Benefit Calculation and Eligibility
Act 1200 of 2009 (SB 164) amends the calculations for benefits and for straight life annuity under the Public Employees' Retirement System -- provides for additional multiplier of 0.5% for each year of service in excess of 28, effective July 1, 2009.
Act 1325 of 2009 (SB 231) provides that the calculations in the final average salary for members of the Teachers Retirement System are to be limited to 120% of the next highest salary used in the calculation of final average salary or an additional $5,000, whichever is greater. [Arkansas TRS notes that this is the replacement provision to correct recurring problems with 110% rule on limiting the amount that a member’s salary can increase from year to year for the purposes of calculating final average.]
Act 1326 of 2009 (SB 240) provides that all National Board Certification bonuses will now be included in the salary of all recipients for earnings and final average salary purposes. The bonus will be treated like all other salary earned by the member.
Act 82 of 2009 (HB 452) prohibits post-retirement benefit increases to anyone who becomes a member of the Employees' Retirement System, Public School Employees Retirement System, the Legislative Retirement System and the Judicial Retirement System after July 1, 2009.
The legislature provided this explanatory preface to the Act: "The General Assembly is desirous of providing an established annual cost-of-living adjustment to all current active and retired members of the Employees' Retirement System of Georgia, the Georgia Legislative Retirement System, and the Georgia Judicial Retirement System. In order to do so, limiting future liability of the systems by adjusting the retirement expectations of persons who are newly employed is a regrettable but necessary step toward fiscal soundness."
Act 83 of 2009 (HB 476) addresses spiking. It provides that an employing unit shall pay the retirement system the actuarial cost of granting an employee a salary increase in excess of 5 percent during the 12 months before an employee's retirement and that the computation of a retirement benefit for persons who become members on or after July 1, 2009, shall not include a compensation increase in the last 12 months of employment which exceeds 5 percent.
Act 95-1043 of 2009 (SB 1985) removes a Social Security offset to benefits provided to a widow or survivor of a State Employee Retirement System benefit when the survivor becomes eligible for Social Security benefits. All SERS retirees who began receiving benefits before January 1, 1998 will have the offset removed from future benefits for their survivor at no cost to the retiree. SERS retirees who began receiving benefits after January 1, 1998 but before July 1, 2009 will have a one-time election period (April 16–May 31) to reduce their retirement benefit by 3.825% monthly, in exchange for removing the offset from future benefits for their survivor. Any member who retires after July 1, 2009 will have the option at the time of retirement to remove the offset provision. In exchange for the removal, SERS will reduce the member’s retirement annuity by 3.825% monthly.
Chapter 433, Laws of 2009 (LD 1496) amends existing law, which allows a reduction in the consumer price index to be reflected in a reduction in the benefit to state employees, to provide that any reduction in the CPI be reset to 0% so far as it affects benefits.
Chapter 21, Laws of 2009 (SB 2079) provides numerous reforms in eligibility requirements for public retirement benefits, addressing widely-publicized issues. The following summary of principal provisions is based upon a report from the Worcester (Mass.) Regional Research Bureau: Pension Update 09-03.
- Eliminates the ability of elected officials to get a full year’s credit for as little as one day of service. The Boston
Globe has reported that since 1991, 52 retired legislators have gained a full year for only one day of service, an average annual increase of $16,350 each. Since departing legislators’ terms do not officially end until their successor is sworn in at the beginning of the new legislative session in January, this loophole essentially provided an automatic pension boost for most legislators when leaving office.
- Eliminates the ability of elected officials with 20 years of public service to collect early, enhanced pensions if they
lose an election or leave office voluntarily. This so-called “termination allowance” was intended when it was enacted in 1945 to protect civil servants against politically motivated firings. It was later expanded to apply to elected officials who had been voted out of office. Since 1991, the state Retirement Board has also allowed elected officials who step down voluntarily to increase their pension and collect it early. According to the Globe, 14 legislators have taken advantage of this loophole, 10 of whom departed office voluntarily.
- It eliminates “out-of-grade” accidental disability pensions. Normal, superannuation pensions are based on an
employee’s highest three years’ average salary. Accidental disability pensions are based on the most recent salary which the employee was receiving at the time of a permanently disabling job-related injury. In January 2008, the Globe reported that 102 Boston firefighters had claimed such injuries while temporarily filling in for a superior at a higher pay grade, thereby managing to increase their pensions by an average of $10,300 a year. This legislation ensures that in cases in which an employee suffers a job-related injury while elevated to a higher pay grade, most recent compensation will be calculated based on the prior 12 months’ salary the employee received, not the salary on the day of the injury.
