BackDROP and the Ongoing Monthly Benefit

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Just want to make sure of something because of one of the Pension Plus articles and the way it was written. (Yes, someone actually reads them!)  
When I do retire I will received the BackDrop money (regardless of what I choose to do with it and those options) AND my monthly retire retirement benefit (regardless of which option I choose). Correct? In other words, the BackDrop is an additional payment to my regular monthly income. Correct? Thanks for the clarification.
Thank you for reading our newsletter. We appreciate it! 
To answer your question, yes, if you elect to take a BackDROP amount, you will still receive an ongoing monthly benefit. If you elect the BackDROP, the monthly benefit payable on your actual retirement date is based on the benefit you would have been receiving had you left employment and retired on an earlier date, referred to as the BackDROP date. In addition, you will receive a lump sum payment equal to 90% of the Life Income Annuity amount you would have received during the BackDROP period. See our website to read more about BackDROP.
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Unemployment Compensation for Retirees

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Can a person retiring from state service receive unemployment compensation? I have heard this several times and it sounds like a rumor/fairytale. Are there groups of retiring people that can receive that type of benefit?
The basic requirements for qualifying for unemployment benefits can be reviewed hereWe did contact the Department of Labor and Industrial Relations, though, and someone from their Division of Employment Security sent us this response:
When a person leaves a state agency and files an unemployment claim, the Division of Employment Security claims department gathers information needed to process the unemployment claim.  This generates a notice to the appropriate state agency that the person filed an unemployment claim, and allows the agency to raise any issues they so choose.
Some issues may be whether the person quit for reasons that are not attributable to the work or the employer when they chose to retire.  Also, the person is asked if they will receive a pension and whether they are able and available for full time work.  These are just some of the questions and possible issues that will likely arise.
If any of the above apply, both the employer and person filing the unemployment claim are given the opportunity to provide information.  These issues are then determined and each party has the right to appeal.
Basically, we look whether the person is unemployed through no fault of their own, whether any pension they receive would affect their unemployment claim (deductible pensions are reportable and deductible from benefits)  and whether the person is available to return to the workforce on a full-time basis.

We hope this information is helpful. However, we highly encourage anyone in this situation to contact the Missouri Department of Labor and Industrial Relations toll-free at 800.320.2519 or by visiting www.labor.mo.gov for confirmation.
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2011 Retirement Incentive Rumor

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I heard that they may let 2012 employees retire in 2011 with full benefits (80 and out). Is this true? Thank you.
 MOSERS does not initiate any kind of retirement incentive. In order for an incentive to be offered for all MOSERS members, a member of the general assembly would have to file a bill authorizing some sort of incentive. We have no way of knowing what, if any, retirement incentive will be offered during the 2011 legislative session. We will monitor the session and inform our members of any legislation signed into law that impacts them. MOSERS has no control over retirement incentives. Only members of the legislature can introduce such legislation, and then it would have to make its way through the legislative process.
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State Pensions for Employees Hired After 2010

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Is it true that the state of Missouri will no longer provide a pension for their employees after this year if you are hired by the state [and] the employee must pay into their own retirement?
No, that is not true. The state of Missouri will provide a pension benefit for all eligible retirees, no matter when they are hired. During the 2010 special session of the Missouri Legislature, a bill was passed that made changes to the current laws on retirement. We've written extensively about these changes on our website, including an FAQ and a feature article on the subject. These changes impact only those employees who are hired for the first time in a benefit eligible position on or after January 1, 2011. While new employees will have to contribute 4% of their pay to the retirement system, that in no way means that the state will not provide them with a pension when they retire. On the contrary! All state of Missouri retirees who retired from a MOSERS covered position, no matter when they are hired, are members of a defined benefit retirement system, which means that when they retire, they are guaranteed a retirement benefit for the remainder of their lives.
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Follow Up to December 9, 2010 Post About Maximum BackDROP Period

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I could be wrong, but I think that the question/answer recently posted on rumor central  may have been referring to the amount of backdrop if you work, say, seven years past your normal eligibility date. Does the maximum five-year backdrop go back to the original date, or does it go back to five years from the date actually chosen for retirement?
Our apologies if there was any confusion over the December 9, 2010 Rumor Central post regarding BackDROP. We hope this question/answer clarifies the issue. To be eligible for the BackDROP, you must work in a MOSERS covered position for at least two years beyond your normal retirement eligibility date. You can work more than five years past your normal retirement eligibility date and still be eligible for the BackDROP, but you can only take a maximum of five years. Whatever BackDROP date you choose, it must meet both of the following criteria:
  • On or after the date you were first eligible for normal (unreduced) retirement benefits
  • Within the five year period immediately prior to your actual retirement date
So, yes, if a person worked seven years past their normal retirement eligibility date, the maximum period they could choose would be a five year BackDROP, but it would be the five years immediately prior to their actual retirement date.

