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David Schlosberg, Retirement Counselor Bensalem Regional Counseling Center

David Schlosberg, Retirement Counselor Bensalem Regional Counseling Center 1 (800) 633-5461 ext. 3607 dschlosber@state.pa.us. AGENDA. Introduction to SERS Service Credit Withdrawal Options & Taxes Benefit Payment Options Vesting Disability Retirement

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David Schlosberg, Retirement Counselor Bensalem Regional Counseling Center

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  1. David Schlosberg, Retirement Counselor Bensalem Regional Counseling Center 1 (800) 633-5461 ext. 3607 dschlosber@state.pa.us

  2. AGENDA • Introduction to SERS • Service Credit • Withdrawal Options & Taxes • Benefit Payment Options • Vesting • Disability Retirement • Retired Employees’ Health Program (REHP)

  3. SERS IS A DEFINED BENEFIT PLAN • Governmental Plan – Section 414 (d) of Internal Revenue Code; Qualified Plan under Section 401(a) • Retirement Code – Title 71 Chapters 51-59 • A formula is used to calculate benefits

  4. FUNDING - Three Major Sources • Members – Class A - 5% Class AA - 6.25% • Agencies – rate set each fiscal year by SERS Board; composite minimum employer contribution rate or “rate floor” of 4% • Investment earnings

  5. RETIREMENT TYPES • Normal– Age 50/60 with at least 3 years of service OR any age with 35 or more years of service • Early– Any age under normal retirement with at least 5 Years of Service (Vested); actuarial reductions (penalty) assessed • Disability– Apply at any age with 5 years of service if unable to perform current job duties

  6. RETIREMENT FORMULA(Assuming Class AA membership) Final Average Salary x 2.5% x Years of State Service + Final Average Salary x 2.0% x Years of Non-State Service= Maximum Single Life Annuity (no withdrawal of contributions and interest) **Military service is calculated at 2%. YOS = Years of Service - service for which contributions were made FAS = Final Average Salary - 3 highest sets of 4 consecutive quarters

  7. SERVICE CREDIT • Credited Service – state service or non-state service (such as military service) for which contributions have been made • Credited by hours paid • 1650 hours = 1 year of service; under 1650 hours = fraction of a year’s credit

  8. PURCHASE OF SERVICE • Types of service purchasable in SERS: • Prior State Service • Intervening and Nonintervening Military • Out-of-State & Federal Service in Public School Education • Community College Service Before 7/1/71 • Cadet Nurse Service • Merchant Marine Service • Justice of the Peace Service Before 1970 • Certain Types of Other Governmental Service

  9. PURCHASE OF SERVICE • SERS-131 Service Purchase Request form; must apply as an active contributing member • Invoice of Amount Due – 30 days to respond; 3 payment options: • Lump sum payment • Payroll Deduction 1-6 years • Actuarial Debt Plan

  10. MULTIPLE SERVICE • Combines SERS and PSERS (Public School Employees’ Retirement System) credits toward one retirement benefit • Voluntary; must elect within 365 days days of SERS membership

  11. WITHDRAWAL OF CONTRIBUTIONS AND INTEREST • Do you want to withdraw any of your Accumulated Deductions? • All contributions and interest • All Pre 1987 Previously taxed contributions • Contributions made to SERS prior to 1/1/82 • Service purchase payments prior to 1/1/87 • Other partial amount

  12. WITHDRAWAL OF CONTRIBUTIONS AND INTEREST • Lump Sum Payments • One Lump Sum Payment with Initial Annuity Payment or • Installments (Limit 4); earn 4% interest annually, until paid • No rollover: if receive distribution of taxable monies, tax law requires 20% of taxable portion withheld for federal income taxes • Additional 10% federal excise tax if not 55 (50 if qualified public safety employees as defined by IRS) by end of year terminate • Rollover: taxable withdrawals from plan are eligible for rollover to IRA or other qualified plan; • use SERS Authorization for Direct Rollover of Taxable Payment (SERS-254) form

  13. TAXES ON MONTHLY BENEFITS • Subject to federal income tax; receive 1099R by end of each January • No local taxes in PA • No state taxes in PA • No city wage tax in PA • Most states tax out-of-state pensions

  14. MAXIMUM SINGLE LIFE ANNUITY • Basic SERS retirement plan based on the formula (FAS x YOS x 2.5%) • Provides the Maximum amount each month for life • Death Benefit: any remaining balance of your “Accumulated Deductions” • May name one or more beneficiaries and change them at any time

