BackDROP Overview

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What is BackDROP?
BackDROP, or the Deferred Retirement Option Provision, gives you the option of receiving a lump-sum payment, in addition to your lifetime monthly benefit payments, at retirement. It is a benefit payment option available for general state employees in the MSEP or MSEP 2000 who work at least 2 years (or more) beyond their first normal retirement eligibility date.

The BackDROP lump-sum is 90% of the amount that you would have been eligible to receive during your BackDROP period if you had been retired during that time. If eligible, you will select your BackDROP period during the retirement process. The maximum BackDROP period is 5 years. The length of the BackDROP period you select will determine the amount of your lump-sum payment. Generally speaking, if you elect a longer BackDROP period, your lump-sum payment will be more, but your monthly payments will be less.

You are not required to take BackDROP, and you don’t have to notify MOSERS of any decisions about BackDROP until you retire. This graphic may help explain the big picture, or you can read the BackDROP brochure on our website for more information. More information about payment options is available on the BackDROP page on our website.

BackDROP can be complicated to understand, so MOSERS benefit counselors are available to help by phone or in person by appointment. Call (800) 827-1063 to discuss your options. Counselor can also provide you with benefit estimates, with and without the BackDROP included, so you can compare.

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Rule of 80 & Retirement Eligibility

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What happens if I leave state employment prior to my eligible retirement date under the Rule of 80? How is my monthly retirement benefit calculated if that happens, and when will I first be eligible to begin receiving my retirement benefit? Also, under this scenario, what retirement benefits, if any, would I lose if I left state employment prior to my Rule of 80 date?
If you are vested with MOSERS (you have at least 5 years of service*) and then leave state employment, you will be eligible for a lifetime monthly benefit, which will begin once you meet the age requirement (and all other legal requirements) and retire under a MOSERS defined benefit pension plan.

If you are a general state employee, your retirement benefit is calculated using a three-part formula:

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

(The multiplier is determined by your plan; 1.6% for MSEP; 1.7% for MSEP 2000/MSEP 2011.)

General state employees who are in the MSEP are eligible for normal retirement once they meet one of the following sets of age and service criteria:

•        Age 65 + 5 years of service
•        Age 60 + 15 years of service
•        “Rule of 80” – (at least age 48) Age + years of service = 80 or more.

You can view retirement eligibility for each plan on the Which Plan Am I In page of our website.

If you are a member of MSEP and you leave state employment before reaching normal retirement eligibility, you may still retire under “80 & Out” (the Rule of 80). Plan provisions in MSEP allow members who terminate employment to “age into” the Rule of 80. (This does NOT apply to members of MSEP 2000 or MSEP 2011**.) However, keep in mind that leaving state employment before reaching eligibility will likely delay when you reach “80 & Out” and reduce your benefit because you will no longer be accruing service. So, you may have to wait longer to begin receiving a smaller benefit if you leave state employment prior to reaching the Rule of 80.

Keep in mind any of the following may affect your retirement eligibility: your retirement plan (MSEP, MSEP 2011, etc.), age, service, and if you retire directly from active employment versus leaving state government and waiting to retire. Contact a MOSERS benefit counselor to discuss your specific situation. You may also contact a MOSERS benefit counselor to request benefit estimates for various scenarios (including a scenario of leaving employment prior to retirement eligibility).

*The 5-year vesting for MSEP 2011 members went into effect on 1/1/2018, and MSEP 2011 members must be actively employed on or after 1/1/2018 to be covered by this change.

**Plan provisions for MSEP 2000 do not allow members to “age into” the Rule of 80/80 & Out. Plan provisions for MSEP 2011, do not allow members to “age into” the Rule of 90/90 & Out.

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BackDROP & Social Security

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In looking over my Social Security application, I see that they want to know what my earnings will be in 2018. I plan to roll over my MOSERS backdrop--will the amount of my backdrop be considered earnings by the Social Security Administration? Or do I only submit my projected salary earnings for 2018?
 Your MOSERS benefit is a public pension and, therefore, is not considered a salary or wage. It does not count towards the annual earnings limit for social security. Your BackDROP payment, however, is considered taxable income for the year in which you receive the payment unless you roll it over to a traditional IRA or another eligible employer plan, such as MO Deferred Comp. Depending upon your age, there could also be an additional 10% IRS penalty if you choose the cash payment.

