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Voluntary Tax-Deferred Retirement Program Option (Supplemental Retirement Accounts - 403b)

The Internal Revenue Code gives employees of nonprofit organizations an incentive to build additional retirement benefits over and above the benefits being accumulated in their regular retirement plans. As a regular full-time or eligible part-time employee, you may divert a percentage of your annual base salary to one or more of the Voluntary Tax-Deferred Retirement Program options. Taxes will be deferred on the amount of your salary contributed to these programs and on the interest or appreciation credited to your account. By using the salary reduction method, you avoid taxes on your contributions and their earnings until you actually receive the funds.

AUI offers two tax-deferred Retirement Program options: TIAA-CREF Supplemental Retirement Annuities (SRA), and Mutual Fund custodial accounts offered by the Fidelity Group. In addition, employees may establish custodial accounts with other qualified 403(b)(7) mutual funds, provided they furnish the proper documentation and required forms from the mutual fund companies.

An employee has the option of investing in the TIAA-CREF plans and a maximum of two families of mutual funds. Employees may transfer their account balances between funds in the same mutual fund family or to different mutual funds as they see fit.

Tax-Deferred Contributions

You can participate in the tax-deferred retirement program by entering into a "Salary Reduction Agreement" with Associated Universities, Inc. Your gross salary is reduced by the amount you specify, and that amount is invested according to the investment options you select. Salary reduction is the method by which your salary may be reduced by an amount subject to the limitations of Sections 403(b) and 415 of the Internal Revenue Code. This amount is then forwarded to TIAA-CREF or a mutual fund by AUI. Since, in effect, this amount has not yet been paid to you, no income taxes are deducted until you begin to receive retirement income.

If you are 50 years old or over, you are eligible to take advantage of the "Catch-up Provision" and may defer additional amounts.

The maximum tax-deferred contributions for Calendar Year 2007 allowed by the IRS is as follows:

You may enter into one salary reduction agreement once per month. You may change the funds or the percentages of your allocations among the various investment options, as well as the total contribution amounts during the year. You may, of course, cancel a salary reduction agreement and cease making contributions at any time during the year.

TIAA-CREF Supplemental Retirement Annuity (SRA) Option

SRA, in this respect, is an individual annuity contract with TIAA-CREF under which you may set aside, through salary reduction, supplemental annuity benefits in either TIAA or CREF. These SRA contracts are separate from the AUI retirement plan with TIAA-CREF, but have the same options, full and immediate vesting, annuity income options, and investment earnings as the regular TIAA-CREF retirement plan annuities.

Expense Charges - There are no sales or expense charges deducted from employee SRA contributions. Annual operating fees are deducted from the total assets of TIAA and the various CREF accounts.

Transfers - Employees may transfer part or all of these accumulations among TIAA and CREF accounts either in a single sum or in installments of at least $1000. In addition, accumulations under SRA contracts are transferable to a qualifying 403(b)(7) mutual fund. Questions on this procedure should be directed to the NRAO Human Resources Manager.

Loan Provisions - TIAA-CREF also offers a loan provision which can give you access to some of your SRA accumulations before retirement. You may borrow up to 45% of your combined  TIAA and CREF SRA accumulations, but not more than $50,000. Repayments are due quarterly over a one- to five-year period, or up to ten years if the loan is for buying a principal residence. Employees should contact TIAA-CREF for details regarding the SRA loan provision.

Withdrawals - You may not make "early withdrawals" (before you attain age 59½) unless one of the following "triggering events" occurs:

• You separate from service.
• You encounter serious financial hardship (as defined by the IRS).
• You are disabled.

Your beneficiary may receive death benefits from your annuities at any time, regardless of your age at death. For hardship withdrawals, you may withdraw only your contributions-all earnings on your contributions must remain on deposit.

Methods of Payment - At retirement, employees may receive a partial or lump-sum payment, periodic cash payments for fixed periods ranging from 2 to 30 years, or a variety TIAA-CREF lifetime annuity income options described in the regular retirement plan section (See Spouse's Benefit Rights.)

For more detailed information on the SRA plan, please consult the TIAA-CREF booklet Supplemental Retirement Annuities, which is available from the Human Resources Office.

Fidelity Mutual Fund Investment Options

A mutual fund is designed to provide a means for investors to pool their money to obtain professional supervision and diversification of their investment. When you invest in a particular fund, you become a shareholder in that fund. As a shareholder, you "own" aproportional share of the investments held by the fund.

As an investor in a mutual fund, you have the option of selecting a group or family of funds that is compatible with your investment objectives. You also have the option of moving investments between families of funds to keep pace with changing or expanding investment objectives.

The Fidelity Group offers a variety of mutual funds, which include money market funds, fixed income funds (bonds and federal securities), equity (such as common stock), and balanced funds (combination of common stock and bonds). Employees may invest in one or several funds within these different families.

Expense Charges - There is no charge to employees for buying or selling mutual fund shares. Annual operating fees, deducted from fund assets, vary for the various mutual funds.

Transfers - Once you are invested in a mutual fund, you may switch existing account balances (or portions of account balances) with a toll free phone call or by Internet access. It is also possible to change future allocations between funds or transfer account balances (or portions of account balances) from one mutual fund company to another by completing forms available from the Human Resources Office.

Withdrawals - IRS regulations currently restrict withdrawal rights for money invested in mutual funds under tax-deferred retirement programs. Money invested in mutual funds cannot be withdrawn until you either reach the age of 59½, become disabled, die, terminate employment with AUI, or encounter serious financial hardship. According to current IRS regulations, financial hardship means a significant need for financial assistance in meeting obligations of a participant or a member of his or her immediate family in connection with medical, educational, or housing needs. In such cases, only your contributions may be withdrawn.

Requests for withdrawals from a mutual fund because of financial hardship must be submitted in writing to the NRAO Human Resources Manager.

Methods of Payment - When you become eligible to take money out of the mutual fund, you may purchase an annuity, roll the money over into an IRA (Individual Retirement Account), or purchase various other reinvestment alternatives. Since the tax implications of various methods of distribution and reinvestment may vary, it is recommended that you consult a tax  advisor when you withdraw your funds.

Applications for the various Fidelity Funds are available from the Human Resources Office.

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