks a range of continuing benefits after you leave. Not everyone qualifies automatically, and eligibility is based on a combination of age and years of service.

Once you’ve met the eligibility criteria, IU retiree status provides access to continued medical coverage options, tuition benefits, life insurance, and other perks depending on your classification. The specific eligibility rules and benefits available to retirees are detailed on the IU HR retiree benefits pages — and if you’re within 5–10 years of a potential retirement date, it’s worth understanding exactly where you stand.

The Phased Retirement Program: IU offers a Phased Retirement Program for certain tenured faculty, but this is primarily available to academic appointees — not most staff. If you’re a staff member wondering about a gradual wind-down approach, speak with IU HR about what options exist for your classification before making any assumptions.

What IU Staff Should Actually Do With All of This

The IU retirement system gives you more flexibility and more employer support than most private-sector jobs. The employer contribution alone — 9% of salary, starting day one, no employee match required — is a meaningful foundation. The question is whether you’re building on it intentionally or just letting the default settings run.

Here’s a practical checklist regardless of where you are in your career:

• Log into Fidelity NetBenefits (netbenefits.com/indiana) and confirm your current base plan, employer contribution rate, and investment elections. If you’ve never logged in, start there.
• Check your vesting status. If you’re within three years of hire and enrolled after September 1, 2010, understand that IU’s contributions aren’t fully yours yet.
• Review your investment elections. The Vanguard target date default is reasonable, but it’s a default — not a plan. Make a deliberate choice.
• If you have legacy TIAA balances, understand what they are and what your distribution options look like. Call TIAA at 800-842-2252 or schedule an on-campus counseling appointment through IU HR.
• Enroll in the IU 457(b) if you haven’t. This is especially important if you think you might retire before 59½ — the no-penalty early access feature is uniquely valuable.
• Consider contributing to both the TDA and the 457(b). The ability to defer up to $47,000 per year in voluntary contributions (more with catch-ups) is a rare opportunity for serious savers.
• If you’re in your early 60s, find out if you qualify for the enhanced 62–64 catch-up contribution on the 457(b). The dollar amount can be substantial.
• Designate beneficiaries — on both your base plan and any supplemental accounts. This is separate from your will and controls who inherits these accounts if you pass away.

This post reflects publicly available information from IU Human Resources as of 2025. Plan details, contribution rates, and benefit rules are subject to change. This is not tax or investment advice — consult a qualified financial or tax professional for guidance specific to your situation.