The Retirement Puzzle

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2 The Retirement Puzzle Make sure you have all the pieces Maine Public Employees Retirement System (MainePERS) SPS-sem0205ME

3 The Horace Mann Companies presents this information to help employees better understand the benefits offered by their retirement system. The Horace Mann Companies is solely responsible for the information contained in this presentation and neither the presenter nor Horace Mann is in any way affiliated with this retirement system. Please contact the Maine Public Employees Retirement System at or on the Web at

4 Maine Public Employees Retirement System (MainePERS) Membership Contributions Vesting Benefit factors Beneficiary Survivor benefits Payment plans Service retirement Early retirement COLA

5 Membership July 1, 1993 changes Age 60 plan Age 62 plan July 1, 2011 Members with less than 5 years of service New hires Eligible to retire at age 65

6 Contributions Deducted from gross salary each pay period Employee rate is 7.65% Employer rate determined annually

7 Vesting Guaranteed a retirement benefit once age and/or service requirements are met Requires 5 years of service Retain membership until retirement or death Lose membership if contributions are withdrawn Vesting status as of 7/1/11

8 Defined benefit formula MainePERS is a defined benefit retirement plan Benefit determined by a formula Average final compensation (AFC) Creditable service Accrual rate (2%)

9 Average final compensation Three years of creditable service Highest salaries received Cap on salary increases

10 Creditable service Membership service under MainePERS for which contributions are made Plus periods of credited or purchased service Refunded service Out-of-state service Military service Leave of absence or sabbatical leave Other public or government employment Up to 90 days unused and unpaid sick time

11 Refunded service Previously withdrawn service may be reestablished Redeposit amount withdrawn plus interest Lump sum or installment payment plans

12 Your beneficiary Make a beneficiary designation One or more primary beneficiaries One or more contingent beneficiaries Certain survivor options may not be available if you designate multiple beneficiaries Keep your designations up to date Designation of Beneficiary form

13 Survivor benefits Payable to your beneficiary if you die before retirement Refund of contributions and interest Monthly benefit (automatic Option 2) Monthly survivor benefit Accidental death benefit

14 Group life insurance Group life insurance may be available if your employer participates in the MainePERS program Coverage amounts Basic coverage on yourself Optional supplemental coverage on yourself Optional dependent coverage Premiums vary by employer

15 Normal retirement age (Unreduced benefit) Age 60, if before 7/1/93 you had 10 years of service; or you had reached age 60 and had at least one year of service immediately prior to reaching 60 Age 62 If you do not meet either of the above requirements Age 65 If you had less than 5 years of service on 7/1/11; or If you are a new hire on or after 7/1/11

16 Service retirement $4,167 Assumptions Member age 60 (2% x 30) Beneficiary age 60 Service 30 years $2,500 FAS $50,000 $1,667 This example is for illustration only. Figures using your specific information can be obtained by going to the MainePERS website.

17 Benefit payment plans Single Life plans Full Benefit (maximum monthly benefit) Option 1 Life with refund Joint and Survivor plans Options 2-8

18 Options 2 & 3 Joint and Survivor Permanently reduced retirement allowance Retirement allowance will continue after your death to the designated beneficiary Option 2 100% of retirement allowance Option 3 50% of retirement allowance If the beneficiary dies first, your monthly allowance will remain the same

19 Option 4 Specified Percentage to Survivor Permanently reduced benefit for your lifetime At your death the beneficiary receives a percentage of the benefit paid to you You elect percentage at the time of retirement Percentage other than 100% or 50%

20 Option 5 Split Percentage with Higher Percentage to Survivor Elect percentage of payment for both you and beneficiary At either death the survivor receives the higher percentage for life Minimum member percentage is 51%

21 Options 6 & 7 Joint and Survivor with pop-up Reduced retirement allowance payable while you and your beneficiary are both alive Retirement allowance will continue after your death to the designated beneficiary Option 6 100% of retirement allowance Option 7 50% of retirement allowance If the beneficiary dies before you, the retirement allowance will revert (pop up) to the maximum amount

22 Option 8 modification of option 4 Joint with specified percentage to beneficiary If the beneficiary dies first, your benefit will pop up to the Full Benefit

23 Early retirement qualifications At least 25 years of service credit Reduced benefit Normal retirement age 60 Reduction of approximately 2.25% for each year younger than 60 Normal retirement age 62 or age 65 Reduction of 6% for each year preceding your normal retirement age

24 Early retirement (Age 60) $4,167 Assumptions Member age 55 (2% x 25) - $234 Service 25 years FAS $50, % reduction for each year under age 60 $1,849 $2,318 This example is for illustration only. Figures using your specific information can be obtained by going to the MainePERS website.

25 Early retirement (Age 62) $4,167 Assumptions Member age 55 (2% x 25) - $875 Service 25 years FAS $50,000 6% reduction for each year under age 62 $1,208 $2,959 This example is for illustration only. Figures using your specific information can be obtained by going to the MainePERS website.

26 Cost-of-Living Adjustment (COLA) COLAs are applied on the first $20,000 of benefits COLA cannot exceed 3% annually Cap amount will be indexed by the CPI for that year

27 Social Security benefits Members of MainePERS do not pay into Social Security You may qualify for Social Security benefits if You ve worked outside this system Your spouse has paid into Social Security These benefits may be reduced Windfall elimination provision (WEP) Government pension offset (GPO)

28 Retirement income shortfall Making a difference Your current income Your income from pension and Social Security You need to provide the difference to maintain your current income

29 Why start now? You need to fill in the gap!

30 Average life expectancy after retirement Source: Table A, United States Life Tables, 2009, National Center for Health Statistics

31 Standard of living Approximately 80% of pre-retirement income First year of retirement Inflation

32 Purchasing power Source: U.S. Department of Labor, Bureau of Labor Statistics,

33 Can you afford to wait? Cherie Started a retirement fund at age 25 Contributed $4,000 annually for 10 years for a total of $40,000 Earned 6% annually Lauren Started a retirement fund at age 40 Contributed $4,000 annually for 25 years for a total of $100,000 Earned 6% annually Who ends up with more at age 65? These figures are hypothetical and do not represent the returns for any particular investment.

34 Developing a retirement plan Retirement age Retirement lifestyle Length of retirement Income needed MainePERS benefits Social Security Health insurance Continue working

35 Estate planning considerations Will Financial power of attorney Advance care directive

36 Additional information Establishing service credit Disability retirement Returning to covered employment Beneficiary and option changes Maine Public Employees Retirement System or

37 You should review your retirement plan Retirement planning is a process, not an event!

38 Your retirement system Maine Public Employees Retirement System 46 State House Station Augusta, ME Telephone Toll-free Retirement-System-MainePERS/

39 Your Social Security benefits Social Security Administration click on Calculate your Benefit

40 Horace Mann representative Agent Name Agent Phone Number Agent