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PERS and TRS The Retirement Process

PERS and TRS The Retirement Process. Division of Retirement and Benefits. Planning for Retirement. Determine your needs Learn what options are available Determine the tax consequences of various options Explore techniques to turn your investments into income

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PERS and TRS The Retirement Process

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  1. PERS and TRSThe Retirement Process Division of Retirement and Benefits

  2. Planning for Retirement • Determine your needs • Learn what options are available • Determine the tax consequences of various options • Explore techniques to turn your investments into income • Review wills, beneficiary designations, long term care policies, etc.

  3. Determine Your Financial Needs • Shift from primarily saving and investing to ensuring that your money lasts • Most people live 20 years or more in retirement • Costs are rising

  4. PERS – Four-Tiered System • Tier I: First enrolled in PERS prior to July 1, 1986 • Tier II: First enrolled in PERS on or after July 1, 1986 through June 30, 1996 • Tier III: First enrolled in PERS on or after July 1, 1996 through June 30, 2006 • Tier IV: First enrolled in PERS on or after July 1, 2006 (DCR Plan)

  5. TRS – Three-Tiered System • Tier I: First enrolled in TRS prior to July 1, 1990 • Tier II: First enrolled in TRS on or after July 1, 1990 through June 30, 2006 • Tier III: First enrolled in TRS on or after July 1, 2006 (DCR Plan)

  6. PERS – Reaching Retirement Eligibility • Tier I: Early–age 50 Normal–age 55 (must be vested) • Tiers II, III: Early–age 55 Normal–age 60 (must be vested) • All tiers can retire at any age with • 20 years of paid peace officer/fire membership service, or • 30 years of paid membership service forall other employees.

  7. TRS – Vesting Requirements • Eight paid-up years of membership service; or • Five paid-up years of membership service and three paid-up years of Alaska BIA service; or • 12 paid-up years of part-time or a combination of part-time and full-time TRS membership service. (If you entered TRS prior to July 1, 1975, contact your representative for more information.)

  8. TRS – Reaching Retirement Eligibility • Tier I: Early–age 50 Normal–age 55 (must be vested) • Tier II: Early–age 55 Normal–age 60 (must be vested) • Tier I and II: • can retire at any age with 20 years of paid TRS membership service.

  9. TRS – Retirement Service Eligibility Can retire at any age and receive a normal benefit if you have: • 20 paid-up years of TRS service; or • 20 paid-up years of combined TRS service and Alaska BIA service, if last five are TRS years; or • 20 paid-up years of combined full-time andpart-time service (at least 172 days worked); or • 25 paid-up years of credited service if last five are TRS years. Unless otherwise noted, TRS years are membership service years.

  10. TRS – How Service is Credited • Based on number of contract days worked during school year • Part-time teachers • must work at least 50% of the normal workweek on a regular basis • Service is credited in proportion to full-time credit

  11. TRS – Membership Service Chart 0-8 days = no credit 9 to 26 days = .1 27 to 44 days = .2 45 to 62 days = .3 63 to 80 days = .4 81 to 99 days = .5 100 to 117 days = .6 118 to 135 days = .7 136 to 153 days = .8 154 to 171 days = .9 172 days or more = 1.0

  12. PERS – Average Monthly Salary (AMS) • Peace Officers and Firefighters • Based on 3 highest consecutive salaries for all tiers • All others • Tiers I and II • Based on 3 highest consecutive salaries • Tier III • Based on 5 highest consecutive salaries

  13. PERS – Average Monthly Salary (AMS) Payroll Year Salary Months 2001 $36,000 12 2002 $33,000 11 2003 $18,000 6 $87,000 29 $87,000 ÷ 29 = $3,000 (AMS) Must work 115 days of credited service in last year to include as one of three/five highest consecutive years. Tiers II and III: Geographical Differential must have been received for 50% or more of PERS service earned through employment to be used in calculation of benefit. • Tiers I and II

  14. PERS – BenefitFormula • Peace Officers and Firefighters • 2% x first 10 years x AMS • 2.5% for all years after 10 x AMS • All others • 2% x first 10 years and all years prior to 1986 x AMS • 2.25% for next 10 years x AMS • 2.5% for all years after 20 years x AMS

  15. PERS Benefit Formula Member A has $3,000 AMS and 21 years of service. • (2% x $3,000) x 10 = $600 • (2.25% x $3,000) x 10 = $675 • (2.5% x $3,000) x 1 = $75 Total base retirement benefit = $1,350/mo If you are eligible for early retirement, or choose a joint and survivor option, this normal benefit amount is reduced. • Example – All Others

  16. PERS Benefit Formula Member B has $3,000 AMS and 25 years of service. • (2% X $3,000) x 10 = $600 • (2.5% X $3,000) x 15 = $1,125 Total base retirement benefit = $1,725/mo If you are eligible for early retirement, or choose a joint and survivor option, this normal benefit amount is reduced. • Example – Peace Officer / Firefighter

  17. TRS – Average Base Salary (ABS) • ABS is determined by • adding together your three highest annual, base contract salaries, and • dividing total by three. • To include a base salary as one of three highest, • you must work and receive compensation during at least 2/3 of the school year.