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Missouri State University Retirement Incentive

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I just saw the article on KY3 News that Missouri State University would be offering a voluntary retirement incentive in 2011 for those employees under the MOSERS plan. Will that benefit be offered to other State agencies who are covered under the MOSERS plan as well? Thank you.
While the incentive being offered at Missouri State University is being referred to as a "voluntary retirement incentive" to faculty and staff of that institution, it doesn't impact their MOSERS benefits. What they are offering is an incentive to their faculty and staff in the form of cash (25% of base salary with a minimum payment of $10,000 and a maximum payment of $25,000) or university paid health insurance for the employee only until age 65. The university has a separate budget for this and their employees are not covered by the Missouri Consolidated Health Care Plan (MCHCP). 
In order for an incentive to be offered for all MOSERS members, a member of the general assembly would have to file a bill authorizing some sort of incentive. We have no way of knowing what, if any, retirement incentive will be offered during the 2011 legislative session. We will monitor the session and inform our members of any legislation signed into law that impacts them. MOSERS has no control over retirement incentives. Only members of the legislature can introduce such legislation, and then it would have to make its way through the legislative process.
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Direct Deposit of Payroll Checks

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Is there any truth to the rumor that there will be a tax placed on direct deposit of payroll checks?
We have heard of no such rumor, nor has the Office of Administration's Division of Accounting. According to OA/Accounting, there are some banking institutions that may charge a fee based upon the number of transactions into an account, but they've not heard of a tax proposal. As always we will monitor the upcoming legislative session and keep members informed of any legislation that impacts them or MOSERS.
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80 & Out

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I was trying to locate information regarding 80 and out. Thank you for your time.
Here is a link to a video on our website. It also includes a video transcript in case you cannot, or do not wish to, watch the video. It includes information on all aspects of retirement eligibility, including the 80 & out provision.

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Un-used Sick Leave and Retirement

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Will unused sick leave time still be converted into time toward retirement (i.e., 168 hours of sick leave equals one month toward retirement benefit)?
Yes, for every 168 hours of Sick Leave you have accrued but not used, you will receive one more month of service to increase your benefit amount. Sick Leave does not affect your eligibility to retire.

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Maximum Period Allowed for BackDROP

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Some confusion over back drop amount when employee retires. Some people think it is capped after 5 yrs. Others believe it would increase if employee stays more than 5 yrs or longer. What is correct situation?
 The maximum BackDROP period a member may select is 5 years. If a member works beyond 5 years past his or her normal retirement eligibility date, still the maximum period that may be selected is 5 years. You can read about all of the BackDROP provisions on our website.
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2011 Retirement Incentives

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Is it true that early retirement may be offered with health insurance premiums paid for an unknown period of time in the near future?
MOSERS is not aware of any proposed retirement incentives. The 2011 legislative session begins January 5, 2011. Staff at MOSERS administers the program we have responsibility for according to state law, and we closely monitor all legislation that impacts MOSERS or MOSERS' members. We can provide information to legislators and show the impact on employees and the trust fund, but ultimately, decisions about making changes to the retirement plan rest with the legislature and the Governor's office. As always, we will keep our members informed of any changes that become law.
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Pretax Dollars for Medical Expenses

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When employed our family set aside pretax dollars to a fund from which we paid unreimbursed medical expenses. Does MOSERS have such a fund?
You are referring to the State's Cafeteria Plan. That is a benefit that is available to active state employees and is administered through ASIFlex. There is no like benefit available through MOSERS.
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Missouri Consolidated Health Care (MCHCP) Reserves

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Channel 5 news announced that you "MOSERS" had given the state 90 Million of our excess money from our health care fund. We also found an article from the St. Louis Business Journal. My question is will that money be paid back? Will the fund still have enough money for the retirees and employees?
MOSERS is the Missouri State Employees' Retirement System, which administers retirement, life insurance and long term disability insurance for Missouri state employees and retirees. The article in the St. Louis Business Journal to which you refer is about the Missouri Consolidated Health Care Plan (MCHCP), the organization that administers health care benefits for Missouri state employees. MOSERS and MCHCP are two distinctly different organizations and our funding is also separate.
Since we do not handle health insurance for state employees we cannot respond to your question. However, it has been forwarded to Missouri Consolidated Health Care Plan (MCHCP) to see if they can address your concerns.   
While we can’t comment on the health care plan, the state of Missouri makes payments in full and on time to the MOSERS trust fund. Your retirement system remains well funded and your promised benefits are secure.
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Comments on Josh Rauh's Studies

