MOSERS BENEFIT PAYMENT OPTIONS AT RETIREMENT

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MOSERS BENEFIT PAYMENT OPTIONSAT RETIREMENT

• Bette Rovik, CRC
• Senior Benefit Counselor

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The Trail of Payment Options

• What is a Payment Option?
• Life Income Annuity
• Joint and Survivor Options
• Life Income with Guaranteed Payments

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What is a Benefit Payment Option?

• A choice at retirement
• Determines whether or not a benefit will be paid
  to anyone after your death
• Regardless of the option elected, you will
  receive a benefit payment each month for your
  lifetime
• Cannot be changed after the first benefit payment
  has been distributed
• Except under two circumstances
  

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Life Income Annuity

• Your retirement benefit will not be reducedyou
  will receive 100 of your base benefit
• No survivor benefits will be paid to anyone after
  your death
• You must name beneficiary to receive final
  benefit payment

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Joint 50 Survivor Option

• MSEP
• Unreduced (100 of base benefit) for retirees
  life
• At retirees death, spouse receives 50 of the
  benefit amount for spouses life

• MSEP 2000
• Reduced benefit for retirees life
• At retirees death, spouse receives 50 of the
  benefit amount for spouses life
• Survivor
• does not receive
• the temporary benefit

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Joint 100 Survivor Option

• MSEP 2000
• Reduced benefit for retirees life
• At retirees death, spouse receives 100 of the
  benefit amount for spouses life
• Survivor
• does not receive
• the temporary benefit

• MSEP
• Reduced benefit for retirees life
• At retirees death, spouse receives 100 of the
  benefit amount for spouses life
• Adjustment factor is .93 /- (age difference x
  .003) maximum is .96

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Can I ever change options?

• If you elect a joint survivor option and your
  spouse dies first, your benefit will revert (pop
  up) to the Life Income Annuity amount
• A copy of the death certificate
• will be necessary for the pop up

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Can I ever change options?

• If Single at Retirement
• Elected Life Income Annuity
• Then marry

• If Married at Retirement
• Elected a Joint Survivor option
• Then spouse dies
• Then remarry

You have one year from your date of marriage to
elect the 50 or 100 Joint and Survivor Option
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Life Income With Guaranteed Payments

• Retirees benefit will be reduced for life
• Beneficiary (can be anyone) will receive
  remaining number of guaranteed payments, if any
• Excluding the temporary benefit

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Life Income With Guaranteed Payments

• MSEP
• Life Income with
• ---- 60 Payments
• ----120 Payments

• MSEP 2000
• Life Income with
• ----120 Payments
• ----180 Payments

Reductions apply leaving remaining benefit of
97 95 91 90
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Benefit Payment Options Roundup

• MSEP
• Life Income Annuity
• Unreduced Joint 50 Survivor Option
• Joint 100 Survivor Option
• Life Income with 60 or 120 Guaranteed Payments

• MSEP 2000
• Life Income Annuity
• Joint 50 Survivor Option
• Joint 100 Survivor Option
• Life Income with 120 or 180 Guaranteed Payments

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The Trail of BACKDROP

• What is a DROP option?
• Who is eligible for the BackDROP?
• What is the BackDROP period?
• How is the BackDROP calculated?
• Example of a BackDROP calculation
• Payment distribution options

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What is the BackDROP provision?

• The BackDROP is an optional form of payment when
  you retire
• Member will receive a lump sum payment in
  addition to an ongoing monthly benefit
• Member elects the BackDROP during the retirement
  process

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Who is eligible for BackDROP?

• Any member who works at least two years beyond
  normal retirement age
• Rule of 80 MSEP MSEP 2000
• Age 60 with 15 years of service MSEP
• Age 62 with 5 years of service MSEP 2000
• Age 65 with 5 years of service - MSEP

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What is the BackDROP period?

• Looking back in time from the date of retirement,
  the BackDROP period is the time between the
  actual date of retirement and the date first
  eligible to retire
• Member can choose BackDROP period in increments
  of one year back to his/her first eligible date,
  up to a maximum of five years

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Example of BackDROP Period

• If Cisco Kid works 3 years and 8 months beyond
  his normal retirement date, then he may choose a
  BackDROP period of
• 1 year
• 2 years
• 3 years, or
• 3 years and 8 months

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BackDROP Period Option

• 1/01/02

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Another Example

• If Wyatt Earp works 6 years beyond his normal
  retirement eligibility, then he may choose a
  BackDROP period of
• 1 year
• 2 years
• 3 years
• 4 years
• 5 years

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Example of BackDROP Period
9/1/2000
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How is the BackDROP calculated?

• Monthly benefit is calculated based on service
  and final average pay as of the BackDROP date
• Lump sum payment equals 90 of the total of all
  payments during the BackDROP period

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How is the BackDROP calculated?

• Cost of Living Allowances (COLAs) are applied to
  the lump sum payment and continuing monthly
  benefit
• The lump sum benefit will be calculated on the
  life annuity (unreduced) option
• Survivor reductions, if chosen, will be applied
  to the monthly benefit

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Example of Monthly Benefit Calculation Without
BackDROP

• Assuming
• Wyatt Earp plans to retire on 9/01/2005
• On that date, he will be 60 years old and have 30
  years of service
• His final average salary on that date is 2500.00
• He chooses the MSEP, with a life income annuity
  (no survivor benefit)
• Then his monthly benefit without the BackDROP
  will be

30 x 0.016 x 2500.00 1200.00
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Example of Monthly Benefit CalculationWith
BackDROP

• Assuming
• Wyatt wants to take his maximum BackDROP
• Wyatts first eligible date for retirement was
  9/01/2000 (when he was 55 with 25 years of
  service under the Rule of 80)
• Wyatt elects the five year BackDROP
• On 9/01/2000 he had 25 years of service, and his
  FAS was 2000.00
• Then his monthly benefit with the BackDROP will
  be

25 x .016 x 2000.00 800.00
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Example of Lump Sum BenefitAccrued During the
BackDROP Period
Monthly Annually 800.00
9,600.00 832.00 9,984.00 865.28 10,383
.36 899.89 10,798.68 935.89 11,230.68
51,996.72
1st Year Benefits 2nd Year Benefits 3rd Year
Benefits 4th Year Benefits 5th Year
Benefits Total
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Example of BackDROPLump Sum Calculation

• The BackDROP distribution is 90 of total accrued
  benefits
• 51,996.72 x .90 46,797.05
• The continuing monthly benefit is 973.33
  (800.00 with 5 years of 4 COLAs)

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Example Comparing Benefits With and Without
BackDROP

• Without the BackDROP, Wyatts monthly benefit
  will be 1200.00
• If he takes the full five year BackDROP, his
  monthly benefit will be 973.33, plus a BackDROP
  lump sum payment of 46,797.05

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Lump Sum Payment Distribution Options

• Cash
• Rollover Option
• Combination Cash and Rollover Option

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Cash Option

• Taxable income in the year received
• Mandatory 20 federal income tax withholding
• State income tax liability
• Subject to 10 penalty if terminated before age 55

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Rollover Payment

• Payment is mailed directly to financial
  institution
• Can be rolled over to traditional IRA, 457
  (PEBSCO), or other 401 (a) or 401 (k) plan
• Not taxable until withdrawn

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Combination Cash and Rollover Option

• Wyatt will decide the amount to be paid to him
  directly (less the required 20 income tax
  withholding)
• Remaining balance will be rolled over to a
  financial institution

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END OF THE TRAIL

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