- Revised the definition of regular compensation upon which a benefit is calculated.
- Service in unpaid positions such as a local library board or moderator of a town meeting can no longer be claimed
as creditable service for benefit calculation. An employee must be paid at least $5,000 a year in order for the position to count as creditable service.
- Post retirement earnings limits are applied to retirees rehired by the government as independent contractors.
LB 403 of the 2009 session provides that members of any Nebraska retirement system who are not in the United States lawfully would not be eligible to receive a retirement benefit. (Currently, the School Employees plan requires lawful presence before an employee can join the plan.) The bill does not address what would be done with the benefits owed a current member who was in the United States illegally.
Chapter 426, Laws of 2009 (SB 427) changes eligibility for retiring with unreduced benefits for employee who join the Public Employees Retirement System (PERS) after 1/1/2010. For those who are not public safety members, eligibility for current members is 65/5, 60/10 or 30 years of service. This bill changes 60/10 to 62/10. For police and firefighters, eligibility of current members is 65/5, 55/10, 50/20 or 25 years of service. This bill removes the 25-and-out option.
For current members the actuarial reduction for early retirement is 4% per year, prorated for months short of a year; for those joining systems on or after 1/1/2010 it will be 6% per year likewise prorated.
For current members the benefits formula is 2.5% of average final compensation (36 highest consecutive months) times years of service before July 1, 2001, plus 2.67% for years of service earned thereafter. This bill removes the higher benefit factor for years of service after 7/1/2001 for those who join PERS after 1/1/2010.
For those who join PERS after 1/1/2010, the calculation of average final compensation will exclude increases in compensation to 10% per year for the 60-month period that begins 24 months before the 36 months used in the calculation of final average compensation. Employees so limited are entitled to a prorated refund of their contributions to PERS for the appropriate period.
Chapter 691, Laws of 2009 (SB 767) provides that a public charter school shall be considered a public employer and as such shall participate in the Public Employees Retirement System.
Article 7, Chapter 68, Laws of 2009 (HB 5983 substitute as amended) made substantial changes in provisions for eligibility for retirement and benefits for many categories of public employees. The revisions are estimated to save in the neighborhood of $50 million in general fund expenditures in FY 2010 (House and Senate estimates differ).For State employees and teachers who are NOT eligible to retire as of September 30, 2009:
- Establishes a retirement age of 62 for all employees regardless of plan, with a methodology that proportionally
changes age requirement based on years of service so the closer one is to retirement, the less the impact:
- Plan A members – proportional to 28 years or age 60 with 10 years (retain 80% cap);
- Plan B members – proportional to 59 and 29 years (retain 75% cap)
- NOTE: Plan B is the tier of pension provisions Rhode Island created in 2005 that provided a reduced package of benefits for members who had not at that time vested in the system and for all new members of the system. Plan A includes members who were vested (with 10 years of service credit) at that time.
- Corrections and Nurses proportional to age 55 and 25 years.
- Bases average final compensation for pension calculation on 5 years rather than 3 years (as under previous law) for members who become eligible to retire on or after October 1, 2009.
- Freezes service credits earned as of September 30, 2009 - but requires that all future accruals are earned at the Plan B schedule.
- Allows purchased credit to count toward total service time but not towards vesting (as in current law), and provides that credit must be purchased at full actuarial cost after June 16, 2009.
- Limits cost-of-living adjustments to the provisions in Plan B--3.0% or the change in CPI, whichever is lower.
- Must annually document disability status to Retirement Board;
- Permanently disabled - continue current benefit of 66 2/3 of salary;
- Disabled from service - benefit reduced from 66 2/3 to 50% of salary.
- Judges – Salary basis is 5 consecutive highest years and the maximum benefit would be 80% for judges retiring under full pay and 65% under reduced pay – Applies only to judges engaged after July 1, 2009.
Chapter 1308, Laws of 2009 (HB 2559), changes eligibility for retirement for members of the employee class of the Employee Retirement System hired after September 1, 2009. Under the new requirement, regular eligibility will be at 65/10 or the Rule of 80 with five years of service credit rather than 60/5 or the Rule of 80 with five years of service credit. For those employees, the act ends the ability to use accumulated annual leave or sick leave to help establish eligibility for retirement, but allows its use in determining the retiree's annuity amount. The base for calculating final average salary will change from the highest 36 to the highest 48 months. A member's annuity will be reduced by 5% for each year the member lacks of reaching age 60, with a maximum reduction of 25%.