  18. TRS – Applying the Formula Example: 22 years of service, assuming ABS is $60,000 • 2% x $60,000 x 20 years = $24,000; plus • 2.5% x $60,000 x 2 years = $ 3,000 • $27,000 divided by 12 = $2,250 monthly Please note: If you are eligible for early retirement, choose joint and survivor options, or have an indebtedness owing at retirement, normal benefit amount is reduced. Reduction is for the lifetime of the benefit.

  19. TRS – Early Retirement Reduction Example: 19 years of service Age is 55 years, 5 months Tier II ABS = $60,000 • 2% x $60,000 x 19 years = $22,800 • Multiply early age factor = x .623501 $14,215.82 / 12 Monthly benefit = $1,184.65

  20. PERS – Increasing Service Credit Claiming eligible service can potentially increase your benefit. • Active military service • Temporary service with PERS employer • Worker’s Compensation leave without pay

  21. TRS – Increasing Service Credit • Claiming Outside teaching service or active military service • Claiming unused sick leave • Claim at retirement • Contributions not required • Credited according to current Membership Service Chart • Added to your TRS service and increases your retirement benefit after retirement • Cannot be used as eligibility credit

  22. Indebtedness Payment Options • Pay indebtedness in full prior to retirement date • Pay with pre-tax transfer from a qualified plan • Pay by pre-tax or post tax payroll deductions • Pay with post-tax dollars • Take a lifetime actuarial reduction to retirement benefit

  23. PERS – Pension Decisions • Regular Retirement • Level Income Options (N/A Tier III) • 50% or 75% Joint and Survivor • 66 2/3% Last Survivor Option (N/A Tier III) • Retirement Pension Options

  24. PERS – Pension Decisions • Regular Retirement • All benefits cease at your death, including health insurance • Beneficiary receives balance of contribution account, if any, and last pension check

  25. PERS – Pension Decisions • Level Income Option (N/A Tier III) • Increased benefit amount prior to age 65 – benefit decreases at age 65 • All benefits cease at your death, including health insurance • Beneficiary receives balance of contribution account, if any, and last pension check

  26. PERS – Survivor Options • Election of a survivor option • Reduces regular retirement benefit • Reduction based on age of member and member’s spouse or qualified same-sex partner at time of retirement • Health insurance eligibility • Continues for spouse or same-sex partner only if a survivor option is chosen

  27. PERS – Survivor Options • 75% or 50% Joint & Survivor • If survivor dies, no change to member’s benefit • 66-2/3% Last Survivor • Remaining survivor receives 66-2/3% benefit • If survivor dies, member’s benefit reduces

  28. PERS – Survivor Options Benefit Type Retiree Survivor Normal Benefit $1,350.00 $0.00 75% J & S $1,185.00 $888.75 50% J & S $1,235.00 $617.50 66-2/3% LS $1,240.00 $826.50 Member is age 60 and spouse is age 55. If retiring early, benefit is reduced. Please note: Vested members who have terminated PERS employment and reach normal retirement age will not receive larger monthly benefits by waiting until they are older to retire.

  29. TRS – Pension Decisions • Regular Retirement • 1% Supplemental • 50% or 75% Joint and Survivor (J&S) • 66-2/3% Last Survivor (LS) • Retirement Pension Options

  30. TRS – Regular Retirement Option • No reduction to benefit except for early retirement or indebtedness, if applicable. • All benefits cease at your death, including health insurance. • Beneficiary receives balance of contribution account, if any, and last pension check.

  31. TRS – 1% Supplemental Option • Must have been enrolled in TRS prior toJuly 1, 1982. • Must have paid supplemental contributions for minimum of five years prior to retirement, • unless first enrolled prior to July 1, 1977, • then must have made contributions for minimum of one year prior to retirement. continued

  32. TRS – 1% Supplemental Option • Survivor’s Benefit = 35% of last contract salary, • plus 10% for each dependent child up tofour children. • Converts to a spouse’s pension when last dependent is ineligible. • Spouse’s Pension = 50% of retirement benefit.

  33. TRS – Survivor Options • Election of a survivor option • reduces regular retirement benefit by an actuarial factor, • based on age of member and member’s spouse or qualified same-sex partner at time of retirement. • Health insurance eligibility continues for spouse or same-sex partner only if the survivor option is chosen. continued

  34. TRS – Survivor Options • Under 75% or 50% Joint and Survivor options, if the spouse dies, there is no change to the member’s benefit. • Under 66-2/3% Last Survivor Option, whoever is remaining survivor receives66-2/3% benefit. If the spouse dies, themember’s benefit reduces.

