Voluntary Employee Retirement Program (VERP) Frequently Asked Questions (FAQ s)

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1 Voluntary Employee Retirement Program (VERP) Frequently Asked Questions (FAQ s) What is the Voluntary Employee Retirement Program (VERP)? The Board of Trustees authorized a retirement incentive. Eligible employees with more than 25 years of service will receive a $35,000 lump sum payment (not to exceed 50% of base salary). Eligible employees with less than 25 years of service will receive a $25,000 lump sum payment (not to exceed 50% of base salary). Eligible employees may apply for this incentive from July 23, 2012 to September 14, 2012, complete necessary requirements, including documenting and sharing knowledge on how to perform their work responsibilities, and retire on one of the selected dates. For staff and administrators, retirement choices are: January 1, 2013, June 1, 2013, January 1, 2014, and June 1, For full-time faculty, retirement choices are: June 1, 2013 and June 1, How does the VERP benefit Montgomery College? This program will facilitate a more orderly transition by providing the College with significant advance notice of retirement and help transfer knowledge from the retiring employee to the organization. This program will also allow for a one college approach to evaluate whether to refill, abolish, or reallocate the affected position by determining staffing priorities in accordance with the College s strategic plan. Additionally, the program will result in savings by lowering compensation costs. Am I eligible to participate? Only full-time staff, faculty, and administrators (10 and 12 month full-time employees) who are eligible to receive a retirement benefit from the State Retirement Plan, State Pension Plan, or the Optional Retirement Plan (ORP) 403(b) and who have at least 15 years of service at Montgomery College are eligible to participate. Approximately 355 employees are eligible to apply for this program and a letter will be mailed to their homes on March 23, How do I tell which retirement plan I am enrolled in? By using the Employee Services section of My MC. Log on to My MC, click Employee Services on the right hand side, then Benefits and Deductions, then Retirement Plans. You may also call Suzanne Redding at x75354, or the State Retirement Agency at I am in the Teachers or Employees Retirement system. When am I eligible for retirement? You are eligible to retire at age 60 regardless of service (but VERP requires at least 15 years of service), or at 30 years of service, regardless of age. Additionally, you are eligible for early retirement if you have a minimum of 25 years of service prior to age 60. However, employees 1

2 who opt for an early retirement will receive a smaller monthly pension from the state. The Retirement System plan provisions provide for a 6% reduction for each year the payments begin prior to age 60 or 30 years of service, whichever produces the smaller reduction. The reduction is calculated on a monthly basis which means that generally, the benefit is reduced by.5% for each month payments begin early. For members who earn service credits on a ten month basis (all Teachers system members), the reduction for service is.6% for each month prior to 30 years. The maximum reduction is 30%. I am in the Teachers or Employees Pension system - Alternate Contributory Pension Selection (ACPS) or Non-Contributory Pension transferred from the Retirement System to the Pension System after April 1, When am I eligible for normal retirement? At age 62 with at least five years of eligibility service (but VERP requires at least 15 years of service); At age 63 with at least four years of eligibility service (but VERP requires at least 15 years of service); At age 64 with at least three years of eligibility service (but VERP requires at least 15 years of service); At age 65 or older with at least two years of eligibility service (but VERP requires at least 15 years of service); or; 30 years of service, regardless of age. Additionally, you are eligible for early retirement if you have a minimum of 15 years of service and have attained age 55. However, employees who opt for an early retirement will receive a smaller monthly pension from the state. The Pension System plan provisions provide for a.5% reduction for each month, or 6% for each year, that payment begins prior to a member s 62 nd birthday. The maximum reduction is 42%. I am in the Optional Retirement Plan (ORP 403(b) investing in either TIAA-CREF or Fidelity). When am I eligible? You must be at least age 55 or older and have at least 15 years of service at Montgomery College. 2