  15. OPTION 1 • Based on your life expectancy only • Death Benefit: Any remaining balance of your Present Value • PV- Made up of the money you contributed and what the state has set aside to fund your retirement account for your expected lifetime • May name one or more beneficiaries and change them at any time

  16. OPTION 2 • Referred to as a “Survivor Annuity” option • Monthly amount is based on your life expectancy and that of your Designated Survivor • Only 1 person can be named - changed only due to death, divorce, or marriage • Designated Survivor will receive SAME amount the member was receiving • Account is closed with death of designated survivor

  17. OPTION 3 • Also a “Survivor Annuity” option • Also based on member’s and the designated survivor’s life expectancy • Only 1 person can be named and changed only due to death, divorce or marriage • Designated Survivor will continue to receive ONE HALF the member’s amount • Account closed upon death of Survivor

  18. Special Option 4 – Design Your Own Plan • Must be actuarially sound and consist of level monthly payments • Annuities to beneficiaries or designated survivor may not be greater than 1 1/2 times the annuity payable to member • Plan must be submitted in writing for approval by SERS Legal Department prior to date of retirement

  19. BECOMING A VESTEE • Leave state service prior to normal retirement & don’t want an immediate SERS benefit • Accumulated deductions remain in fund and continue to accrue interest • Monthly benefit increases as approach normal retirement age

  20. DISABILITY RETIREMENT • Must file papers before termination • Submit Medical Report form & job description • Independent Medical Examiners review application & make recommendation to Board • If approved, notified permanent or temporary • If denied, notified of right to appeal • Annual Earnings Statement

  21. DISABILITY RETIREMENT FORMULA • Class “AA” member with at least 13 1/3 years of service • 2% x Class Multiplier x Years of Credited Service x Final Average Salary • Class “AA” member with less than 13 1/3 years of service is the lesser of: • 1/3 Final Average Salary, Or • 2% x Class Multiplier x Final Average Salary x Years of Service Projected to Normal Retirement

  22. DISABILITY PLAN OPTIONS • Cannot withdraw contributions and interest • Disability Maximum Single Life Annuity • Disability Option 2 • Disability Option 3

  23. STEPS TO RETIREMENT • Call to request an estimate 90 days prior to retirement date • Once you receive the estimate, call your counselor to schedule a counseling session or to sign your retirement papers • Complete paperwork usually no more than 30 days prior to termination date • It takes @ 8-10 weeks to receive initial annuity payment; longer if there is an agency debt.

  24. RETIRED EMPLOYEES’HEALTH PROGRAM (REHP) • Administered by PA Employees’ Benefit Trust Fund (PEBTF) • Two types of Premium Assistance • Majority State Paid with Variable % Member Share (retiring after 07/01/07 meeting eligibility requirements) • $5.00 State Payment

  25. ELIGIBILITY REQUIREMENTS • 25 Years of Service; no age requirement • Age 50/60 with 20 years of service effective 07/01/2008 (grandfather clause may apply) • Disability Retirement (any age) with at least 5 years of service

  26. GRANDFATHER CLAUSE • If a member is employed on June 30, 2008 AND • Has at least 15 years of service as of that date THEN • Eligible to retire with Majority State Paid REHP when they reach their Normal retirement age (age 50 or 60)

  27. Second Part of Grandfather Clause • Members who are employed on June 30, 2008 AND • Have 13 years of service as of that date AND • Will reach Normal Retirement Age (age 50 or 60) before 06/30/2009 THEN • Eligible to retire with Majority Share REHP when they reach their Normal retirement age (age 50 or 60 with 15+ years of service)

  28. Variable % continued…. • As the active employees’ share goes up, those who retire AFTER July 1, 2007, will pay the same higher share. • Those who retire under the new contract, no matter when they leave, will have their share rise to 3 % by the end of the contract. • There is no cap on future increases to the retirees’ share

  29. REHP COVERAGE From Retirement to Age 65 (or when you become Medicare-eligible) • PPO for member and dependents • Prescription Drug coverage with applicable co-pays • Dental and Vision coverage cease at retirement • HMO available (must have been enrolled as an active employee)

  30. REHP Coverage cont. Medicare-eligible • Choose Medicare PPO or Medicare HMO plan • Fee-for-service plan (Advantra) discontinued effective 1/1/2010 • You, and any Medicare-eligible dependent, must have both parts of Medicare in place the first of the month you are retiring • Part A - Hospital coverage - no charge • Part B - Medical coverage - premium from Social Security check

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