The Forgotten Benefit

Transcription

1 The Forgotten Benefit When KPERS benefits is said, does a vision of retirement dance in your head? Most members connect KPERS with retirement and retirement only. After all, you re making contributions toward that big day with every paycheck. But as a KPERS member, you also receive important benefits while you re still working. You have life insurance and disability benefits, also known as Death and Disability. And they re free to you. KPERS oversees these often-forgotten benefits for members. With each paycheck, your employer pays for basic life insurance and long-term disability benefits with their regular contribution payment. Here s what you get. Long-Term Disability Benefit This employer-paid benefit pays you 60% of your annual salary if you become disabled while you re an active KPERS member. While on disability, you will continue to build your retirement benefit and keep your basic life insurance benefit. You can also continue any optional life insurance coverage (see below). Basic Life Insurance As a KPERS member, you automatically receive term life insurance equal to 150% of your annual salary. If you earn $40,000 a year, you have $60,000 of life insurance coverage right now and at no cost to you. KP&F members do not have basic life coverage but can purchase optional insurance. Your KPERS death and disability benefits can be easily overlooked. But they re nice to have, and they re free to you. And that s hard to forget.

2 What If You Need More Coverage? Optional life insurance can give you added financial security, and many employers offer it. You decide how much you need, and premiums are automatically deducted from your pay. KPERS also offers spouse and child coverage. Check with your employer to see which types are included in your plan. If You Leave Employment Life insurance coverage ends when you leave employment. But you can stay covered by continuing any basic and optional term insurance on your own or converting it to whole life insurance. In either case, you would pay the insurance company directly and premiums could go up. Smart Saving Through a Plan at Work Whether you're a state employee, a city worker or a teacher, chances are you have a plan at work to help you save for retirement. Employer 403(b) or a 457(b) plans offer tax advantages that help build your retirement nest egg. ABCs and 403(b)s For many public educators, a 403(b) plan scores an A+ when it comes to saving for retirement. A 403(b) plan, also known as a tax-sheltered annuity plan, is available to employees of public schools, Board of Regents institutions and other tax-exempt organizations. While your KPERS benefits are an important part of retirement income, you ll still need personal savings to supplement your retirement income. If you re an educator, a 403(b) plan is one way to do it.

3 403(b) plans work like other employee retirement plans such as a 401(k) or 457(b). Contributions are made pre-tax through your employer. You pick the investments, and those contributions and investment earnings can grow tax-deferred until retirement. Withdrawals are then taxed as ordinary income. Many Kansas school districts and Board of Regents institutions offer a 403(b) plan as a way to save. Check with your employer about participation. Want to Educate Yourself? Here are some 403(b) information sources around the web you might find useful. U.S. Securities and Exchange Commission: While you're devoting your time and talents to teaching others, the SEC has provided information to help you learn more about 403(b) plans ( 403bwise: Two California educators created a 403(b) information center that is dedicated to teaching teachers about their 403(b) plans and wise investing. Visit 403bwise.com ( or follow them on Facebook ( Internal Revenue Service: For the nitty gritty on 403(b) plans, see Publication 571 ( at irs.gov ( Not a Teacher? You Have a Savings Plan, Too! A 457(b) plan is also known as a governmental deferred compensation plan. State and local government employees are the most common participants. Like a 403(b), an employer offers the plan and employees defer money into an account pre-tax. A key difference with a 457(b) plan is that there is no 10% federal penalty for withdrawing funds before age 59 ½. KPERS 457 is the State of Kansas' deferred compensation plan. It s a voluntary savings plan for all State employees and many local employees. And KPERS oversees the plan with your best interest in mind. How it works: You choose how much to save and when You can start or stop anytime Contributions are automatically deducted from your pay pretax You can start with as little as $12 per pay period State employees can enroll online at ( Local employees: Check with your employer to see if they participate.

4 KPERS 101 Vesting Let's talk about vesting. It s not a clothing style, but it does put you with the in crowd. Vesting means you have worked enough years to guarantee a retirement benefit when you re eligible. Even if you leave KPERS-covered employment. KPERS members are vested with 5 years of service. KP&F members vest with 15 years (Tier II) or 20 years (Tier I). Did You Know? Total Active Members: 152,175 Average Age: Average Years of Service: years KPERS Investment Snapshot as of 6/30/2016 Target Return = 8% Total Assets = $16.98 Billion Our actuarial projections assume an average, long-term investment return of 8%. In some years, returns will be below that rate, and in others, returns will exceed it. While investment returns each year are important, healthy returns over time are essential for proper funding. KPERS 25-year return is 8.5%*, exceeding the 8% target. 1-year 5-year 10-year 25-year KPERS Return 1.4% 9.1% 6.6% 8.7% Policy Index 0.0% 8.5% 6.3% 7.9%

5 Letter from Executive Director Each year, our actuary completes an actuarial valuation. This is a snapshot of the Retirement System s financial health. It shows what money has come in through contributions and investments. It also shows the amount of money needed to pay future benefits. Based on the 2015 actuarial valuation published in July, KPERS financial health is headed in the right direction. Our overall funded ratio increased by 5% and the unfunded actuarial liability dropped by $1 billion. Our unfunded actuarial liability is the difference between the current value of our assets and the cost of future benefits. The funded ratio is the ratio of assets to those future liabilities. KPERS is continuing to make progress on our long-term funding journey. This year s gains are due in large part to past positive investment returns and proceeds from the pension obligation bonds sold by the State of Kansas in If our investments stay on track over the long term and actuarial assumptions are met, KPERS should reach 100% funding by Funding for your KPERS benefits comes from you, your employer and KPERS investments. You contribute 6% of your pay. The valuation is used to determine what employers need to pay. Right now, employers are paying:

6 KPERS Local KPERS State/School KP&F Judges 9.18% 10.81% % We invest all these contributions in a diversified portfolio. The KPERS trust fund has a 25-year investment return of 8.5%, higher than our target of 8%. And over the years, investments have paid for about 60% of benefits. One last piece of good funding news! Right now, the trust fund is at an all-time high of $17.4 billion. If you would like to learn more about KPERS long-term funding, you can download the 2015 Actuarial Valuation Report ( or the Valuation Results PowerPoint Presentation ( As always, we welcome your comments and questions. Please feel free to contact me any time at or aconroy@kpers.org (mailto:aconroy@kpers.org). Contact KPERS: Phone or kpers@kpers.org (mailto:kpers@kpers.org) Our Mission: In our fiduciary capacity, we exist to deliver retirement, disability and survivor benefits to our members and their beneficiaries. The fiduciary standard is our driving force. That means we put the interest of our members first. It is the highest standard of care and accountability. A fiduciary relationship is highlighted by good faith, loyalty and trust. Board of Trustees: Lois Cox (Chair), Kelly Arnold (Vice-Chair), Ernie Claudel, Shawn Creger, Ron Estes, Todd Hart, Christopher Long, Suresh Ramamurthi, Michael Rogers Executive Director: Alan D. Conroy