Retroactive Vesting for MSEP 2011 Members?

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Assume HB 729 passes. How would that bill affect an employee who was hired after 2011, now has more than 5 years of service, but leaves state employment prior to passage of the bill. Would that person be vested retroactively?
It would have no effect on such a person and, no, as it is currently written, HB 729 does not allow for retroactive vesting. Eligibility for benefits for any MSEP 2011 member who has already or who will terminate employment before the effective date of the bill (currently 1/1/2018) is based on the laws in effect on that person’s termination date*. Non-vested service is considered forfeited.

Assuming they did not take a refund of their member contributions after termination, if such a member returns to work in a MOSERS (or MPERS) benefit-eligible position, their forfeited service will be restored and combined with their new service after they work continuously for one year in a MOSERS (or MPERS) benefit-eligible position.  So, if the vesting requirement was 10 years when they left but they came back in a benefits-eligible position and worked continuously for at least one year, they would then fall under the five-year vesting rule.

Example:  Let’s say Kathy worked in a MOSERS benefit-eligible position from January 1, 2011 until March 31, 2016 (5 years & 3 months). HB 729 passed as currently written. Kathy returns to work in a MOSERS benefit-eligible position on February 1, 2018 and works continuously for one year. On February 1, 2019 (with a total of 6 years & 3 months), her previous service will be restored and she will become vested, which means she is eligible for a future pension benefit from MOSERS. She can begin drawing her pension benefit once she also meets the age requirement and completes the retirement process.  Because the formula for MOSERS pension benefits uses service in the calculation (Final Average Pay x Service x Multiplier = Monthly Base Benefit), the more service she has, the higher her benefit will be.

Please note that this is proposed legislation. It must be passed by the Missouri House and Senate and approved by the Governor. If it is passed, it could change during the process. We do not know what might happen with individual bills during the legislative session but we will monitor all legislation impacting MOSERS and inform our members of any changes that become law. The 2017 legislative session ends on May 12, 2017.

*Termination date is your last day of work in a MOSERS (or MPERS) benefit-eligible position, as reported by your employer.



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Taxes & Temporary Benefit

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I retired under MSEP 2000, I will be turning age 62 in May of 2017. My question is: How do I reduce my deductions for state and federal taxes for the new retirement amount I will be receiving in June?
You may change your federal and Missouri state tax withholdings at any time by submitting a new Tax Withholding Authorization (Substitute W4-P) form. Simply log in to your Member Homepage on MOSERS’ website and go to the Forms menu. MOSERS has a federal tax calculator on our website to help estimate your withholdings:
https://www.mosers.org/Members/Calculators/Federal-Tax-Calculator.aspx 

MOSERS withholds state taxes only for Missouri residents. If you aren’t a Missouri resident in retirement, contact the appropriate state and local tax authorities to determine the taxability of your MOSERS benefit.

Note: This question is in reference to the expiration of the “Temporary Benefit”. Additional information is available on our website about the temporary benefit and related topics. We also have a number of Rumor Central posts on the temporary benefit for more background information.

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Educational Seminars

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Is MOSERS still hosting informative seminars on retirement? I'd love to sit down in a small group or individually to ask some questions about saving for retirement. 
Yes! MOSERS still hosts PreRetirement seminars in various locations around the state from February through November. You can bring your spouse or a guest as well (registration required). These seminars are usually announced in mid-December for the next year and fill up fast. They focus on your eligibility for MOSERS retirement, calculating your benefit amount, differences between MSEP and MSEP 2000, BackDROP, COLAs, and life insurance. They also include presentations from MO Deferred Comp, Missouri Consolidated Health Care Plan (MCHCP), and Social Security.

MO Deferred Comp offers seminars and one-on-one consultations throughout the year for employees at all career stages. If you are an early or mid-career state employee, deferred comp has specifically designed educational opportunities, like Pocket Change and the Completing the Retirement Paycheck Puzzle seminar,  to help you learn more about saving for retirement. To find a seminar near you, visit modeferredcomp.org and click the yellow Event Registration button at the top of the page or call (800) 392-0925 to schedule a meeting with your local education specialist.

If you would like to schedule an individual appointment with a MOSERS benefit counselor, please call (800) 827-1063 or (573) 632-6100 and select option 2.

