2016 Pre-Retirement Webinar

Transcription

1 2016 Pre-Retirement Webinar 3 SOURCES OF RETIREMENT INCOME Personal Savings YOUR RETIREMENT INCOME Social Security KPERS 2

2 TYPE OF RETIREMENT PLAN KPERS 1 and KPERS 2 are 401(a) Defined Benefit Plans Contrast to Defined Contribution Plans (personal savings plans) (b) 401(k) IRA 3 EMPLOYEE CONTRIBUTIONS Employee contributions are based on gross wages each pay period Contributions are deducted pre-tax for federal taxes only All employee contributions are deposited into the member s account Interest is credited annually after June 30 based on the balance of the account on December 31 of the previous year 4

3 EMPLOYER CONTRIBUTIONS The employer also makes contributions to KPERS The employer contributions are not deposited into the member s account Employer contributions go into the KPERS trust fund to help pay for the following benefits: Disability benefits Death benefits Future retirement benefits 5 Access Your KPERS Account Online

4 USING YOUR KPERS ACCOUNT Before Retirement Download your annual statement Create personalized benefit estimates Review or update beneficiaries After Retirement Change direct deposit and tax withholding Print 1099-R tax form Update contact information Payment history 7 ONLINE ACCOUNT ACCESS 8

5 LOGIN 9 YOUR ACCOUNT HOME PAGE 10

6 ACCOUNT SUMMARY (ACTIVE MEMBERS) 11 ACCOUNT SUMMARY (RETIRED MEMBERS) 12

7 Retirement Eligibility KPERS 1 KPERS 2 KPERS MEMBERSHIP KPERS 1 Member Employee hired before July 1, 2009 and active on July 1, 2009 KPERS 2 Member All employees first employed in covered positions on or after July 1, 2009, and before January 1,

8 RETIREMENT ELIGIBILITY FOR UNREDUCED BENEFIT KPERS 1 Age 65 with at least 1 year of service credit Age 62 with at least 10 years of service credit Any age when your age and years of service equal 85 points Current age 52 Current years of service + 29 Total points 81 Subtract total from = 4 Divide by = 2 Add to current age = 54 Age reaching 85 points 15 RETIREMENT ELIGIBILITY FOR UNREDUCED BENEFIT KPERS 2 Age 65 with at least 5 years of service credit Age 60 with 30 or more years of service credit No points 16

9 RETIREMENT ELIGIBILITY FOR A REDUCED BENEFIT KPERS 1 and KPERS 2 Age 55 with at least 10 years of service credit The earlier you retire, the more your benefit is reduced. KPERS 1 Age Example Reduction 62 Full benefit = $1,500/month 0% 60 Reduced benefit = $1,425/month 5% 55 Reduced benefit = $885/month 41% 17 Retirement Benefit Calculation

10 RETIREMENT BENEFIT CALCULATION KPERS 1 Benefit Calculation Final average salary times the statutory multiplier 1.75% for years prior to January 1, 2014 plus 1.85% for years January 1, 2014 and after Equals annual benefit Divided by 12 equals monthly benefit KPERS 2 Benefit Calculation Final average salary times the statutory multiplier 1.85% for all years of service Equals annual benefit Divided by 12 equals monthly benefit 19 FINAL AVERAGE SALARY (FAS) KPERS 1 If hire date is before July 1, 1993, (includes non-school members in their year of service waiting for membership) Average of highest three years salary without additional pay or, Average of highest four years salary including additional pay The highest calculation will be used. Additional pay is the lump-sum payout of unused leave time. If hire date is on or after July 1, 1993, Average of highest three years salary without additional pay. 20

11 FINAL AVERAGE SALARY (FAS) KPERS 2 Average of highest five years of salary without additional pay. 21 FINAL AVERAGE SALARY EXAMPLE W/ADD PAY th quarter 0 10,500 10,100 10,000 10,400 3 rd quarter 10,600 (+4,000) 10,500 10,100 10,000 10,400 2 nd quarter 10,600 (+4,000) 10,500 10,100 10,000 10,400 1 st quarter 10,600 (+4,000) 10,500 10,100 10,000 10,400 Total Pay 43,800 42,000 40,400 40,000 41,600 Additional leave pay: $12,000 (divided equally over number of days worked in final year) Sum of highest 4 years (16 quarters) w/add pay = $177,800 Sum of highest 3 years (12 quarters) w/out add pay = $125,500 Average of highest 4 years = $177,800 4 = $44,450 Average of highest 3 years (w/out add pay) = $125,500 3 = $41,833 22