Similar provisions apply to newly-hired law enforcement and custodial officers. FAS will be based on the highest 48 months and the standard annuity will be reduced by 5% for each year the member retires before age 55 with a maximum reduction of 25%.
Chapter 522, Laws of 2009 (HB 1445) provides benefits to domestic partners under the Washington state patrol retirement system.
Act 29 of 2009 (Assembly Bill 75, the budget bill, passim) establishes that a domestic partner is treated like a spouse for purposes of public employee benefits including Wisconsin Retirement System benefits, health insurance (state and local), deferred compensation and other related benefits. Domestic partners must meet all of the following conditions:
- Be at least 18 years of age and otherwise competent to enter into a contract
- Neither individual is married to or in a domestic partnership with another person
- Neither individual is related by blood in any way that would prohibit marriage under Wisconsin law
- The two individuals consider themselves to be members of each other’s immediate family
- The two individuals agree to be responsible for each other’s basic living expenses
- The two individuals share a common residence.”
Chapter 300, Laws of 2008 (HB 1645), revises the definition of earnable compensation for the purpose of calculating retirement benefits to exclude end-of-career payments and a number of work-related reimbursements. Allows inactive members to leave their contributions in the system indefinitely (or request they be returned 30 days after leaving membership) and earn interest at 2 percentage points less than the rate of return on system investments for the previous fiscal year (down from actual return, as provided in previous law).
The act also provides that if compensation in the final year of service exceeds 125% of final average compensation, the retirant's last employer will be assessed the cost of the excess benefit. Annual retirement benefits are capped at $120,000.
SB 1962 raises normal retirement age for public employees and teachers' systems from 60 to 62 for those who become members after the effective date of the bill (previously 55/25 or age 60); increases membership eligibility for teachers from minimum annual compensation of $500 to $7,500 and for public employees from $1,500 to $7,500, with the minimum to be adjusted annually by CPI but by no more than 4% a year; ineligible persons may enroll in the Defined Contribution Retirement Program.
HB 1019 increased multipliers for pension benefit calculation for the South Dakota Retirement System both prospectively and for beneficiaries. The multipliers increases by amounts in the neighborhood of one-tenth of one percent.
For general employees. Upon retirement, a member shall receive a normal retirement allowance, commencing at normal retirement age or thereafter as provided in § 3-12-90, for Class A credited service, equal to the larger of 1.7% (previously 1.625% for service before 7/1/02)of final average compensation for each year of Class A credited service before July 1, 2008, plus 1.55% of final average compensation for each year of Class A credited service after July 1, 2008 (unchanged except for adjustment of date), or 2.4% of final average compensation for each year of Class A credited service before July 1, 2008, plus 2.25% of final average compensation for each year of Class A credited service after July 1, 2008, less other public benefits. For purposes of this section, federal military retirement or federal national guard retirement benefits are not other public benefits. For the purposes of this section, any Class A member who did not participate in federal social security during the period of credited service shall be presumed to be entitled to the maximum primary social security benefit permitted at the time of retirement. Class A credited service includes all credited service under this or any of the retirement systems consolidated pursuant to § 3-12-46. Higher multipliers apply for members who are covered by Social Security.
Act 116 of 2008 (HB 403) changed state employees' qualifications for retirement benefit eligibility, the cap on benefits, contribution requirements and provisions for cost of living adjustments and made other changes, some only for employees hired after July 1, 2008.
§ 1 For state employees hired after July 1, 2008, normal eligibility for retirement is changed to 65/5 or the Rule of 87 (for those who joined earlier 62/5 or 30 years of creditable service). Benefit formula remains what it has been since 1991, but the maximum retirement benefit was increased to 60% of final average compensation (from 50%).
§ 2 provides changes in the calculation of the benefit reduction for early retirement. The previous-law schedule was a reduction of ½ of 1% per month before normal eligibility. For employees hired after July 1, 2008, the law provides a sliding scale that takes age and years of service into account to reduce benefits less for greater age and years of service.