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BackDROP & COLAs

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If you are over the age of 62, have completed 5 years of backdrop, and go out under the old MSEP plan, do you get the 4% COLA until you reach 65 yrs? The rumor is that once you reach age 62 the 4% COLA stops.
If you retire under the MSEP and were hired before August 28, 1997, you will receive a COLA of at least 4% each year (maximum 5%) until you reach your COLA cap. The COLA cap is when the sum of your COLAs equal 65% of your initial benefit amount. COLAs earned during the BackDROP period do count toward the 65% cap. In general, it takes approximately 12-13 years to reach the COLA cap. Then, your annual COLA will be equal to 80% of the percentage increase in the average Consumer Price Index (CPI) with a minimum of 0% and maximum of 5%.

The cost-of-living adjustment (COLA) for 2017 is 1.010%. This will be effective for MSEP retirees who have reached their 65% COLA cap or who were first hired on or after August 28th, 1997 and for members retired under MSEP 2000, regardless of date of hire. You can see a history of annual COLA rates on MOSERS’ website and also watch a short video on COLAs.

You may be confusing COLAs and the “Temporary Benefit”.  The temporary benefit is NOT available to members who retire under MSEP but IS available to members who are eligible for and retire under the Rule of 80/”80 & Out” in MSEP 2000. In addition to their base benefit, such members receive a temporary benefit until they reach age 62.  At age 62, the temporary benefit ends, but the base benefit continues for life.  You can compare plan provisions in the MSEP and MSEP 2000 Summary of Plan Provisions chart. Often members must weigh the value of the guaranteed minimum COLA in the MSEP against the value of the temporary benefit in MSEP 2000 to see which is best for them. You can use our Comparison Calculator to see how the dollar value of each adds up over time.

All plan provisions are based on state law. We understand they are rather complicated and we are available to help explain further over the phone or during and in-person appointment. We can also help you compare benefit estimates based on different termination dates. View our Contact Us page to reach a MOSERS benefit counselor.

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Possible Vesting Legislation?

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I've heard a rumor that the 10 year minimum to qualify for retirement benefits may go back to 5 years. Is this true? 
There is proposed legislation to do so. If passed by the General Assembly and approved by the Governor, House Bill 729 &/or Senate Bill 333 will reduce the vesting period from 10 years of service to 5 years of service for current and future active members of MSEP 2011 (those members first employed in a MOSERS or MPERS benefit-eligible position on or after January 1, 2011).

The legislature is on break this week, but House Bill 729 is scheduled for a hearing on March 29th in the Rules—Administrative Oversight committee. The Senate Committee Substitute for SB 333 is on the Formal Calendar - Senate Bills for Perfection.

For additional information, see a previous Rumor Central post on HB 729 from March 15.

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Employer & Employee Contributions to MOSERS

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Where is the money that employees and employers pay into the MOSERS retirement fund deposited and invested? 
All funds are held in trust to pay benefits and administer the pension fund. Member contributions are tracked by person while employer contributions are pooled. Funds needed to pay benefit payments and current bills are held in a local bank account while all other funds are invested to produce the primary source of revenue for the pension system.

The MOSERS investment portfolio is diversified across a myriad of asset classes and investment strategies to mitigate the potential impact of negative economic circumstances. The Total Fund Allocation chart below reflects the actual percentage of the total investment portfolio by specific asset class at June 30, 2016. This asset allocation is built on the belief that diversification is critical in achieving consistent, high, long-term, risk-adjusted investment returns. Please see the Investments section of our annual report and the Asset Allocation page of our website for additional information.


Total Fund Allocation  Policy vs. Actual (As a Percentage of the Total Fund) 



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Annual Leave Limit?

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Is there a limit on the number of vacation hours I can be paid for upon retiring?
Your human resources representative/the HR office where you work can tell you about your agency's policies and procedures for paying out unused annual leave. Unused vacation time/annual leave has no impact on your MOSERS retirement benefits and MOSERS is not involved in the payout process.
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FY18 Funding for MOSERS

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 This week, we received the following questions from different members:
I read an article in the newspaper discussing how some legislators are not wanting to fully fund MOSERS retirement in the new budget. If that were to happen, what implications does/could that have for employees who have already retired or who are close to retirement? Also, would that create the possibility that retirement benefits for MO state employees could be cut in the future as they have been for retirees in certain municipalities with underfunded retirement plans.

My husband said he viewed a newscast that said that the MO Retirement fund has a shortfall of $45 million. Is that true? If so what affect will that have on our retirement?

