Contribution Refunds

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I’m considering accepting a job that participates in Moser. There is a substantial payroll contribution for the pension and that it takes five years to be vested. My question is if I do not work the full five years in order to be vested will my payroll contributions be available to me for withdrawal or transfer?
Anyone who is first employed in a MOSERS or MPERS benefit-eligible position on or after January 1, 2011 must contribute 4% of pay to the retirement system. Your 4% contribution is used to help pay the cost of your future defined benefit retirement plan and could potentially pay you back far more than you contribute. See a simplified example in The Value of Your Retirement Benefit. When you retire, you will receive a benefit payment every month for as long as you live. This means you can never outlive your MOSERS retirement benefit.

If you leave state employment prior to becoming eligible for normal retirement, you may request a refund of your contributions plus credited interest. By taking a refund, your forfeit all your credited service. Or, you may leave your contributions with the system if you think you might return to work for the state at some point in the future and would like for those years of service to count toward an eventual retirement benefit. See our Member Contributions brochure for more information. 

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MOSERS' Funding Ratio

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So I read on here that the Funding Ratio for Mosers was around 82% in June of 2010. Looking at the most recent Fund Ratio:59% (correct me if I’m wrong). Should I be concerned about this considering the 20-22% drop in just 8 years when I plan on retiring in 28 years? What is the reason for this significant drop?
If the drops related to poor investments why when the overall market has recovered and has been doing well during this period?
If because of liabilities continue to grow faster than contributions/investment returns what steps are being taken for this? Is the lump sum option presented to former employees that left the state going to help this?
-If it continues to go down wont employee/employer contributions continue to go up? The employer contribution rate has steadily been rising correct? Isn’t this a bad sign for sustainability of the fund?
What steps are being taken to prevent the pension fund from ending up like California or Arizona in the next decade or so? Is any research being done in relations to these funds on why they are failing and how to prevent similar outcomes for Missouri? I’m just asking as I have been very concerned for my future retirement as I’m sure many others are.
Thank you for your insightful questions and your interest in these very important topics. 

Certainly, one factor that spurred the decrease in MOSERS’ funded status was the Great Recession of 2009. In our fiscal year 2010 annual report (FY10 CAFR), it says, “During the year ended June 30, 2010, the funded ratio (of …the MSEP…) decreased from 83% to 80.4%, primarily as the result of the previous years’ unfavorable investment experience” (p 12 FY10 CAFR).

Consequently, Missouri was among the first of many states to pass legislation making changes to their retirement benefits. In 2010, the Missouri General Assembly created the MSEP 2011. By requiring employee contributions and increasing the retirement eligibility age (among other changes), this action assists in long-term plan sustainability, retained the defined benefit retirement plan structure for state employees, and provides stability for future generations. While the impact of these changes will grow over time, as of January 30, 2019, already 45.72% of active state employees are in the MSEP 2011.

However, the primary reason that MOSERS’ funded ratio has dropped so significantly is that our Board of Trustees has taken action over the past four years to incrementally reduce our assumed rate of return (ARR) on investments. This reduction is to more accurately reflect capital market expectations. The Board has also indicated their intention to further reduce the ARR going forward:

MOSERS Assumed Rate of Return
•         Effective 6/30/2011: 8.5%
•         Effective 6/30/2012 - 6/30/2015: 8.0%
•         Effective 6/30/2016: 7.65%
•         Effective 6/30/2017: 7.5%
•         Effective 6/30/2018: 7.25%
•         The MOSERS Board has indicated an intention to reduce the ARR to 7.10% for the June 30, 2019 actuarial valuation.
•         The MOSERS Board has indicated an intention to reduce the ARR to 6.95% for the June 30, 2020 actuarial valuation.

Your MOSERS Board of Trustees is actively engaged in prudent analysis, plan sustainability, and benefit security for members. The Board's recent decisions to reduce the assumed rate of return on investments automatically result in higher employer contributions and a lower funded status in the short term but work to ensure MOSERS’ sustainability over the long term. Each year, the MOSERS Board certifies an employer contribution rate which results in an appropriation request within the state budget. The employer contribution is calculated by our external actuary as the amount needed from the state, as the employer, (in addition to investment income and employee contributions) to systematically and appropriately pay current and future benefits. In other words, if we assume that, in the future, we will receive less income from investments and not change employee contributions, the difference must come from increased employer contributions.

As you inquired about, the voluntary Buyout Program, authorized by state law, was offered by the MOSERS Board of Trustees in 2017 and 2018 to eligible vested former state employees of the system in an effort to reduce MOSERS pension liability. It eliminated $41 million in net liability for the system.

Additionally, our investments staff reduced investment fees by $36 million in FY18 and the MOSERS Board adopted a new asset allocation, which began in January 2019 and will be fully implemented over a 36-month period. While MOSERS’ investment returns have not always met assumptions in recent years, our long-term investment results, of 9.4% (since first tracking this data in 1981), exceed our current assumed rate of return. This, combined with the new investment portfolio, put us in a good position to meet our assumptions in the future.

It is important to remember that a pension system, such as MOSERS, operates on a very long-term time horizon. While our actuaries expect that employer contributions will increase and our funded status will decrease over the next few years, they also expect that throughout your career, our funded status will improve and MOSERS will be well-funded by the time you retire – allowing us to keep our promise of helping to provide retirement security for you and all of our other current and future retirees.

For more information on the above, see our FY18 Summary Annual Financial Report and our Actuarial Valuation Report as of June 30, 2018 (p 32, column 6). 