§§ 3 and 4 replace the existing-law COLA, which is an annual adjustment equal to 50% of the CPI, whether positive or negative. For active members as of June 30, 2008 who retire after July 1, 2008, the COLA will be the CPI percentage or at least 1%, to a maximum of 5%, beginning on January 1, 2014. Members' contribution rates are increased from 3.25% to 5% until July 1, 2019, when the contribution rate will fall to 4.75%. The additional cost of the COLA will be amortized separately from the existing UAAL over 30 years.
Chapter 537, Laws of 2008 (HB 112) adds all county administrators to the list of local government officials that currently include some county administrators and other local government officials who may retire without a reduction in retirement allowance upon attaining age fifty, if they are involuntarily dismissed or are not reappointed.
Chapter 21, Laws of 2008 (SB 68) amends retirement eligibility criteria for judges by reducing various combinations of age and length of service requirements and by specifying the amount of reduction for "early retirement" (set at 5% for each year of retirement prior to age 65 for those with less than the minimum combination of age and length of service for "full retirement). The bill contains a general fund appropriation of $761,900 for the additional liability of the judicial retirement system under the act. It also contains a general fund appropriation of $410,846 for additional required or authorized under the bill.
Act 220, Acts of 2007 (SB43), temporarily increases the multiplier for service through June 30, 2007 for the Public Employees Retirement System from the rate that would have taken effect without the legislation. The legislation continues the rates actually in effect, which would have fallen otherwise. For the noncontributory system, the multiplier for service through June 30, 2007. will continue at 1.75%; after that date, 1.72% For the contributory system, the rate for service through June 30, 2007, will be 2.03% and 2% after June 30, 2007.
Chapter 74, Laws of 2007 (SB 221), bill requires that the retirement allowance for certain statewide officials who become members of the Legislators Retirement System (LRS) on or after January 1, 2008 be based the highest average salary for 12 months of consecutive service. Under existing law, the allowance is based on the single highestsalary level. [Proposition 140, passed in 1990, closed the Legislators Retirement System to legislators elected for the first time in November 1990 and thereafter, but specified statewide elected officials remain members.]
Chapter 58, Laws of 2007 (HB 437) permits same gender couples to enter into civil unions and have the same rights, responsibilities, and obligations as married couples. This law will go into effect as of January 1, 2008. For the effective date of 01/01/2008 New Hampshire Retirement System is working on the implementation of the house bill and is creating a brochure regarding civil unions.
SB 406 provides that within the Teacher and School Employee Retirement Systems, the maximum percentage of increase in the annual compensation in the final average salary period shall not exceed ten percent. This limit will not apply to increases due to changes in position or employer, that are required by state statute, or that are due to district-wide salary schedule adjustments for previously unrecognized education related service. Section 169.010.
Currently, certain alternative retirement allowance provisions, commonly referred to as "25 and out" and the "31st year factor" of the Teacher and School Employee Retirement Systems, terminate on July 1, 2008. This act extends the termination dates to July 1, 2013. Section 169.070.
Provides that the board of trustees for the public school retirement system in districts of 700,000 or over is authorized to increase retirement benefits for the system and to adopt additional retirement benefits for persons who have retired, including cost-of-living adjustments, as long as the board of trustees finds that the additional benefit will not require an increase in the contribution rate required by members or the board of education and is actuarially sound. Sections 169.466 and 169.471.
Chapter 488, Laws of 2007 (HB 464) changes the age of retirement for public safety officers. Under present law, any member in Group 1 of the TCRS is eligible for service retirement upon attainment of 60 years of age or upon completion of 30 years of creditable service. This bill authorizes Group 1 members who serve in state public safety officer positions covered by the mandatory retirement provision to retire on service retirement benefits upon attainment of 55 years of age with 25 years of creditable service.
Local governments whose employees participate in TCRS may adopt this provision. The act adjusts provisions for supplemental bridging benefits to take the lower age of retirement into account.
Chapter 99, Laws of 2007 (HB 2007) directs the Public Employees Retirement System to extend the same rights and benefits to registered domestic partners as are extended to married individuals, unless the plan administrator reasonably concludes such extension would conflict with a condition of the plan's tax qualification or other favorable tax treatment of the plan.
Chapter 491, Acts of 2007 (HB 2391 and others) provides for closing the retirement systems' gain-sharing plans. They are closed to members of PERS, TRS, and SERS Plans 3 who are hired after July 1, 2007. After January 1, 2008, gain-sharing distribution, gain-sharing is eliminated for all members of Plan 1 and Plan 3. On July 1, 2009, the Annual Increase Amount (Uniform COLA) in PERS and TRS Plan 1 is increased by approximately 14 cents. The increase is calculated by determining the difference between the actual January 1, 2008, gain-sharing amount, and 40 cents. The Uniform COLA is increased by this difference (but may not be decreased by a negative number), up to 20 cents.