12 Purchasing Service Credit WHY PURCHASE SERVICE CREDIT? Increase years of service Increase lifetime retirement benefit Possibly retire earlier 24

13 TYPES OF SERVICE AVAILABLE TO PURCHASE Year of Service Forfeited KPERS service Military Elected official Out-of-state teaching (cannot be a private school) In-State or out-of-state non-federal public service Forfeited (Board of Regents) service Vista or Peace Corp service 25 COST AND METHODS OF PAYMENT Cost is based on age and salary at time of purchase Payroll Deduction Method Payroll deduction over a period of time (pre-tax) Lump-Sum Method Rollover or a trustee-to-trustee transfer from another retirement plan Personal check, money order or Discover Card (after tax) Purchase must be applied for and paid for before your last day on your employer s payroll 26

14 Retirement Payment Options Maximum Monthly Benefit Joint & Survivor Life Certain Partial Lump-Sum MAXIMUM MONTHLY BENEFIT OPTION Member will receive a monthly benefit for their lifetime After member s death, the beneficiary will receive the balance of any remaining money that the member contributed to KPERS There is no continued monthly benefit after the member s death 28

15 JOINT SURVIVOR RETIREMENT OPTIONS Lifetime benefit plus provide a monthly benefit for someone after your death. KPERS 1 Benefit Reduction 50% Joint and Survivor 91% (+ /.4%) 75% Joint and Survivor 87% (+ /-.5%) 100% Joint and Survivor 83% (+ /-.6%) KPERS 2 KPERS 2 reduction factors are slightly different Benefit increases to Maximum if survivor dies first 29 LIFE-CERTAIN RETIREMENT OPTIONS Lifetime benefit. But if you die within a guaranteed period of time from your retirement date, your beneficiary will receive the same monthly benefit for the rest of the guaranteed period. KPERS 1 5-year period Life-Certain 98% 10-year period Life-Certain 95% 15-year period Life-Certain 88% Reduction factors for KPERS 2 members are slightly different You can change beneficiaries at any time and name any number of beneficiaries. They all share equally. 30

16 PARTIAL LUMP-SUM OPTION Based on the actuarial present value of lifetime retirement benefit, not the member s account balance. KPERS 1 can choose 10, 20, 30, 40, or 50 percent KPERS 2 can choose 10, 20, or 30 percent Monthly retirement benefits will be reduced by the same percentage of the partial lump sum option taken. 31 THINGS YOU SHOULD CONSIDER Monthly benefit is a lifetime benefit, therefore PLSO reduction is a lifetime reduction If you roll over your PLSO, are you able to make up the difference each month equal to your lifetime reduction? If the PLSO is paid directly to you, KPERS will withhold 20% for federal income taxes You may also be subject to a 10% IRS penalty if you are under age 59 ½ 32

17 Calculate an Estimate Member Web Portal ONLINE ACCOUNT ACCESS 34

18 LOGIN 35 MEMBER WEB PORTAL HOME PAGE 36

19 BENEFIT CALCULATOR 37 BENEFIT CALCULATOR 38

20 BENEFIT ESTIMATE 39 Calculate an Estimate Estimate Request Form 15-E

21 KPERS-15E BENEFIT ESTIMATE REQUEST FORM Use this form to have KPERS calculate an estimate that includes add-on pay. 41 Retirement Date

22 CHOOSING YOUR RETIREMENT DATE State and Local - All School - non-licensed (classified) Always the first day of a month Must be off the payroll of all KPERS employers on your retirement date 43 CHOOSING YOUR RETIREMENT DATE Licensed (certified) School employees under Continuing Contract Law Teachers As early as June 1, if work under the contract is complete Principals and Superintendents As early as June 1, if work under the contract is complete If using lump-sum add-on pay, first of the month after the end of the contract 44

23 The Retirement Process STEPS IN THE RETIREMENT PROCESS Determine your best retirement date (call KPERS for assistance) Review and choose a monthly benefit option Submit the retirement application (KPERS-15) at least 30 days before retirement date. (You must apply; retirement does not start automatically) Provide proof of age and name change (also required for your joint annuitant, if applicable) List of acceptable documents is provided in retirement application booklet 46