3 I started at Montgomery College as a casual temporary, student employee, or part-time faculty. Will that time count towards my 15 years? No. Those categories of employees are not benefit-eligible. The 15 year timeline starts when you were hired as a benefit-eligible employee (regular staff, administrator, temporary staff with benefits, or full-time faculty). I am a member of the Maryland State Retirement & Pension System. How do I request an estimate of my retirement benefits? The state has an Application For An Estimate of Service Retirement Allowance (Form 9) available on their website at This form is also posted on the VERP website and the HR website or you may call Suzanne Redding at x Please note, you may only request an estimate for a retirement date within one year (so estimates for June 1, 2013 may not be requested until June 1, 2012). Your estimate could take six to eight weeks, depending on the state s backlog of requests. You may also refer to your Personal Statement of Benefits, which you should have received in September or October of 2011, for an estimate of the Basic Option (maximum allowance) under both Early and Normal Service retirement. This document is issued by the Maryland State Retirement Agency and mailed to members homes every year. Please note, the Office of Human Resources, Development, and Engagement does not have access to these statements. I am enrolled in the Optional Retirement Plan (ORP) with either TIAA-CREF or Fidelity. How do I request an estimate of my retirement benefits? You will need to request a lifetime annuity illustration with either TIAA-CREF or Fidelity (minimum amount is $10,000), to commence on one of the pre-determined retirement dates. Please call either TIAA-CREF or Fidelity to request the illustration. 3

4 When can I sign up and when can I retire? You may complete an irrevocable written election and submit to HRDE between July 23, 2012 and September 14, At that time, you will elect a date of retirement preference: for staff and administrators, January 1, 2013, June 1, 2013, January 1, 2014, or June 1, 2014; for faculty, June 1, 2013 or June 1, What else is required of me once I elect to participate? Those accepted into the program must work collaboratively with their first line administrator to develop and complete a knowledge transfer agreement to help facilitate the transfer of information from you to your unit. Further instruction will be provided to those accepted in the program and their supervisors and administrators. Is there any limitation on the number of employees who can participate? Yes. The College reserves the right to cap participation if it receives expressions of interest which would result in payments of more than $2 million. If the College chooses to cap participation, preference will be given to those employees with the greatest length of service. Is it possible the retirement date I select could be adjusted? Yes. In the event a significant number of employees in the same unit select the same retirement date and this would result in undue hardship for the unit, the unit administrator may request that HRDE discuss with affected employees the possibility of selecting one of the other available dates of retirement (from the dates listed above). In the unusual event the College does exercise this option, preference will be given to those employees with the greatest length of service. What if I sign up and then fail to complete the knowledge transfer contract I agreed to? In that event, you will only be eligible to receive half of the incentive upon retirement. There will be an appeal process in case of disagreement. Can I change my mind? No. Once you have made an election during the window period (July 23, 2012 to September 14, 2012), it is irrevocable. 4

5 Can I retire and then come back to work for Montgomery College? No. All employees participating in this program must wait at least 12 months until returning to Montgomery College. This restriction does not apply to those returning as part-time faculty members. However, there may be earnings limitations for returning retirees governed by the State of Maryland retirement system. Additionally, Maryland state law requires that there must be a minimum of 45 days between your last day on payroll and the date you are rehired by Montgomery College. Full-time faculty retiring June 1, 2013 may not return as part-time faculty until September, 2013 and correspondingly, full-time faculty retiring June 1, 2014 may not return as part-time faculty until September, Please contact Suzanne Redding with further questions. I also have a Supplemental Retirement Annuity (SRA) plan (either a 403(b) or a 457(b) plan, or both) through the college. Am I required to start withdrawing that money in order to retire? No. The college only requires that you commence a monthly retirement benefit from your main retirement plan, which is either the Maryland State Retirement & Pension System, or the Optional Retirement Plan (ORP). Please note, federal tax law generally requires that plan participants receive an annual minimum distribution in the year in which they reach the age of 70 ½, or, if still employed by the employer sponsoring the plan, the year of actual retirement, whichever is later. Does taking the VERP affect my benefits as a retiree? No. You may continue the health, dental, vision, and basic life insurance in retirement. If you are age 65 or older, you are required to enroll in Medicare Parts A & B in order to participate in the Cigna PPO health plan, or the Kaiser Permanente Medicare plan. These are the plans that coordinate with Medicare, whereas the Cigna POS does not. If you are under the age of 65 at the time of retirement and currently enrolled in the Cigna POS plan, you may continue that until the month in which you turn 65. At that time you must pick up Medicare Part B and change to either the Cigna PPO plan or Kaiser. If you are enrolled in the Cigna Choice Fund/HSA, you must change to either the Cigna PPO plan or Kaiser at retirement. However, the funds you have accumulated in the Health Savings Account are portable and may be used to pay medical expenses, including insurance premiums, in retirement. The basic life insurance is the only life insurance that you may carry into retirement, and it is a reducing benefit. The Optional, Spousal, and Dependent life insurance are terminated on your last day of employment. All of the life insurance plans are what is known as term life so they have no cash value. 5