Effective July 1, 2008 (September 1, 2008 in TRS and SERS), the early retirement reduction factors are improved for both members of Plans 2 and 3 of PERS, SERS, and TRS that have completed 30 or more years of service. Eligible members may retire from age 62 with no reduction in benefits, while members aged 61 or less may retire with a 2 percent benefit reduction, plus an additional 3 percent reduction for each year between age 60 and 55. For example, a member retiring at age 59 would receive an 8 percent reduction (2 years plus one year each for the 60th and 59th years of age). Individuals who are employed in a position making them newly eligible for membership in TRS or SERS have a 90-day period to irrevocably choose membership in Plan 2 or Plan 3.
The subsidized early retirement (improved early retirement reduction factors), the increases to the Uniform COLA, and the choice of Plan 2 for new entrants to TRS and SERS are intended as a replacement for gain-sharing, and are not provided as a matter of contractual right to members until there is legal certainty with respect to the repeal of gain-sharing, including the expiration of any statutory limitations on actions and the end of the process of judicial review. Any legal action brought under the bill must be commenced within three years after the effective date of the act.
For the Department of Retirement Systems’ explanation of the act, see http://www.drs.wa.gov/legislative/2007/default.htm
Chapter 418, Statutes of 2005 (SB 973), allows members who retired before the establishment of the domestic partnership registry to qualify their domestic partners for survivor continuance benefits. The bill also clarifies the administration of domestic partner community property settlements to ensure compliance with federal law, and it eliminates PEMHCA provisions that discriminate against domestic partners in the provision of health benefits.
Chapter 259, Session Laws of 2006 (SB 235) increased the age requirements for regular service retirement (other than for state troopers) to the Rule of 85 for those who become members of the Public Employee Retirement Association (PERA) after January 1, 2007, to the Rule of 85; any age with 35 years of service; or 65/5. The minimum retirement age and service requirements are age 55 with five years of service. The former general rule was the Rule of 80; or, any age/35; or, 65/5.
For those who are members on December 31, 2006 and who retire on or after January 1, 2009, annual salary for the purposes of calculating benefits can increase no more than 15 percent a year. For those who join PERA after December 31, 2006, the cap on salary growth will be eight percent per year. The multiplier remains at 2.5 percent (PERA members are not covered by Social Security).For those who join PERA after December 31, 2006, retirement benefit COLAs will be effective with July benefit payments, only after the retired member has received a benefit for a full calendar year, and only for members whose age and service credits equal 85 or who have attained the age of 60. No age and service requirements apply for disability retirees.
The annual COLA was preserved at 3 percent (grandfathering those who were members on 6/30/05 at 3.5 percent) but for those who join PERA after December 31, 2006, the actual increase will be calculated annually based on an actuarial valuation of the division (such as state employees or teachers). The act creates a new Annual Increase Reserve for each such division and provides for its funding, consisting of an annual payment of 1 percent of the salaries of members eligible for retirement benefit increases from the reserve, certain other revenues and interest earnings. The annual COLA is to be the least of (1) 3 percent of benefits; (2) the CPI-U; and (3) the amount that would exhaust 10 percent of the year-end market value of the reserve fund. The change may not be negative.
HB 400 (on governor's desk 4/28/06) increases retirement benefits for those who retired before July 1, 1987: 10% for those who retired before July 1, 1974; 6% for those who retired from July 1, 1974 through June 30, 1982, and 2% for those who retired from July 1, 1982 through June 30, 1987. The full increase applies only to retirees who had 20 or more years of service, and is reduced by 5% for each year of service less than 20.
Public Law 94-1057 (Senate Bill 49) modifies Public Act 94-0004 from 2005, which requires school districts to fund pension benefits based upon salary increases over 6 percent used in the determination of final average salary. As a result, the liability associated with these salary increases will be partially paid for by the school districts instead of the state of Illinois. This calculation is applied to any compensation that is paid to members during their average salary period.
- Salary increases paid to a teacher who is 10 or more years from retirement eligibility.
- The transfer of a teacher from one employer to another caused by school consolidation or annexation.
- Earning increases that are the result of overload work and summer school.