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Please comment on the recent article by Josh Rauh entitled " The Day of Reckoning for State Pension Plans" dated 3-22-10, in which he claims that the Missouri State Retirement Plan will go broke in 2021.
Just yesterday, Keith Brainard, Research Director of the National Association of State Retirement Administrators (NASRA) issued this letter to the editor. It was published in the online magazine Pension & Investments (P&I). While the P&I letter to the editor by Mr. Brainard addresses projections made by Mr. Rauh in the recent past, we think it appropriately addresses Mr. Rauh's sentiments in the article you mention.  It is reprinted below in full. For further information, you might want to read a recent article, "What's Really Behind the New "Truth," written by MOSERS Executive Director Gary Findlay, and published on our website on 11-1-10.
Flawed studies misleading readers
Letters to the Editor
Source: Pensions & Investments
Date: November 15, 2010 
 
Pensions & Investments' reference to projections made in studies by Joshua Rauh, et al., (“Tough decision looms,” Editorial, Nov. 1) as if they are matters of fact, is as misleading to your readers as the studies themselves. A glimpse beneath the veneer of these studies would reveal specious methods and assumptions that are used to arrive at the startling conclusion that most public pension plans face near-term insolvency. 
 
For example, the authors assume that over the next decade, public pension plans will receive no contributions to pay down their unfunded liabilities. Since fiscal year 2001, the average annual required contribution paid to public pension plans exceeds 90%, and a majority of plans can be reasonably expected to continue to receive their full contribution. Many states and cities mandate payment of the full pension contribution. Simply wishing away these contributions, as do the authors of these studies, does not mean the contributions won't be paid. With the rest of the media that has reported these findings, P&I has an obligation to question this assumption.

Another method used in these and like studies is the application of a corporate-style pension accounting standard to value public pension liabilities. This method uses current interest rates, which conveniently are at multidecade lows, to project the cost of future pension liabilities. Yet, after taking into account written comments and hearing oral testimony from dozens of individuals reflecting a wide range of views and backgrounds, the Governmental Accounting Standards Board recently “considered but rejected” this very method, stating, “The rate used should be a reasonable estimate of the rate at which plan net assets are expected to grow, over a term commensurate with the accounting measurements for which the rate is used, as a result of investment earnings.” In other words, the body responsible for setting standards for calculating public pension liabilities has specifically rejected the method used in recent studies to contend that the public pension sky is falling.

The liability projections in these studies are wildly inconsistent with the findings of the professional actuaries who are trained and certified to make such calculations. Were those making these projections professional actuaries, their professional standards would preclude them from reporting these dramatic results.

How public pension liabilities should be valued, whether current public pension investment return assumptions are appropriate, and whether GASB in its present form is the optimal governance model for determining public sector accounting standards, are all reasonable questions and fair game for debate. But these projections, made on the basis of methods and assumptions of one's own choosing, ought to be called out for what they are: an opinion. 
 
Keith Brainard
Research Director
National Association of State Retirement Administrators
Georgetown, Texas
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Is Withdrawing or Borrowing Against the MOSERS Fund Allowed?

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Is it possible for a member to withdraw some funds from the MOSERS account or to borrow funds against the account?
MOSERS is a non-contributory benefit plan for members hired before January 1, 2011. For those members, your employer pays the necessary contributions into our system so that you may draw a future retirement benefit. Since those members do not pay these contributions, they are not eligible to withdraw monies from their retirement plan.  
Members hired in a MOSERS covered position for the first time on or after January 1, 2011 are required to contribute 4% of their gross salary to help fund the retirement system. Those members, if they leave state employment, will have the option of requesting a refund of the contributions they have made to the retirement system plus any applicable interest. Any member who receives a refund will forfeit the right to receive any future retirement benefits from MOSERS.  
Members of MOSERS are not eligible to borrow against the fund for any reason

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Temporary Benefit

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Is it true that you can't get the temporary benefit if you retire earlier than your projected retirement date?
Members who are eligible to retire normally under the MSEP2000 plan, and do so prior to their 62nd birthday, will receive a temporary benefit in addition to their normal monthly benefit. This temporary benefit will be paid until the member's 62nd birthday.
Members who retire early are not eligible to receive this temporary benefit.
For more information on the temporary benefit, please consult our "General Employees' Retirement Handbook."

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Life Insurance

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Can I purchase life insurance for my spouse who just lost his job?
In order to obtain optional life coverage on your spouse, you must complete the "Enrollment/Change Optional Life Insurance" form and your spouse must complete the "Standard Medical History Statement." Both of these forms may be found here.
Your spouse's insurance coverage, if approved, may not exceed the lesser of $100,000 or the amount of your optional coverage. 
The cost of life insurance is determined as a monthly premium. You pay a flat rate for every one thousand dollars in coverage you have. The rate you pay for both your coverage and your spouse's coverage is determined by your age on the "Schedule of Monthly Premiums."
For a schedule of these premiums, or further information on life insurance, please consult our Life Insurance Handbook.
If you have further questions or concerns, please contact a benefit counselor at (800) 827-1063.