6 How much does the college pay towards retiree benefits? The college will pay 60% of the monthly rate for health, dental, and basic life insurance. The vision plan is a employee/retiree pay all benefit, so there is no college contribution towards that. Please see the retiree monthly rate sheet on the VERP webpage. Retirees from the Maryland State Retirement & Pension system may have their group retiree insurance premiums deducted from their monthly pension checks. ORP retirees receive a monthly bill from the college for their insurance premiums. My spouse will still be working when I retire. When he/she retires, may I add him/her to my group insurance benefits? Yes, as long as they have been continuously covered by an employer s group health insurance plan and can provide proof of such coverage. How does the reducing benefit on the life insurance work? The death benefit for active employees is equal to two times your annual base (or academic year) salary, rounded to the nearest $500.00, and capped at $100, On the day you retire, the face value benefit (for most people, $100,000.00) is cut by 50%. On the anniversary of your retirement date every year, the benefit reduces by 10% of the original face value until it becomes $5,000.00, where it stays until your death. I am a member of the Maryland State Retirement & Pension System. Will I still get credit for my unused sick leave? Yes. Unused sick leave adds creditable service, which determines the amount of your monthly check. However, it neither affects when you are eligible to retire nor alters any early retirement reduction factor. To check your sick leave balance, please go to the Employee Services section of My MC. Your balance is listed in hours. The state uses full eight-hour days as a determination of how much service is added. For the unused sick leave conversion table, please download the handbook that pertains to your plan, available on the state s website at 6

7 What happens to my unused annual, personal, sick, and enrichment leave at retirement? Unused personal and enrichment leave are lost and not paid out. Annual leave (staff and administrators) is paid out on the final paycheck, up to the amount that may be carried over from year to year (208 hours). Upon retirement, staff and administrators hired prior to January 1, 1993, are eligible to receive pay for 25% of their unused sick leave balance up to a maximum of 25% of 180 days. Upon retirement, faculty members who were employed as faculty members during the fiscal 1989 academic year are eligible to receive pay for 25% of their unused sick leave balance up to a maximum of 25% of 180 days. Please note, the sick leave payout does not reduce the unused sick leave reported to the Maryland State Retirement & Pension. May I allocate my unused annual and/or sick leave payout to be deposited pre-tax to my Supplemental Retirement Account/s? Yes. You may direct the payouts to your SRA/s up to the IRS limit for each plan (currently $17,000 or $22,500 for those age 50 or turning 50 in 2012). Please note, these payouts are still subject to FICA taxes (currently 7.65%). You must have enough in your final paycheck to cover the FICA tax, insurance and other required deductions, or other taxes. I am a member of the Maryland State Retirement & Pension system. Will I still be eligible for the cost-of-living (COLA) increase as a retiree? Yes. The Maryland State Retirement & Pension system requires that the member must be retired at least one year as of July 1 to be eligible to receive that year s increase. Please note, ORP members do not have a COLA provision. Who can answer my other questions? Please contact Suzanne Redding in the Office of Human Resources, Development, and Engagement at Suzanne.redding@montgomerycollege.edu or x Disclaimer: This statement does not supersede the Board approved plan summary or any of the retirement or benefit plans referenced. In the event of conflict, the applicable plan document applies. 7