- Earning increases due to promotions when the member is required to hold a certificate or supervisory endorsement. This exemption only applies if the certificate or supervisory endorsement is different than the member’s previous position.
- Payment to a teacher from the state of Illinois or the State Board of Education when the employer does not have discretion.
- Other exemptions apply to employees of higher education such as promotion to a tenure-track position or compensation for overload teaching (such as summer school).
The school district must provide an affidavit attesting a member’s final average salary exemption for an increase over 6 percent. Exemptions apply to contracts entered into, amended, or renewed after June 1, 2005 but before July 1, 2011. Exemptions for these contracts continue until July 1, 2014. All of the exemptions end after June 30, 2014.
HF 729 reduced the vesting requirement for members of the Judicial Retirement System from six years to four; provided that a judge is eligible for an unreduced annuity after 20 years of service (current law, 25) if the judge is at least 50 years of age, increased the multiplier for benefits from 3.0% to 3.25%, and increased the maximum percentage of judges' salary that payments are based on from 60% to 65%.
HF 729 also provided a "spiking control" that limits how much of a wage increase applies when calculating pensions. IPERS will compare the average of the highest three years, or the final average salary, to the fourth highest year’s salary. If the final average salary is more than 121 percent of the fourth highest wage, the final average wage is adjusted. This approach allows for a wage increase of approximately 10 percent in each of the highest three years.
Act 647 of 2006 (SB 88) provides that for members of the School Employees' Retirement System hired after June 30, 2006, the period used for calculating final average compensation is extended from 36 months to 60 months. It also provides an anti-spiking measure: for the calculation of final average salary, the figure used for a 12-month period after the first 12-month period cannot increase by more than 10 percent from the previous period, except for legislatively-enacted increases.
Chapter 110, Laws of 2006 (HB 1737), the "State Employees' and Teachers' Retirement Enhancement Benefit Act of 2006," provides teachers and employees hired after 1998 with a benefit that equals 54% of salary after 30 years service instead of the current 42% of salary. It increases the multiplier used to calculate a retiree’s annual payment from its current level of 1.4% to 1.8%. To help pay for the enhanced benefit, teachers and employees will contribute 5% of their annual compensation, up from the current level of 2%.
This increase will be phased in over a three-year period. The bill also allows the 120 local governments who participate in the employee pension system to opt in to the enhanced benefits by June 30, 2007.
The 1.8% multiplier applies only to service earned from July 1, 1998 forward. The act provides no additional benefit to those who retire before July 1, 2006; and is effective for those who retire on that date and thereafter. Formula remains 1.2% (or former non-contributory formula of .8%/1.5%, if greater) of average final compensation times service credit to June 30, 1998.
House Bill 1179, enacted during the 2006 Special Legislative Session, provides that members of the Oklahoma Teachers’ Retirement System ("TRS”), who joined TRS prior to July 1, 1995, and who work one or more years beyond "normal retirement age”, will qualify for an improved benefit formula at retirement. "Normal retirement age” is when a TRS member reaches age 62, or when age plus total service equal 80 (90 if the member first joined TRS after June 30, 1992). TRS members working in four-year universities do not qualify for EESIP coverage.
The current retirement formula for members who joined TRS before July 1, 1995, is a two-tiered formula:
- 2% x Final Average Salary not to exceed $40,000* x service performed prior to 7/1/1995 plus
- 2% x Final Average Salary x service performed after 7/1/1995
The new formula will allow members working beyond normal retirement age to move pre-1995 service to a higher salary. For each year a member works past normal retirement age, the member may move two years of service performed prior to July 1995, to the higher tier of the formula.
For members who retire between July 1, 2006, and June 30, 2007, the maximum average salary that can be used for the moved service is $60,000. For members who retire between July 1, 2007, and June 30, 2008, the maximum average salary increases to $80,000, for moved service. For members who retire on or after July 1, 2008, the member’s final average salary, regardless of amount, can be used to calculate the benefit for moved service that was performed before July 1, 1995.
SB 7 provides a level-payment benefit option to members of the South Dakota Retirement System who retire before being eligible for Social Security retirement benefits. They may elect to receive initial retirement benefit payments from the system in an amount greater than the standard benefit payments computed on the basis of the member's age and earnings at retirement. The greater amount, in conjunction with a later reduced amount, will be the actuarial equivalent of the normal retirement allowance computed on the basis of age at retirement. The greater amount shall be paid until the member reaches the age of 62, at which time the payment from the system will be the reduced amount so that, as far as possible, the member's combined monthly retirement income from the system and social security shall approximately equal the greater amount paid prior to age 62.