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COLA 2011

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What is the possibility of receiving a COLA this year? I retired under the new plan and with my health insurance going up I just thought I would ask. Thanks for your time and help
At this point, we don't know if there will be a cost of living adjustment (COLA) in 2011. We will not be able to make a determination until mid-January at which time we will have the complete picture of the Consumer Price Index for all of 2010. COLA rates are determined in January, and we will inform members of the COLA rate at that time.
See these two recent Rumor Central posts for more information.
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What Happens if the Federal Government Raises the Early Retirement Age of 62?

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I retired quite early from State of Missouri at 49. I'm now 55. I will receive the incentive pay until I'm 62 and first take SS benefits. What will happen if the federal government raises the early retirement age of 62. I thought I remembered that the bill stated at the time the incentive would go until 62 or first eligible for early social security. What is your take on this?
The legislation to which you are referring regarding the temporary benefit originally said "first eligible for social security" with no mention of age 62. The words "no later than 62" were added later. Section 104.1024 RSMo reads, in part:
The temporary annuity and any cost-of-living adjustments attributable to the temporary annuity pursuant to section 104.1045 shall terminate at the end of the calendar month in which the earlier of the following events occurs: the member's death or the member's attainment of the earliest age of eligibility for reduced Social Security retirement benefits, but no later than age sixty-two.
 If the federal government raisethe age at which a person can take early social security benefits, it would take a change to Missouri law in order for us to pay the temporary benefit past age 62.
 See this recent Rumor Central post for further information on this subject. You may also want to click on the "social security" label at the bottom of the post. That will bring up all the posts on the subject that we've done.
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Reduction of Pay

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Is it true that if you are within 3 years of retiring your pay cannot be decreased?
No, that is not true. There is no provision in the law that says pay cannot be reduced.
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Was MOSERS' Email System "Hacked" (regarding the Blackstone Issue)?

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Has the FBI been contacted concerning the breach of security by the union that hacked our email addresses? The vast majority of co-workers I have spoken with are more concerned about union hackers stealing their email than they are about the politics of investments.  Once again: Is law enforcement investigating?
No, we did not contact law enforcement because our security was not breached.  We do not know the source of the e-mail addresses used for the mass mailing by the union other than to know it was not acquired through the MOSERS system.  Our confidence regarding that is the result of the following:

  • Two years ago we had a comprehensive information technology (IT) intrusion audit conducted and, through that initiative, established a comprehensive monitoring process for identifying attempts to breach our security.  There have been no successful attempts to circumvent the IT security we have in place.
  • The addresses used by the union appear to have all been work e-mail addresses.  In many cases we do not have work addresses but rather only have personal addresses on file.  If our system had been breached as the source, they would have been using the addresses of record with us.  We know that there were many cases where the address they used was not what we have on file.
  • We know that there were MoDOT employees who received the message from the union.  Those employees are not covered by MOSERS and thus are not included in our database.  Thus, we could not possibly have been the source of those addresses.
  • Our email servers do not use the statewide address book.  You could not “hack” into our email system to obtain the addresses that were exploited in this campaign.
The Office of Administration (OA) is aware of this situation.  OA also monitors attempts to breach their system and did not find any successful attempts to circumvent their IT security. Therefore, what we do know is that neither MOSERS nor OA gave this organization the email addresses of state employees, and neither of our systems was “hacked” by this group.
It’s difficult to identify exactly where the addresses might have been obtained and in fact it could be from a consolidated list of multiple sources.  While the State no longer publishes email address, almost every state employee has access to them.
In addition, it’s not that hard to guess them.  Each agency uses email addresses based on a standard naming structure--for example, “first.last@agency.mo.gov.”  Given that the names of state employees are public information, once you figure out the template it’s not difficult to extrapolate the actual addresses.
Your concerns at this point are best addressed to the individual and/or the organization that sent you the email.  It may be effective for them to hear directly from state employees who received the email that this tactic created concerns and may not reflect positively on their organization.
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MOSERS' Relationship With Blackstone

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What is your response to the "Blackstone" issues?
We have recently been contacted by active MOSERS members who received an email from the Hotel Employees and Restaurant Employees International Union (UNITE-HERE). At issue is an escalating labor dispute presently taking place between Hilton Hotels Worldwide, a company in which Blackstone owns a controlling interest, and UNITE-HERE union members. Negotiations between the union and Hilton have been going on for more than a year in various locations. 
The email from UNITE-HERE that was sent to Missouri state employees included a link for generating an e-mail form letter to MOSERS’ questioning the system’s relationship with Blackstone. Blackstone is a large investment company that has both publicly traded stock and private investment relationships. MOSERS does not own any of Blackstone’s publicly traded stock; we are, however, one of many investors in some of Blackstone’s private real estate funds. 
MOSERS has invested in Blackstone Real Estate Funds because of their track record of generating strong investment returns for their limited partners. Hilton is one of many real estate investments Blackstone has made on behalf of their limited partners over the years. Blackstone’s real estate funds have consistently outperformed the stock markets and are an important diversifier in the MOSERS portfolio. 
What is of paramount importance to MOSERS is the security of your retirement benefits. Strong investment results and sound business practices are critical elements in achieving this security. It has been our experience, since first partnering with Blackstone in 2002, that they possess both of the critical elements for a successful long-term relationship. Contract negotiations are never easy, yet ultimately it is our expectation that a compromise will be reached and all parties involved will be well served. 
Some of our members have asked us how UNITE-HERE acquired their email addresses and how UNITE-HERE is even aware they are members of MOSERS. At this point, we do not know. MOSERS did not provide member names or email addresses or any other contact information to UNITE-HERE.
We requested Blackstone’s perspective on the issues that were raised as concerns in the e-mail message MOSERS’ members received from UNITE-HERE. Those concerns and Blackstone’s response can be found here.
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Cost-of-Living- Adjustments (COLA)

