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Making the Jump to Retirement?

Making the Jump to Retirement?

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Making the Jump to Retirement?

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  1. 2011 Pre-Retirement Seminar Kansas Public Employees Retirement System Making the Jump to Retirement? .

  2. Sources of Retirement Income

  3. What Type of Plan is KPERS? 401a Defined Benefit Plan. Contrast to Defined Contribution Plans (personal savings plans). 457 403b 401k IRA

  4. EmployeeContributions • All contributions go into member’s account. • Interest is credited annually after June 30th based on the balance in your account on December 31st of the previous year. • Contributions based on gross wages each pay period, pre-taxed federal only. • Retirement benefit is not based on how much money is in your account.

  5. Employer Contributions Employer contributes a percentage depending on the needs of the retirement system. Employer contributions do not go into your account. Employer contributions go into the employer fund to help fund the following: Disability Benefits Death Benefits Future Retirement Benefits

  6. Annual Statement • Receive in March or April • Check Beneficiary • Years of Service • Final Average Salary • Use to get Retirement Estimates

  7. Disability VS Retirement • Long Term Disability Coverage is an Employee Benefit. • If retiring because of health reasons talk with your designated agent.

  8. When Can You Retire? • Retirement with unreduced benefits (Normal Retirement) • Retirement with reduced benefits (Early retirement)

  9. Retiring with Unreduced Benefits (Tier 1) Age 65 with at least one year of service credit. Age 62 with at least ten years of service credit or Any age when age and years of service equal 85 points.

  10. How to calculate the 85 points Current age 52 Current years of service 29 Total points 81 Subtract total from 85 4 Divide by 2 2 Add current age 52 85 points at age 54

  11. Retiring with Reduced Benefit Age 55 with at least 10 years of service credit Age 60 to 62: Reduction .2% per month. Age 55 to 60: Reduction .6% per month.

  12. Early Retirement Example An unreduced benefit at age 62 is $1,500.00. Age Reduction Amount 62 0% $1,500.00 60 4.8% $1,425.00 55 40.8% $ 885.00 Does not apply to members who have 85 points.

  13. Calculating Your Retirement Benefit Factors used to determine retirement benefits • Final Average Salary • Statutory Factors 1.75%, 1% or .75% • Years of Service

  14. Calculating Final Average Salary – Tier 1 Membership date before 7/1/1993 Final average salary is greater of: 4-year (16 quarters) average including additional compensation, or 3-year (12 quarters) average excluding additional compensation. KPERS will calculate both ways and use the highest. Membership date on or after 7/1/1993 Final average salary is greater of: 3-years (12 quarters) average excluding additional compensation. Calendar year salary is used to calculate the final average salary.

  15. Increasing Your Retirement Benefit Purchasing service credit (Page 6 & 7) Year of Service Forfeited KPERS Service Military Service Elected Official Service In-State or Out-of-State Non-Federal Public Service Vista Service Peace Corp Service

  16. Cost to Purchase Service Credit Based on actuarial factors and tables Age Salary Current Salary Prior Year Salary Final Average Salary

  17. Retirement Payment Options

  18. Retirement Benefit Options Maximum Monthly Benefit Option Joint-Survivor Options Life-Certain Options Partial Lump-Sum (PLSO) When you retire, the option you choose is irrevocable.

  19. Calculating Maximum Monthly Benefit Example Member’s age: 62 Member’s years of service: 30 Member’s final average: $30,000.00 1.Multiply final average salary $30,000.00 by 1.75% x 1.75% 525.00 2. Multiply answer by years of service x 30 This is the total annual benefit $15,750.00 3. Divide the answer by 12 + 12 4. This is total estimated monthly benefit $ 1,312.50

  20. Maximum Monthly Benefit Option (Page 8) Lifetime monthly benefit. No continued monthly benefit after your death. Upon members death, beneficiary/ies will receive balance of contributions and interest not paid out. Total contributions and interest usually paid out in 3 to 4 years. Employer fund then kicks in and pays benefit for member’s lifetime.

  21. Joint-Survivor Options (Page 8) Provide benefit for someone after your death Joint and 1/2 (50%) 91% (+ -) .4% Joint and 3/4 (75%) 87% (+ -) .5% Joint and same (100%) 83% (+ -) .6% Pop up feature

  22. Life-Certain Options (Page 9) Five-Year Certain: Benefit reduced to 98% Ten-Year Certain: Benefit reduced to 95% 15-Year Certain: Benefit reduced to 88% The life certain option begins with the member’s retirement date,not the member’s death date.

  23. Partial Lump-Sum Option (Page 9) Based on actuarial present value of retirement benefit. Partial lump sum can be 10, 20, 30, 40, or 50 percent. Monthly retirement benefits reduced by percent of lump sum taken. A 30 percent PLSO payment will result in a permanent 30 percent reduction in your monthly benefit.

  24. Apply Age Factor Maximum Monthly Benefit $1,312.50 Age/Factor from Table x 117 Present Actuarial Value $153,562.50 Partial Lump-Sum BenefitReduced Monthly Benefit 50% $76,781.25 50% $656.25 40% $61,425.00 60% $787.50 30% $46,068.75 70% $918.75 20% $30,712.50 80% $1,050.00 10% $15,356.25 90% $1,181.25

  25. Things You Should Consider Monthly benefit is a lifetime benefit, therefore PLSO reduction is a lifetime reduction. If your roll over your PLSO, are you able to make up the difference each month equal to your lifetime reduction? If the PLSO is paid directly to you, KPERS will withhold 20% for federal income taxes. You may also be subject to a 10% tax if you are under the age of 59 ½.