HB 209 provided for a lump-sum benefit for members of the Utah State Retirement System. The benefit may equal either 12 or 24 months' value of the member's retirement benefit, for which the subsequent monthly benefit is actuarially reduced. No member to receive more than one lump-sum benefit.
Chapter 244, Laws of 2006 (SB 6453) adjusts the minimum monthly benefit for Public Employee Retirement System and Teachers Retirement System Plan 1 retirees. In 2004, the Legislature established a minimum monthly benefit of $1,000 for PERS and TRS Plan 1 retirees who have at least 25 years of service and have been retired 20 years or more. The legislation increases that minimum benefit by three percent annually. This bill would also extend the minimum monthly benefit, with the three percent annual increase, to PERS and TRS Plan 1 retirees who have at least 20 years of service and have been retired 25 years or more.
Act 146 clarifies that for Teachers Retirement System benefit calculations, the salary used to calculate FAS cannot grow by more than 10% a year over the preceding year's salary.
Act 1450 increased the multiplier for the non-contributory Public Employee Retirement System plan from 1.72 to 1.75 for service before June 30, 2005.
Act 14 (HB 381) allows a retiree who was unmarried at the time of retirement and elected an optional allowance to revoke the election upon marriage and designate the spouse as beneficiary. In such event, the retiree shall receive an actuarially reduced benefit allowance.
HB 85, the General Appropriations Act, provides that effective July 1, 2005, the benefit formula multiplier for the Public School Employees Retirement System for current and future retirees will increase from $13.00 to $13.50 per month for each year of service. The General Assembly provided for this increase in the general appropriations act and the Governor has signed the bill.
Act 75 (SB 311) provides that retirement benefits in the Louisiana State Employee Retirement System hired after July 1, 2005, will be based on the member's highest 60 months of service, and will stay at 36 months (as in existing law) for those hired before that date and certain specified classes of public employees (which include the governor, lieutenant governor, certain legislative officials and judges).
For existing employees the amount to be considered in the FAS calculation is capped for the second 12 months of the period at 125% of the amount in the first 12 months, and in the third 12 months at 125% of the second 12 months. New law reduces the anti-spiking percentage to 15% per 12-month period (from 25%) and provides an exception for pay increases that result from system-wide increases adopted by the Department of Civil Service or enacted by the legislature.
Old law provided a number of provisions for benefit eligibility: Any age, 30 years of service; age 55 with 25 years of service; age 60 with 10 years of service; any age, 20 years of service with an actuarial reduction in benefits. These provisions remain in effect for those hired before July 1, 2006. For those hired thereafter, benefit eligibility is limited to age 60 with 10 years of service.
LB 503 (originally in LB 411) changes the definition of compensation in the School Employees Retirement System to provide that the amount of compensation which would be subject to retirement could increase no more than 7% per year (the current limit is 10%) during the five years before retirement unless certain conditions are met. The bill also stipulates the employer would report compensation which exceeds the limit to the Nebraska Public Employees Retirement System. Changes in pay that result from a collective bargaining agreement or from a substantial change in an employee's job position do not qualify as exceptions.
HB 1070 changed the calculation of final average salary for the Highway Patrol Retirement System to the average of the highest 36 months in the member's final 180 months, not the highest 36 consecutive months in the final 120 months as previously. This applies to those who retire on and after July 1, 2009. The bill similarly changed the calculation of final average salary for other members of the Public Employees Retirement System, for those who retire on or after July 1, 2009.
Chapter 210, Laws of 2005, reduces the number of years that inactive members may leave their funds in the New Hampshire Retirement System (NHRS). An inactive member refers to someone who is no longer making contributions to NHRS through NHRS-covered employment. This new law does not affect vested members--those with at least 10 years of NHRS creditable service. Currently, members who are not vested and terminate their NHRS-covered employment may leave their contributions in NHRS for up to six years, during which time their contributions are credited with interest (current interest rate is 9.0%).
Effective June 30, 2006, inactive members may leave their contributions in NHRS for up to two years, not six years. NHRS will issue refunds to members who have been inactive for two or more years as of June 30, 2006, unless they are vested.