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Considering MOSERS has done so well with investments this last fiscal year, can we look forward to a COLA greater than "0" or will we be "tied to the SSA COLA of 0?"
Cost-of-living adjustments (COLAs) are not tied to MOSERS' investment performance or to the Social Security COLA rate.  Instead, the COLA is tied to the statutory provisions in Missouri state law. State law provides a COLA based on 80% of the percentage increase in the average Consumer Price Index for all Urban Consumers (CPI-U) from one year to the next At this point, we don't know if there will be a cost-of-living-adjustment (COLA) in 2011. We will not be able to make a determination until mid-January at which time we will have the complete picture of the CPI-U for all of 2010. The COLA rate is determined each January and we will inform members of the COLA rate at that time.  You can find additional details on COLAs on our website.
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Retirement Incentives

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When the state offers incentives for employees to retire early, such as paying more of the health care premium, etc., does it remove long-term costs from the state budget only to put more of a burden on the retirement system's ability to meet its obligations?  Also, what is the current assumption by the system for its annual rate of return on investment, and has it been adjusted due to economic conditions over the last two years?
The short answer to the first question is, it depends. We make every attempt to give definitive answers to questions that we get, but in this case, it really does depend on the kind of incentive being offered. Incentives, by their very nature, are designed to encourage people to leave employment earlier than they planned. For incentives to be successful, they have to be generous enough to make it worthwhile for people. On the other hand, if it is too generous an offer it will cost far more than it saves. That is a difficult balance to strike.
MOSERS looks at all incentive proposals for their long-term impact and provides information to decision makers. Much of the long-term impact on the cost to the retirement system depends on whether or not the positions that are vacated due to whatever incentive is offered are refilled. It also depends on what type of incentive that is being offered. For example, an incentive that addresses only health care costs in retirement but does not change retirement benefits would only indirectly impact MOSERS by resulting in members retiring earlier than might have otherwise been the case.
Regarding the second question, the current assumed rate of return on investments is 8.5%. After careful consideration at the September meeting of the MOSERS Board of Trustees, it was decided not to adjust the assumed rate of return. It remains at 8.5%. One of the criticisms of public employee retirement systems is the claim that they have used unrealistic investment return assumptions in determining funded status and establishing contribution rates. In MOSERS case, the nominal compound annual assumed rate of 8.5% was first used in connection with the June 30, 1992, annual actuarial valuation and has not been changed since that date. 
Actual returns over the period beginning July 1, 1991 and ending June 30, 2010 (net of all investment expenses), have been right on the mark at 8.52% relative to the assumed rate of 8.50%.  The complete package of long-term assumptions, including the rate of return, will again be evaluated by the Board of Trustees in connection with the next regularly scheduled five year actuarial experience study to be conducted in 2012.  (It’s probably worth noting that the Board of Trustees did not increase the assumed rate of return when the system earned 17.2%, 12.6%. 11.5% and 18.6% for the fiscal years ended June 30 2004, 2005, 2006 and 2007 respectively.)  For fiscal 2010 the return was 14.3% and the return for the first quarter of this fiscal year was 7.6% (not annualized).

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Benefit Calculation After Reaching 80 and Out

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I've heard that once you reach 80 and out, your salary is no longer used to calculate your benefit. Is that true?
The formula for calculating a normal retirement benefit is always based on a formula that is made up of 1) Final Average Pay (FAP): the average of an employee's highest 36 consecutive months of compensation, 2) a multiplier established by the state legislature, and 3) an employee's years and months of credited service.
FAP x Multiplier x Credited Service = Monthly Benefit
If a person reaches "80 and out," for example, a person who began working at age 20 and is now age 50, and who has 30 years of service (age+service=80), her salary (based on 30 years) would be used in the calculation of her benefit.  If she continued to work, for example, three years past the point at which she reached 80 and out, her salary (based on 33 years of service) would be used to calculate her benefit (if she did not elect BackDROP).
If that person chose to work three years past her normal retirement eligibility date and elected to receive a BackDROP (for example, based on three years), her monthly benefit would still be calculated using her FAP and creditable service as of the BackDROP date.  Therefore her FAP would be based on 30 years of service, excluding any salary received during the BackDROP period for the FAP calculation.         
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BackDROP and Changing Jobs