Today on KY3 noon news, I caught a sentence only, re: MO State Employee Pension fund being under funded. Republican Leg is suggesting even less funding? Since this pension is the majority of my retirement income, what did I really hear? I'm am concerned!

In light of the budget crisis and the shortfall in the pension fund, are state retirees at risk of having their pension amount cut or losing the pension entirely? I would appreciate a heads-up in case I need to start looking for employment.
As we do each year, MOSERS submitted its Fiscal Year 2018 (FY18) budget request to the State. In the initial phase of the budget process, the House Budget Committee chose to not fully fund the amount that was determined by the actuary and certified by the MOSERS Board. Our budget request is still pending in the House. Once the full House has finalized its version, the Senate will weigh in with its budget recommendations. If the legislature decides to not fully fund MOSERS’ FY18 budget request, it will have no immediate impact on benefit payments to retirees, however, a pattern of inadequate funding certainly could have negative long-term consequences for the retirement system.

For additional information, see this Rumor Central post from February, Appropriation for Pension Funding, and our Key Facts about MOSERS’ funding principles. Print Friendly and PDF

Changes to BackDROP?

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I was told today that the back drop benefit has changed. I was told that you can only do a two year back drop. Is this true or is it still the same and you have to do a minimum of two years with a five year maximum?
The BackDROP requirements have not changed and we are not aware of any proposed legislative changes to BackDROP. Any change to this, or any other state employee pension provision, requires passage of legislation by the Missouri General Assembly and approval by the Governor. The 2017 legislative session ends on May 12, 2017.

BackDROP is a retirement benefit payment option that allows eligible members to receive a lump-sum payment in addition to an ongoing monthly payment. It is available only to general state employees who are members of MSEP & MSEP 2000 and who work at least two years beyond normal retirement eligibility. The maximum possible BackDROP period is 5-years.

For more information, see the BackDROP page on our website, our BackDROP brochure, or a recent Rumor Central Question on BackDROP.

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House Bill 729 Update

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What is the status and impact of HB 729? The bill summary looks like it guts benefits even for employees that are already vested.
As of today, the status of HB 729 is that it (as a House Committee Substitute, but materially the same) was voted out of the House Pensions Committee “do pass” on March 13, 2017. A similar bill, introduced in the Senate as SB 333, was also voted out of committee “do pass” and is on the Senate calendar for perfection.

As it is written in both the House and Senate versions, it has no impact on members of MSEP and MSEP 2000. (See Which Plan Am I In? for membership information.)

If passed by the General Assembly and approved by the Governor, HB729 &/or SB 333 would reduce the vesting period for current and future active members of MSEP 2011 (those employees hired for the first time on or after January 1, 2011) from 10 years of service to 5 years of service.

To offset the cost of doing so, the proposed legislation would modify some provisions regarding when COLAs are payable, when survivor benefits are payable, and disallow service credit for unused sick leave at retirement for new terminated-vested members of MSEP 2011 only, but have no impact on current employees, retirees, or members of MSEP 2011 who retire directly from active state employment. Please see a similar recent question and answer about HB 729 on our Rumor Central blog for more information.


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Termination and Rule of 80

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If I'm past my 80 and out date and get fired from my job can I still collect my pension? Do I have to wait until age 62? I'm eligible for both MSEP and MSEP2000 plans. 
Regardless of the reason, if you leave state employment and are vested (which is 5 years for members of the MSEP/MSEP 2000), you will be eligible for future retirement benefits*. In general, your benefits will be based on the laws in effect on the day you leave state employment.

As far as your question on eligibility for the Rule of 80 (“80 & Out”), if you are already eligible for normal retirement you will not have to wait until age 62.  You can retire based on the filing dates required by law.  See this chart for due dates. You may also want to read a question we recently answered regarding resignation and the Rule of 80, which would also apply to termination.

If you have any questions about your specific situation, we encourage you to view our Contact Us page to reach a MOSERS benefit counselor.

*An exception would be if you were fired because you were found guilty of a specified felony committed in connection with your job as a state employee on or after August 28, 2014 under provisions of HB 1217 which was passed by the Missouri legislature in 2014.

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BackDROP Payment

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After retiring, how soon can I expect my BackDROP Payment?
Your BackDROP1 payment (either cash or rollover) will be paid on the last working day of the month your retirement is effective, along with your first monthly retirement benefit payment. For example, if your retirement date2 is May 1, your BackDROP payments will be made on the last working day of May. This is assuming you have completed all necessary forms, including your BackDROP Distribution3 form, when you retire online or on paper.