Chapter 117, Laws of 2005, Article 7 changed retirement eligibility and benefit calculation provisions for teachers and general employees who were not vested (at the 10 year requirement) on or before July 1, 2005. Previous-law eligibility requirements were age 60 with 10 years of service or at any age with 28 years of service. New minimum requirements are age 59 with 29 years of total service; age 60 with 10 years of contributory service, or age 55 with 20 years of total service at an actuarial reduction.
Benefit provisions were changed for the same groups as follows:
Years of Service Previous Multiplier New Multiplier
- 1 – 10 1.7% 1.6%
- 11-20 1.9% 1.8%
- 21-34 (Old plan) 3.0%
- 35th year (Old plan) 2.0%
- 21 -25 (New plan) 2.0%
- 26 - 30 (New plan) 2.25%
- 31 - 37 (New plan) 2.5%
- 38th(New plan) 2.25%
The benefit cap was changed for the new plan. The old plan provision is a cap of 80% of final average compensation. The new cap is 75%.
Former law, still applicable to employees vested on or before June 30, 2005, provided for an annual COLA of 3%. New law delays any COLA until three years after retirement, and sets it at 3% or CPI, whichever is less, unless the CPI is negative.
Act 153 (SB 618) provides for a guaranteed annual COLA of up to 1% if the annual CPI index through the previous December 31 is up at least 1%. The act allows the State Budget and Control Board to grant a greater COLA is the unfunded liability amortization period of the S.C. Retirement System does not exceed 30 years. The board approved a 3.4% COLA effective July 1, 2005.
SB 1691 concerns the Texas Teachers Retirement System. It increases the minimum age required for an unreduced retirement benefit to age 60 for members hired on or after September 1, 2006 and for these participants, adds a new reduced retirement benefit for members who have satisfied the Rule of 80, with a 5% reduction for each year under the age of 60.
The bill will eliminate the early retirement subsidy provided by Section 824.202(c), increase the number of years included in the final average salary calculation from 3 years to 5 years, and requires a member to satisfy the rule of 90 to be eligible to elect a partial lump sum distribution. These three provisions will not apply to TRS members who have already met eligibility for retirement or who have, on or before August 31, 2005, met one of the following: (i) age 50, (ii) 25 years of service, or (iii) age and years of service equal to 70.
§ 28 requires local employers to pay contributions to TRS during the first 90 days of an employee's employment and requires employers of a TRS retiree to pay the member contribution and the employer contribution unless they were reported to TRS in January 2005.
Chapter 201, Acts of 2005 (HB 2984) provides that no retirement system contributions can be withheld from lump sum payments for unused accrued annual leave, nor can the lump sum payments be included in final average salary calculation for the purpose of calculating benefits, because no service credit is granted in relation to them.
The act also provides that a member of the Public Employee Retirement System who becomes a member of PERS after July 1, 2005 and who is retired from a public retirement system for police or firefighters, cannot receive a total, combined benefit greater than 105% of the highest salary received in a position covered by PERS or the police or firefighter positions.
HB 290 reduced the multiplier for members of the County Employee Retirement System from 2.25 to 2% for employees whose participation begins on or after August 1, 2004.
HB 224 provides that benefits paid a member's heirs from the Teachers Retirement System must at least equal a member's accumulated contributions, whether through survivor benefits or a payment to the former member's estate.
HB 1032 provides that beginning July 1, 2004, for the purposes of calculating benefits from the SD Retirement System, compensation in a person's last quarter cannot exceed 115% of any previous quarter and the average compensation of the last four quarters cannot exceed 110% of any previous quarter. Termination pay will not be considered as compensation for SDRS purposes and no employer or member contributions will be required. Beginning July 1, 2004, the percentages mentioned above will be reduced to 105%. See also South Dakota in "Contribution rates."
SB 344 allows the percentage threshold for fixed annuity increases to be established by rule promulgated by the Department of Employee Trust Funds, and provides that administrative rules promulgated by the department do not require the approval of the Teachers Retirement Board or the Wisconsin Retirement Board. Previous law required that the minimum increase in annuitants' payments be 2 percent. The new law sets the threshold at 0.5 percent unless the department establishes a different threshold upon advice from its actuary. [The effect of the new legislation is to allow increases in annuity payments when resources are not sufficient to cover a 2 percent increase, as in 2004.]
SB 428 provides that retirement benefits provided by existing law shall not exceed 100%, and when a member has earned a benefit accrual equal to 100% no further contributions shall be required of him. However, the state shall continue to pay to the system the employer's contribution.