Beyond the Basics: Special Issues

1. Beyond the Basics: Special Issues 2007 Annual Training Seminar 2007, Texas Municipal Retirement System.

2. In this presentation, we will cover: • Beneficiary Designations • Death Benefits • Divorce • Service Credits and Purchases

3. Prior to vesting and upon member’s death, benefits are paid to the designated beneficiary. If no valid designation is on file… Benefits are paid to member’s estate Why Designate a Beneficiary?

4. When first enrolled Upon becoming vested When applying for retirement Common times to designate a beneficiary… Member may change their designation at any time prior to retirement Up to three beneficiaries may be designated

5. If Member Dies Before Vesting… • Designated beneficiary will receive a lump sum refund of member’s account balance • Beneficiary is not eligible for retirement benefits • City match is forfeited

6. Vested = 5 years of service (some cities require 10 years) At death, beneficiary is entitled to a monthly benefit based on member’s and city’s money What happens when member is vested?

7. Vested Options Beneficiary may receive: • Monthly payments for life • (only if 1 person is designated) • Monthly payments for 15 years • A lump-sum refund • (city matching forfeited)

8. Yes! If a vested member dies without a vested designation, benefits will be paid as follows: To the spouse; or To the children if there is no spouse; or To the last designated beneficiary if there is no spouse and no children; or To the estate Are There Vested Forms to Complete?

9. What About Spousal Consent? • Spouse must consent by affidavit if: • Not named as beneficiary, OR • No lifetime benefit elected

10. A non-spouse beneficiary will receive benefits immediately. A spouse beneficiary may choose to receive their benefit immediately or when the member would have reached age 60. Available only if spouse elects monthly payments Spouse must make this election within 180 days from date of death When will beneficiary receive benefits?

11. Why Wait? • Member’s account grows two ways: deposits and interest • Compounding interest increases value • City match applied when monthly benefits become payable

12. At Retirement… • Previous beneficiary designations are no longer valid • Member must redesignate beneficiary for retirement purposes • Upon death, beneficiary receives monthly payments based on the option the member selected at retirement

13. Program of group term life insurance Active employees: payment equal to yearly salary Retired employees: payment equal to $7,500 Must be authorized by city Different beneficiary may be designated to receive SDB payment What Is a Supplemental Death Benefit (SDB)?

14. Who is Covered by SDB? Member is covered from the day: • City elects to participate; AND member is required to make a TMRS contribution Coverage ends: • The month after employee terminates employment UNLESS…

15. SDB – Extended Coverage • Members who fail to earn compensation because they are incapable of gainful employment are automatically eligible for up to 6 months from month of last deposit. • If member requires coverage past the 6-month period, an application is required.

16. Designating Minors TMRS benefits cannot be paid to minors without a legal representative.

17. Designating an Estate • Will must go to probate • Payments distributed to executor or administrator An Estate may be designated if the member wants TMRS to pay in accordance with his or her will.

18. Designating a Trust • Trust must satisfy all IRS requirements • If trust not acceptable, benefits will be paid in accordance with the TMRS Act (alternate beneficiary, estate, etc.)

19. What About Divorces? Deposits and interest earned during marriage are community property.

20. Call a lawyer — TMRS cannot give legal advice Call TMRS! “Divorce packet” includes information that will assist member and attorney (mailed to member — also on TMRS Website) Member going through divorce…What’s first?

21. What happens to member’s account during divorce? • Account is “flagged” • No payments can be made during divorce

22. Do TMRS Benefits Have to Be Divided? NO! • If member retains entire benefit, divorce needs to state so • TMRS does not need a copy of divorce unless account was “flagged”

23. How Is Benefit Divided? • TMRS benefits are protected by law! • Only Qualified Domestic Relations Order (QDRO) can divide benefits. • Only TMRS can decide if an Order is qualified!

24. Types of Service Credit • Service Buyback • Restricted Prior Service Credit • Proportionate Retirement • Updated Service Credit

25. Prior Service Credit … Service performed before city joined TMRS. Monetary credit applied only if employee retires.

26. Probationary Prior Service Credit • Optional provision — employees hired on “probationary” basis prior to September 1, 1989, to receive credit.

27. Military Service Prior to Employment • Employee must have 5 years of service and have been a contributing member on 12-31-2003; otherwise credit only Optional provision that allows employees to purchase/receive credit for a maximum of 60 months active military service.

28. Must have left employment to serve in the military Must return to work for the same city within 90 days of discharge Must be released or discharged under honorable conditions What Is USERRA? USERRA = Uniformed Services Employment and Re-employment Rights Act (federal law)

29. What does member get? • Member can “pay” into TMRS amount that would have been contributed had they never left. • Member has up to 5 years to pay total due.

30. Special Purchases: Buy-Back • Optional provision allows employees who have forfeited TMRS time to “buy back” their time. • Must be an employee of the city at the time the city adopts “buy-back”

31. Restricted Prior Service Credit... • Optional provision that grants a “time” credit for previous, full-time, paid, public work anywhere in U.S.

32. Proportionate Retirement • Texas public retirement systems allow combination of time between systems for vesting and retirement • Funds stay in separate systems — only time is combined

33. Employees should contact the retirement system in which they previously participated for eligibility requirements. Proportionate Buyback for Current Employees • Current TMRS members who have refunded service credit from another Texas statewide public retirement system may be allowed to restore that service credit with that retirement system.

34. Updated Service Credit (USC) • Optional provision designed to increase the value of retirement benefits comparable to an amount that more closely reflects the member’s pre-retirement income.

35. HELPS Provision • TMRS begins participating in the program in January 2008. • HELPS allows retired public safety officers to pay for their health insurance coverage from their monthly retirement annuity. • TMRS makes direct payment to health insurance provider from retiree’s annuity. • Up to $3,000 of the payment may be deducted on the retired officer’s tax return per year.

36. HELPS Provision (cont.) • Retirees who were public safety officers – law enforcement, firefighter, or EMS – may be eligible for this program. • Retiree’s employing city must verify status as a retired public safety employee. • Call TMRS at 800-924-8677 if you need more information or to request the HELPS forms.

37. Questions & Answers HOW TO CONTACT TMRS: Toll-free: 800-924-8677 Web: www.TMRS.com E-mail: phonecenter@tmrs.com