  35. TRS – Joint and Survivor Example Early retirement benefit of $1,184.65/month Member age: 55.5 Spouse age: 54 Member Survivor 75% J&S $1,082.43 $811.82 50% J&S $1,114.48 $557.24 66 2/3% LS $1,132.00 $754.67

  36. Insurance Decisions • Medical (PERS Tiers II and III, TRS Tier II) • Dental-Vision-Audio (DVA) • Long-Term Care (LTC) • Health Insurance Elections

  37. PERS – MedicalBenefits • Tier I: Family medical coverage at retirement – system-paid. • Tier II: System-paid family medical coverage at age 60 or 25 years of peace officer/fire fighter service, or 30 years of all other service. If retired prior to age 60, pays full premium until age 60. Open enrollment each year. • Tier III: Must have 10 years of service to receive Tier II medical benefits; otherwise pays full premium. Open enrollment each year.

  38. TRS – MedicalBenefits • Tier I: System-paid family medical coverage at retirement. • Tier II: System-paid family medical coverage at age 60 or 25 years of TRS membership service. • If member retires prior to age 60, pays full premium until age 60. Open enrollment each year.

  39. MedicalBenefits • The retiree medical plan covers member and eligible dependents. • Eligible dependents are spouse, qualified same-sex partner, and dependent children. • Dependent child means: • unmarried, dependent upon member for support, and under age 19 or; under age 23 and registered at and attending on full-time basis accredited educational/ technical institution recognized by Department of Education and Early Development. • Age limits do not apply to child who is totally and permanently disabled.

  40. MedicalBenefits Summary • $150 deductible per person, maximum three per family. • Pays 80% of first $4,000 in covered claims for each person, then 100% of all covered claims for rest of year. • Prescription drug coverage – $8 brand-name, $4 generic, $0 mail order. • Lifetime maximum benefit – $2,000,000 per person. • Secondary to Medicare at age 65.

  41. Optional Insurance Plans • Dental-Vision-Audio (DVA) • Tier I: Must elect at retirement. • Tiers II, III: May elect at open enrollment if medical coverage of same or higher level is also elected for first time. • Long-Term Care (LTC) • One enrollment at time of retirement only (all tiers). • All tiers pay DVA and LTC premiums for as long as coverage is desired.

  42. Optional Insurance Plans • Dental: 100% – preventative services 80% – restorative services 50% – prosthetic services $50 annual deductible for restorative and prosthetic services. Maximum: $2,000 per year • Vision: No deductible, 80% of covered services • Audio: No deductible, 80% of covered services Maximum benefit: $2,000 in 3-year period. • Dental-Vision-Audio Coverage

  43. Optional Insurance Plans • One time opportunity to elect at retirement. • Three plans available: • Silver, Gold, and Platinum • Can elect plan for self or self and spouse. • Premiums based on age at retirement; separate premium for each person covered. • Long Term Care (LTC)

  44. After Retirement Increases • 10 % of base retirement benefit, minimum $50 per month • Must be domiciled and physically present in Alaska • Tier I – eligible at retirement • Tiers II and III – eligible at age 65 • All disabled members are eligible • PERS – Alaska Cost of Living Allowance

  45. After Retirement Increases • 10 % of base retirement benefit per month • Must be domiciled and physically present in Alaska • Tier I – eligible at retirement • Tier II – eligible at age 65 • All disabled members are eligible • TRS – Alaska Cost of Living Allowance

  46. After Retirement Increases • Based on change in consumer price index (CPI) from year to year in Anchorage area. • Must be age 60 or have been receiving benefits for five years. • Members receiving disability benefits. • Tier I eligible for two types; ad hoc and automatic. If both are granted in a year, one yielding highest increase is used. • Tiers II and III eligible for automatic PRPA. • PERS – Post Retirement Pension Adjustment (PRPA)

  47. After Retirement Increases • Based on change in consumer price index (CPI) from year to year in Anchorage area. • Must be age 60 or have been receiving benefits for eight years. • Members receiving disability benefits. • Tier I eligible for two types; ad hoc and automatic. If both are granted in a year, one yielding highest increase is used. • Tiers II and III eligible for automatic PRPA. • TRS – Post Retirement Pension Adjustment (PRPA)

  48. PERS – Working After Retirement • Alaska Statute 39.35.150 prohibits a member from working in a PERS-covered position while receiving benefits. • When you go back to work, your benefit will be suspended until you terminate employment. • When you terminate employment, your first benefit will be reinstated. • You must apply for your second benefit. • Standard Option

  49. PERS – Working After Retirement • Work in a temporary or nonpermanent position for PERS employer • Work in private sector • Work in TRS-covered position • Types of Employment Allowed

  50. TRS – Working After Retirement • Alaska Statute 14.25.043 prohibits a member from working while receiving TRS retirement benefits and service at same time. • Your benefit is suspended until you terminate employment. • Earn additional service toward additional pension benefit. • Your first retirement is automatically reinstated when you terminate employment. • You must apply for your second benefit. • Standard Option

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