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As I understand the BackDROP you need to work a full 24 months past your official retirement date in order to qualify for your BackDROP. What happens if you leave your current position a few months shy of the 2 year requirement? Can you go to work for another state agency and pick up where you left off?
It is correct that in order to be eligible for the BackDROP, you must work in a MOSERS covered position at least two years beyond your normal retirement eligibility date. And yes, you can leave your current position before you reach that requirement and pick it up in another position, as long as it is a benefit eligible position covered by MOSERS. 
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Did Any Retirement Incentives Pass During the 2010 Legislative Session?

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Several of my rumor central people in my office in St. Francois County advised me the initiative for retirement did pass. If it did, please let me know. If it did not but there is another incentive, I would like to have that information as well. Thanks for all your help.
No retirement incentives passed during the special session of the legislature this past June, or the regular session that ended in May, 2010. Representative Jones did file HB 1583, which would have offered a medical insurance and retirement incentive for certain employees, but that legislation did not pass. HB1, which makes changes to retirement benefits for new employees hired for the first time on or after 1/1/2011, was passed during the special session of the legislature in June, but that final legislation also did not include any proposed retirement incentive. You can read more about the legislation that was passed here. As always, we will monitor the progress of all retirement related proposals during the upcoming legislative session that begins in January and keep our members informed.
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MOSERS Benefit Cap and Social Security

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Has it ever been considered to put a "top" amount that could be paid to retirees; say, $100,000 as I note there are several that are paid more than this?  $100,000 plus Social Security should be plenty to live on as a retiree, along with any other income they may receive.  It seems folks on the lower end of the retirement scale need every penny they receive and should not be penalized by not receiving a small percentage increase from time to time.
The short answer to this question is no, MOSERS has not seen any legislative proposals to cap retirement benefits at $100,000 annually. To more fully address the question, though, please keep reading.
We presently have 16 retirees, out of more than 30,000, making over $100,000 annually in retirement benefits from MOSERS. This may be one reason why we've not seen a proposal to cap retirement benefits. Nine of the 16 receiving over $100,000 were judges when they were employed with the State of Missouri. There are several others who get very close to that amount, many of whom were also judges, university presidents, department heads, etc. Keep in mind a couple of things: these benefit amounts are based on relatively high final average salaries for these employees who function much like high level officials in private companies, and have similar levels of responsibility. And this is by no means the norm.
As you correctly point out, the retirement package for State of Missouri employees consists of the MOSERS benefit plus Social Security. A key difference between the two programs is that Social Security benefits are weighted so that lower paid employees get a higher percentage of their income replaced by Social Security than do higher paid employees.  For example, an employee retiring at age 62 earning $150,000 per year in pay could expect to have about 19% of their pay replaced by Social Security while an employee earning $36,000 would have about 47% of their pay replaced.
You can see the Social Security Administration's website for more detailed information on computing benefits. The point here is to clarify that Social Security benefits actually favor lower income workers. Consequently, through their combined benefits from MOSERS and Social Security, the higher the working pay of state employees the lower will be the percentage of their income replaced by retirement benefits.
Finally, there is a cap on the compensation considered in computing Social Security benefits - in 2010 the Social Security wage base is $106,000, meaning that any income over that amount will not be considered in calculating Social Security benefit.

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BackDROP

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I've heard that backdrop may be going away. If so, how will this affect those already in the process of earning backdrop?
BackDROP is not going away for current state employees or anyone who is currently in the process of working toward their BackDROP. What is likely being referred to is the legislation that was passed impacting retirement benefits during the special session of the legislature that was held this past summer. In addition to several other changes made to retirement benefits only for those hired on or after January 1, 2011, this legislation also eliminated the BackDROP going forward, for those new employees. You can read more about this legislation on our website.
Again, this legislation does not impact current employees.
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2011 COLA

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Will there be a cost of living increase this year?
 According to Missouri state law, each January MOSERS must compare the average Consumer Price Index (CPI) for the calendar year just completed (in this case 2010) to the average CPI from the prior year (2009) to determine the percentage change between the two years. The MOSERS COLA rate for any year is based on 80% of the percentage increase in the average CPI from one year to the next.