When you retire with MOSERS, you will be asked if you want to elect BackDROP* (if eligible), and, if so, how you want to receive that distribution: cash option, rollover option, or combination cash and rollover option. State employees eligible to receive a lump-sum BackDROP payment get this payment in addition to a lifetime monthly benefit payment and can choose to roll the lump sum into the MO Deferred Comp Plan at retirement. This option is available to all state of Missouri employees, even if they have never participated in the deferred compensation plan. A popular reason to roll the lump-sum payment into the deferred compensation plan is that it allows employees to defer taxes on the payment until those assets are distributed in retirement. There is a helpful publication on MO Deferred Comp’s website called Thinking About the BackDROP?

We suggest you speak to a tax professional or financial advisor for advice specific to your situation and to discuss all of your options at retirement.  For more information about Social Security, the Social Security Administration website is www.ssa.gov or call them toll-free at (800) 772-1213.

*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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COLA Cap

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With regard to the following statement in the most recent MOSERS emailed information:
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.
Question: Please explain in more detail how the COLA cap is figured.
Is the amount of the annual COLA, for example, a 4% COLA in 2015, again in 2016, again in 2017, and again in 2018 (that amounts to about $40/month in each of those years) multiplied by 12 to get the total annual COLA ($480) for each of those years and then all of the annual totals are added together to determine when the 65% limit has been reached?
For ex.: $40 X 12 X 4 = $1920
Or perhaps it’s figured as follows: $40/mo. COLA x 8, 9, 10, 11, 12 years etc.
If not, please explain in detail how the COLA cap of 65% is figured. Thank you. 
The COLA cap* is calculated based on the initial base benefit amount, rather than on the COLA itself. Your estimated date to reach the COLA cap can be found on your annual benefit statement in the COLA section. It says “Estimated Date to Reach 65% COLA Cap….” and a date. Typically, it is around 12-13 years after you’ve retired.

Example of Calculating the 65% COLA Cap:

$1,000 (Initial Base Benefit) x .65 (65%) = $ 650 (COLA Cap) 

So, when you look back at your initial base benefit, once it has increased by 65% due to COLAs, you will no longer get the minimum 4% COLA; instead, your COLA will be based on 80% of the increase in the CPI and be between 0 and 5% each year. For example, for those who have their COLA calculated this way, it is 1.704% in 2018.

*The COLA cap does not apply to MSEP 2000 members; it applies only to members of MSEP hired prior to 8/28/97, who receive a minimum 4% COLA until meeting their COLA cap.

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MSEP 2011 Retirement Eligibility

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Vesting is changed to 5 years, so why is the monthly benefit not payable until 10 years? If I were to retire after 8 years, would I receive a lump sum payout of my contributions plus any amount vested by the plan, or would the benefit be deferred until after 10 years?
Vesting is one part of retirement eligibility. The other part is age. Both vesting and age requirements must be met in order to retire under a MOSERS defined benefit plan. As a member of MSEP 2011, you will become eligible for normal retirement when you have at least 5 years of service and reach age 67 OR under the “Rule of 90” which is when you are at least age 55 and your age plus service equals 90 prior to you leaving state employment.

Once you are vested with MOSERS, even if you leave state employment, you will be eligible for lifetime monthly benefit payments once you also meet the age requirement (and any other legal requirements) and retire under a MOSERS defined benefit pension plan. The 5-year vesting for MSEP 2011 members went into effect on 1/1/2018 and MSEP 2011 members must be actively employed on or after 1/1/2018 to be covered by this change.

Your contributions go toward helping pay for your future lifetime monthly benefit payments. You will receive a lump-sum payment only if you request a refund of your member contributions. By taking a refund, your forfeit all your credited service. If you are vested and take a refund, you give up your future lifetime monthly benefit payments.

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