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Purchasing Military Service with Deferred Comp Funds

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I was told that I could use the money from my Deferred Comp to purchase my military time. Is that correct? If so, how would I do so? I could not find any details about in on the website.
Yes, your MO Deferred Comp 457(b) – excluding Roth 457 assets –  and 401(a) funds are available to use for purchasing prior military service. If you have not already done so, complete the Application to Purchase Active-Duty Military Service, attach the required documentation and submit it to MOSERS. We will provide you with an estimate of the cost to purchase your prior military service and a Tax-Free Rollover to MOSERS form that you can use to perform that transaction.

For additional information, here is a description of this service purchase option from page 6 of our MSEP | MSEP 2000 Acquiring Service Credit brochure:

You may purchase up to four years of active-duty military service credit performed prior to last becoming a member of MOSERS. This may include active-duty military training. To be eligible to purchase military service credit, you must be:
•         A vested, actively employed member of MOSERS, or
•         A terminated-vested member of MSEP (eligible for future benefits, but no longer working for the state).

If you elect to purchase your active-duty military service, you must purchase all that you served (total months and days) up to a maximum of four years. In connection with such a purchase, MOSERS requires that you submit a copy (not the original) of your military DD 214 or NGB 23 discharge form, which verifies the following:
•         Your service was active duty.
•         Your service was in an eligible branch of the U.S. Armed Forces or reserve component (Army, Air Force, Navy, Marine Corps, Coast Guard, Army National Guard, or Air National Guard).
•         Your dates of service.
•         You were honorably discharged.

Any active-duty military service you wish to purchase must have been performed prior to last becoming a member of MOSERS. Active-duty military service performed after you last leave state employment is not eligible for purchase or automatic credit.

You may only acquire active military service that is not being used for credit or benefits under another retirement plan, other than the U.S. military.

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BackDROP Lump-Sum Payment

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I keep being told that if a person work at least 2 years backdrop pass their normal retirement, they will receive their monthly lifetime benefits, plus whatever their lump sum amount is. Is the second part of this statement true? 
Yes--If you are eligible for and elect BackDROP at retirement, you will get the one-time lump-sum payment plus monthly pension benefit payments for life.

The tradeoff is that, in most cases, your monthly benefit payment will be less than it would have been if you hadn’t elected BackDROP.

The reason most people have a lower monthly benefit when they elect the BackDROP is because any service and any salary earned during your BackDROP period (up to five years) doesn’t count when we calculate your monthly benefit amount. We use your years of service and your final average pay from BEFORE your BackDROP period.

Your BackDROP lump sum will be equal to 90% of what you would have received during your BackDROP period if you had been retired during that time (based on the life income annuity amount).

This BackDROP graphic may help you visualize how it works or you can read the BackDROP brochure for more information. BackDROP can be complicated to understand, so MOSERS benefit counselors are available to help by phone or through an in-person appointment. Call (800) 827-1063 to discuss your options. Counselors can also provide you with benefit estimates with and without the BackDROP so you can compare.

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State Employee Pay Raise

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I am planning to retire 01/07/2019. My question is... IF we were to receive the much talked about raise in January of 2020 would that action have any impact on my retirement/backdrop?
No, if you retired before a pay raise was given to active employees, any such increase would have no impact on you as a retiree. 

If you continued working beyond January 2020, got a pay raise, and did not take BackDROP, the impact of a pay increase on your monthly retirement benefit payment would be dependent upon how long you continue working. 

Remember, in calculating your monthly benefit, one factor is your Final Average Pay, which is your highest 36 consecutive months of pay. So, if you got a raise and worked a few months past 2020, the impact may be very small. If you got a raise and worked an additional 36 months, the impact would be bigger. 

Any pay earned during your BackDROP period has no impact on either your monthly benefit amount or your BackDROP lump-sum amount. 

But keep in mind that, by law, MOSERS retirees receive an annual cost-of-living adjustment (COLA) between 0-5%. You can find more information about the retiree COLAs on our website. 

You can run benefit estimates under a variety of scenarios by logging in to your MOSERS Member Homepage, or ask a MOSERS benefit counselor to run them for you. You may find our Creating a Benefit Estimate video and our Comparison Calculator helpful in weighing your options.

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Tax Information for Retirees

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If you are receiving a retirement check from the state of Missouri are you required to claim it on your state tax income tax return as income?
Yes, you are required to claim your MOSERS benefits on your state taxes if you are a Missouri resident. (If you are not a Missouri resident, contact your state department of revenue or a qualified tax advisor for the answer to this question.) Below is some additional information that MOSERS retirees often need when filing their taxes:

1.      MOSERS is a public defined benefit (DB) pension plan and the benefit you receive through MOSERS is considered a “public pension”.

2.      MOSERS withholds state taxes only for Missouri residents.

3.      As long as you reside in Missouri, your retirement benefits are subject to Missouri state income tax and federal tax. However, you may qualify for the Public Pension Exemption on your Missouri state tax return.

4.      We have mailed 1099-R tax forms to all retirees/benefit recipients, which you can read more about in the current Fall/Winter 2018 issue of RetireeNews.

5.      See “Understanding Your 1099-R” for additional information. Print Friendly and PDF

Continuing Basic Life Insurance at Retirement

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My wife also worked for the state of Missouri for 29 years. Her office closed just before she reached 80 and out. A year later she started collecting her state retirement when she turned 51. Does she still get the $5,000 life insurance like I do. I stayed for 35 years and received full backdrop at age 55. 
No. Anyone who does not retire directly from state employment (within 60 days from their last day of state employment), does not get the automatic $5,000 in basic life insurance coverage at no cost to them.

The state will continue to pay for $5,000 of basic life insurance coverage for life for retirees who meet the following conditions:

•         They had basic life insurance coverage as an active employee and did not terminate coverage at retirement.
•         They have a MOSERS retirement date that is within 60 days of when they left state employment.

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