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Effect of Fewer State Workers on the Contributions to the Retirement Fund

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What will be the effect of significantly fewer state workers (due to downsizing of state government) and associated contributions to the retirement fund and more retirees due to the downsizing trend? 
The system receives contributions to fund the retirement plan through an annually established contribution rate that is multiplied by the state’s monthly payroll.  While the contribution rate remains constant for the year, the monthly payroll fluctuates due to employee turnover, salary adjustments, and layoffs that may occur.  
To arrive at the contribution rate, the board’s actuary uses economic assumptions regarding the investment return rate, pay increases, the expected changes in active member payroll, and post retirement cost-of-living adjustments.  In addition, the actuary uses non-economic assumptions which include projected mortality, probabilities of age and service retirement, and probabilities of withdrawal from service including disability and death before retirement. Each year the rate is adjusted by the actuary to reflect differences between actual and assumed experience and presented to the board for certification to the state in establishing the contribution rate for the following fiscal year.
A reduction in payroll, over a prolonged period of time, can gradually increase the state’s contribution rate. However, a declining payroll may result in a reduction in the dollars contributed despite a rate increase. The recent changes to the plan for employees hired for the first time on or after January 1, 2011, are expected to reduce the state’s annually required contribution over time without negatively impacting the system’s ability to pay all benefits when they are due.  The primary changes for new hires include increasing the normal retirement age and requiring member contributions of 4% of pay (which was the employee contribution rate from the system’s inception in 1957 until 1972).

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MOSERS and Social Security

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I am approaching the magic age of 62 and I will be taking early social security. If the feds raise the early retirement age to 65 will the temporary benefit in the MSEP 2000 plan change or remain at age 62? It will certainly change our plans.
The short answer to your question is that the MOSERS temporary benefit ends at age 62. It is not dependent upon eligibility for or if you take reduced social security benefits. Any change to the temporary benefit would require the Missouri legislature to pass legislation to revise it (i.e. it wouldn’t be a MOSERS Board decision).
This question has been asked and answered in a variety of ways on Rumor Central in the past and those additional details might be of interest to you. If you go to the "Labels" column on the right side of the Rumor Central screen, scroll down and click on "Temporary Benefit" you will see a number of entries on the topic. In particular, you might be interested in the special note we posted in July, 2007 to alert members of the following:
One final note concerning when the MOSERS temporary benefit ends and when early social security benefits begin.
We recently became aware that there is a timing issue here that will affect most retirees. The MOSERS temporary benefit ends the month you turn age 62. According to the social security website, you must be age 62 for a full month before early social security benefits can begin. Also, the week of the month on which you receive your social security benefit depends on which day of the month you were born. (Several years ago, social security started staggering monthly payments throughout the month based on birthday rather than making all payments at the first of the month.) For these reasons, there can be a lag period between the time the MOSERS temporary benefit ends and the first social security payment is received. It’s important to be aware of this and have a plan in place to cover any shortfall that may occur during the transition.
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Is the MOSERS fund ever used to fund other budget priorities?

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When was the last time the MOSERS pension fund was "raided" to fund other budget needs of the state?

MOSERS is set up as a trust fund and is separate from state general revenue, so the funds can’t be “raided.” The statutory language is found in RSMo 104.436.4, which says "These amounts are funds of the system, and shall not be commingled with any funds in the state treasury."
MOSERS is stable and secure, and the state of Missouri has consistently contributed the amount recommended by the actuary and certified to the state by the MOSERS board of trustees.


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Who Makes Proposals to Change Retirement Benefits?

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Every year there seems to be proposals submitted to the legislature that could influence retirement decisions, such as the proposal this year to give a $2,000 bonus per year of employment. Who makes these proposals?
Only members of the legislature can propose new laws or changes to existing laws in the form of bills that make their way through the legislative process. The proposal this past legislative session, which did not pass, was to offer $1,000 cash for each year of service up to 20 years. These types of proposals are designed as incentives for employees to leave state employment, thereby reducing the state’s payroll and fringe benefit obligations. The Missouri House of Representatives offers a chart detailing how a bill becomes law, which may aid in understanding the process.

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Is the legislature and/or MOSERS considering changing retirement benefits for current state employees?

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I read with interest the recent article in the Jefferson City News Tribune regarding pension reform for Missouri State employees. This has prompted a number of questions in my office and I would very much appreciate if you would address them. 1. Is the legislature and/or MOSERS considering changing the pension/retirement benefit for current Missouri State Employees? During the recent special session, all communication from the legislature/MOSERS clearly indicated that changes would be directed at new hires only. However, the mentioned news article would seem to indicate that these earlier statements were not completely true and attempts will be made to impact benefits for current employees in upcoming sessions. Is this the case, and if so, what changes are being considered?
2. Is it legally possible for pension/retirement benefits that are held by vested Missouri State Employees to be changed or taken away?
3. Does state law protect the retirement benefit of a vested Missouri State Employee?
4. Does Missouri State law view state employee retirement/pension benefits as Gratuity, as Contract, as Promissory Estoppel, or as Property Interest?
5. Are there any court cases that establish legal precedent for what changes are can and can't be made to the retirement/pension benefit of a vested Missouri State Employee?Finally, I would suggest that you put more information on your website that speaks honestly and directly to this issue. This is a topic of great interest to most state employees with over 10-15 years experience. There is much discussion and rumor surrounding the issue.