24 RECEIVING MONTHLY BENEFIT PAYMENTS The retirement application booklet includes a bank form for direct deposit (KPERS-15B) Your retirement benefit will be direct deposited in your checking or savings account Direct deposits are made on the last working day of each month You will receive notice of any changes, but you will not receive a payment notice in the mail each month 47 RETIREE DEATH BENEFIT KPERS retirees have a $4,000 death benefit The $4,000 death benefit is taxable for federal income tax, but not Kansas income tax Member can choose a person, estate or a trust the beneficiary will pay the taxes on the death benefit Member may name a funeral establishment to receive the $4,000 death benefit to avoid federal income tax to a beneficiary Not payable on the death of a joint survivor 48

25 IMPORTANT TO KEEP BENEFICIARY UP-TO-DATE Review your beneficiaries whenever there is a significant life event, such as: Marriage Divorce Retirement Birth or adoption Death May name a person, estate or trust Can change beneficiaries at any time If a beneficiary is not named, KPERS must follow the line of descendants by Kansas law 49 CONTINUING YOUR LIFE INSURANCE Portability Option A term insurance option to continue coverage when leaving employment or retirement At your own cost, but without evidence of insurability Must be under 80 and actively at work the day before leaving employment (cannot be off work due to sickness or injury) Coverage reduces to 65% at age 65 and all coverage ends at age 80 Portability must take place within 60 days of your last day on employer s payroll 50

26 CONTINUING YOUR LIFE INSURANCE Conversion Option A whole life option to continue coverage when leaving employment or retiring At your own cost, but without evidence of insurability Higher premiums, but builds cash value Conversion must take place within 60 days of your last day on employer s payroll 51 HEALTH INSURANCE KPERS does not provide health insurance coverage for KPERS retirees Contact your personnel office for information on continuing health insurance coverage 52

27 FEDERAL AND STATE INCOME TAXES Monthly benefit is subject to federal income taxes Monthly benefit not subject to Kansas state income tax. You already paid state taxes during your working career with KPERS If you move to another state, your benefit may be taxable in that state Submit a W-4P form to KPERS or login to your account to change federal tax withheld from your retirement benefit You can change your federal withholding anytime A 1099-R tax form is available by the end of January each year 53 COPY OF 1099-R TAX FORM 54

28 KPERS AND SOCIAL SECURITY All KPERS members pay into Social Security KPERS benefit will not affect Social Security benefit Social Security benefit will not affect KPERS benefit For questions about Social Security, you may call Working After Retirement

29 WORKING FOR A NON-KPERS EMPLOYER Any employer that is not affiliated with KPERS No waiting period No earnings limit No effect on your benefits 57 WORKING FOR A KPERS EMPLOYER Any employer that is affiliated with KPERS No employment prearrangements 60-day waiting period $25,000 earnings limit (some exemptions) 58

30 NO PREARRANGEMENTS IRS requires a true separation from employment You cannot discuss or agree to employment with a KPERSaffiliated employer before retirement or during your 60- day waiting period Your retirement benefit will be suspended if a prearrangement is discovered Employers also penalized for prearrangements DAY WAITING PERIOD 60-day waiting period before returning to work for any KPERS-affiliated employer The 60-day waiting period begins the day after your KPERS retirement date If you return to work with a KPERS employer after retirement, you cannot make contributions to KPERS 60

31 $25,000 EARNINGS LIMIT Earnings limit applies to all KPERS retirees returning to work for any KPERS employer If you reach the earnings limit, you can: Stop working for rest of the calendar year. Continue working and your retirement benefit stops. Benefit starts again in January or if you stop working. 61 EXCEPTIONS TO EARNINGS LIMIT Non-School and School Hardship position Licensed School Positions Special education teaching positions Hard-to-fill positions Determined by the Kansas Department of Education 62

32 RETIREMENT CHECKLIST Attend a Pre-Retirement Seminar. Find out when you are eligible to retire. Calculate a retirement estimate. Understand the benefit payment options available to you. Complete Application for Retirement Benefits (KPERS-15). Review life insurance. Determine tax withholding. Confirm Social Security benefits. Determine health insurance needs. Review your other retirement plans and savings. 63 KPERS CONTACT INFORMATION Website: Info-line: Toll-free Local kpers@kpers.org Fax: Mail: 611 S. Kansas Ave., Suite 100 Topeka, KS

33 Thank You For Attending Kansas Public Employees Retirement System