 For more information, see the BackDROP brochure available on our website.

1BackDROP is an option that allows eligible members to receive a lump-sum payment in addition to an ongoing monthly payment. It is available only to general state employees who are members of MSEP & MSEP 2000 and who work at least two years beyond normal retirement eligibility. 

2Your “retirement date” is defined as the first day of the month in which you begin receiving your MOSERS pension payments. Your “termination date” is last day of employment as a MOSERS benefit-eligible employee, as reported by your employing department. “Termination date” is usually the day people have cake, carry out their stuff, and say goodbye to their co-workers. Your termination date must be at least one day before your retirement date. Members often confuse these terms but they have very specific meanings when it comes to paying your benefits. 
3 Note: If you choose to roll over any portion of your BackDROP distribution to an account other than with MO Deferred Comp, the BackDROP Distribution form must be signed by an authorized official from your financial institution or employer plan to indicate it is a qualified retirement account that can accept this distribution. This form will be sent to you if you elect a rollover and your BackDROP will not be processed until it is completed and returned to MOSERS. Print Friendly and PDF

Taxes on BackDROP Payment?

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I intend to retire early next year, after my 55th Birthday. I intend to exercise my BackDROP option, but do not intend to roll it into another retirement account. Will this be taxed at standard rates, at both the State and Federal levels, or are there additional penalties to be paid?
MOSERS is required to withhold 20% of a BackDROP* cash payment for federal taxes. We do not automatically withhold for state taxes but we can, if you request it.

If you are younger than age 59½, there is an additional 10% income tax on early distributions for any payment from MOSERS (including amounts withheld for income tax) that you do not roll over unless one of the exceptions listed on page 4 of the Special Tax Notice brochure applies. One exception is if payments are made after you separate from service if you will be at least age 55 in the year of the separation.

You can defer taxes and avoid the IRS tax penalty by rolling over the BackDROP payment to a qualified retirement account such as with  MO Deferred Comp and not withdrawing it until you meet all IRS regulations.

We encourage you to consult a professional tax advisor and your state and/or local taxing authority about your state and local tax liability before taking a lump-sum distribution. More details are available in the Special Tax Notice brochure on our website.

*BackDROP is available only to general state employees who are members of MSEP & MSEP 2000 and who work at least two years beyond normal retirement eligibility. 

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Unused Sick Leave

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I know there is no limit on how much unused sick leave can be applied to credited service. And I also understand I will receive one month of credited service for every block of 168 hours of unused sick leave reported to MOSERS by my employer at the time I leave my position. Will I also get paid for my unused sick leave, like I would get paid for all unused annual leave at the time of retirement from the state?
No. Since you are getting credited service and therefore a higher benefit, you will not get paid for any unused sick leave. Print Friendly and PDF

Final Average Pay (FAP)

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Is my retirement high three year average based on my base pay or is it based on my gross pay? (gross pay being base pay plus all overtime pay that was cashed out.)
 Your pension benefit uses your gross pay (before taxes, health insurance, cafeteria plan, etc. and may include overtime pay and holiday pay). Pay is one part of the three-part formula for general state employees:

Final Average Pay (FAP) x Credited Service x Multiplier = Monthly Base Benefit

•         FAP is the average of your highest 36 full consecutive months of gross pay no matter where in your work history that may fall. Practically speaking, for most, it is during their last three years, but not always. (Note: If you become eligible for and elect the BackDROP upon retirement, your FAP will be calculated using your MOSERS-covered work history prior to your BackDROP date.) 
•         Credited Service is the amount of time (in years & months) that you have worked in a MOSERS benefit-eligible position (added to any service credit that you may have purchased or transferred).
•         Multiplier – The multiplier for MSEP is 1.6% (0.016); for MSEP 2000 & MSEP 2011 it is 1.7% (0.017).

As an example, let’s use the following assumptions:
•         Final Average Pay - $2,600.00    
•         Credited Service - 25 Years 3 Months      
•         MSEP 2000 Multiplier - 1.7% (.017)

$2,600.00 x 25.25 x .017 = $1,116.05 in monthly pension benefits from MOSERS

See Which Plan Am I In? to determine if you are a member of the MSEP, MSEP 2000, or MSEP 2011 and to find summaries of benefits, brochures, handbooks, videos and more. Use the Member Login to access your own individual information, see when you are eligible to retire, print a benefit estimate, and retire online when you are Ready to Retire.

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