We also read the article to which you refer with great interest and responded with a letter to the editor of the Jefferson City News-Tribune that was published in the August 15, 2010 edition of that paper. We also posted the letter on our website.
Regarding the first question, we are not aware of any proposals to make changes to the retirement plan’s present benefit provisions that would in any way diminish or impair benefits accrued to date or that will be accrued in the future by present active and retired employees.
Your remaining questions are generally addressed in the Revised Statutes of Missouri in sections 104.540 (MSEP) and 104.1054 (MESP 2000) which, in pertinent part, read as follows:
Benefits are obligations of the state—benefits not subject to execution, garnishment, attachment, writ of sequestration—benefits unassignable—reversion of benefits, when—refund received, when.—
1. The benefits provided to each member and each member's spouse, beneficiary, or former spouse under the [law] are hereby made obligations of the state of Missouri and are an incident of every member's continued employment with the state. No alteration, amendment, or repeal of the [law] shall affect the then-existing rights of members, or their spouses, beneficiaries or former spouses, but shall be effective only as to rights which would otherwise accrue hereunder as a result of services rendered by a member after such alteration, amendment, or repeal.

If legislation were enacted that might be construed to be a diminishment or impairment of benefits, it is highly probable that resolution of the matter would ultimately be determined by our court system.
In the absence of any specific proposal to change plan benefits for present members, we are not positioned to offer opinions regarding how any benefit law change might be viewed by the courts. However, if any such proposals are forthcoming you can rest assured that they will be comprehensively vetted and the results will be presented to the policy makers who are proposing or considering plan changes.
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Can the MOSERS Board Make Changes to Benefits?

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I heard that the MOSERS Board of Trustees was only one vote short of changing benefits for existing members. That has everyone worried that next year the Board will vote to apply contributions to existing employees, change eligibility for retirement, or eliminate the BackDROP for existing employees. Is that true?
NO. This is not true. The MOSERS Board of Trustees did not come within one vote of changing benefits for existing members. The board does not have the authority to make changes to retirement laws and cannot make changes to retirement benefits. Only the legislature has the authority to do that. We have no way of knowing what the legislature will do, and MOSERS is not currently aware of any retirement benefit changes being considered by the General Assembly. We will continue to keep members informed.

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Financial Health of Plan

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Recently we’ve heard from members in the field who’ve expressed concern about the financial health of MOSERS. Hearing of the System’s 84% funded status has raised questions among some members who then wonder if this will impact the state’s contribution rate for FY2012. Some are even hearing rumors that the contribution rate would be 20% next year, and the difference (between the FY2011 rate of 13.81% and 20%) would be paid by the employee.
First, and most importantly to you, no employee contributions are being considered for present employees. We are definitely on an economic roller coaster ride, but our returns are exceeding expectations so far this year. The state’s contribution rate, which was certified by the MOSERS board for FY 2011 to be 13.81% of payroll, fully recognized our funding ratio of 84% (which is viewed by the industry as a healthy position). We have no idea what would have prompted someone to suggest that the rate is going to 20%.
These and other rumors may have stemmed from press reports on the recent Pew report. That report, unfortunately, had a misleading title, and the data they used included the Public School Retirement System’s (PSRS’) liabilities in their calculation. There are still a few PSRS members who are state employees and because of that the preparers of the Pew report included PSRS’ total liabilities in their report on the state of Missouri. That’s not just misleading – it’s simply wrong. You can read MOSERS’ response to the Pew report
here.
Also, the state cannot require contributions from any employees without a change in the law. SB 714 (which is now also attached to HB 2357) has a provision which would require a 4% of pay contribution rate for new employees only, who are hired for the first time on or after January 1, 2011. While the University of Missouri recently established a contribution rate for current employees, their plan specifically allows the Board of Curators to make those types of changes without a law change. Our statutes do not.
The fact that the funded status is not higher than it is currently can reasonably be attributed, in part, to significant benefit increases that have been enacted over the years. Benefit changes enacted in the 1990s that resulted in material increases in unfunded liabilities are described below.
Benefit Changes Since 1992


  • 8/28/94 - Permanent Rule of 80 adopted (It had previously been put in place for a one
    year window period commencing 8/28/92)
  • 1/1/95 - Benefit multiplier increased from 1.5% to 1.6% (applied to active and retired
    members)
  • 8/28/97 - COLA made permanent for life rather than temporary period (applied to active and retired members)
  • 8/28/97 - “Free 50” survivor benefit enacted (applied to active and retired members)
  • 7/1/2000 - Year 2000 Plan became effective but this was cost neutral. (However, the
    other changes identified here resulted in significant additional liabilities and related
    contribution rate increases.)
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