  26. KPERS Account Access – Personalized Estimate Estimate Your Benefits KPERS 15-E – Request for Benefit Estimate form Note: The annual statement is a helpful tool when calculating an estimate. Monthly Benefit Estimate

  27. Click on “Active Member” • Click on “Online Account Access”

  28. Member Web Portal Homepage • If you have a KPERS, KP&F or Judges account, they will be listed separately. You will then click on the account you would like to view. • Click on link to view or enter information regarding your personal profile (address, etc.) • View your beneficiaries. Click on the beneficiary form link to complete form should you wish to change your beneficiary.

  29. View information about your account. • Use the KPERS benefit calculator • Check your service credit • Check your contributions and interest

  30. From the side bar, click on “Estimate your Benefit”. • Click on the KPERS calculator.

  31. View Your Annual Benefit Divide your Annual Benefit by 12 to get your maximum monthly benefit amount.

  32. Choosing Your Retirement Date Retirement date is the first day of the month. Must be off your employer’s payroll. Must be off the payroll of all participating KPERS employers’ on your retirement date. Non-School employees can retire on the first day of any month. Reminder – Years of Service Rounds

  33. Retirement Date for School Employees School employees under continuing contract law Teachers As early as June 1st if work under contract is completed. If using lump-sum add on pay – September 1. Principals and Superintendents June 1st if work under contract is completed. Non-certificated school employees First day of any month (same as all non-school).

  34. Steps in the Retirement Process Review the retirement options. Submit application for retirement 30 to 60 days prior to your retirement date. Submit proof of age (birth certificate). Submit proof of name change (marriage certificate). Submit proof of age and name change document for joint survivor (if applicable). All documents may be photocopies.

  35. Receiving Monthly Benefits • Benefit paid last working day of month. • No Automatic COLA (Cost of Living Increase).

  36. Your Beneficiary Keep your beneficiary up-to-date. You may name a living person, your estate or trust. You can change beneficiaries at any time. You can designate a funeral home to receive the $4,000 death benefit. If a beneficiary is not named, KPERS must follow the line of descendants by Kansas law.

  37. Continuation of Your Life Insurance Conversion Option A whole life option to continue coverage when leaving employment or retiring. At your own cost, but without evidence of insurability. Individual rates are higher than group rates. Conversion must take place within 31 days of last day on employer’s payroll.

  38. Portability Option A term insurance option to continue coverage when leaving employment or retiring. At member’s cost, but without evidence of insurability. Must be under age 70 and actively at work the day before leaving employment (can not be off work due to sickness or injury). Coverage reduces to 65% at age 65, all coverage terminates at age 70. Portability must take place within 31 days of last day on employer’s payroll.

  39. Retiree Death Benefit The retiree death benefit is $4,000. The death benefit is payable with all options. Is not payable on the death of a joint annuitant. Is not taxable for Kansas income tax. Is taxable for federal income tax. Retired members may name a funeral establishment to receive the $4,000 death benefit. (Retiree will still need to designate a primary beneficiary.)

  40. Health Insurance KPERS does not provide health insurance coverage for retirees. K.S.A. 12-5040 states that members who have been employed with their employer for ten years or more can remain in their current health plan by paying the entire premium themselves. KPERS does not administer this statute. Contact your personnel office for information on continuing health insurance coverage.

  41. Federal & State Income Taxes Monthly benefit is subject to federal taxes. Part of monthly benefit may not be subject to Federal taxes if: Member made contributions to KPERS prior to July 1984. Member paid for a purchase of service credit with a personal check. Monthly benefit is not subject to state taxes for State of Kansas residents. Submit a W-4P form at time of retirement and KPERS will withhold taxes from retirement check. A new W-4P form may be submitted to our office anytime. A 1099-R tax form sent out in January of each year.

  42. 1099-R Forms

  43. Working After Retirement

  44. Waiting Period Before Returning to Work There is a 60 day waiting period before returning to work for any KPERS employer (there is not a waiting period if you return to work for a non-KPERS employer- church, department store, etc.) The 60 days is from KPERS retirement date, not from member’s last day on payroll. Retirement date is June 1. Retiree cannot return to work until August 1. Note: Retiree cannot contribute to KPERS after retiring

  45. Working After Retirement Non-School & School Non-Licensed Returning to work for the same KPERS employer • $20,000 calendar year earnings limitation in any position (covered or non-covered). Returning to work for a different KPERS employer • No earnings limitations – employer pays actuarial rate if retiree is employed in a KPERS covered position.

  46. Changes for Licensed School Employees • “Licensed” school employees can now retire as early as June 1st only if all work on contract has been completed. • Employee must still wait until end of contract to use add-on pay. • Effective July 1, 2009 through July 1, 2012, the $20,000 earnings limit removed for licensed school employees that return to work for the same employer.

  47. Definition of Licensed School Employee • Educator (Teachers, administrators) • Audiologist • Speech Pathologist • Occupational Therapist • Physical Therapist • Social Worker • Registered Nurse • Dietician • Licensed Professional Counselor • Licensed Clinical Professional Counselor • Psychologist • Orientation and Mobility Instructor