MSEP 2011 Legislative Changes from 2017

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Correction Officers have been hearing that the State of Missiouri Retirement System is bringing back the "80 and out" rule or 80/80 and the Employee is vested after 5 years of service?
For members of MSEP 2011 who are actively employed on or after 1/1/2018, yes, the vesting requirement did change to 5 years, effective 1/1/2018. This change was part of Senate Bill 62, which was passed during the 2017 legislative session. The changes were summarized on our legislative page. You can read more about the vesting change in our news article from 2017, The Change from 10 to 5-Year Vesting for MSEP 2011 Members.

However, requirements for retirement eligibility were not changed. Members of MSEP 2011 reach normal retirement eligibility when they have at least 5 years of service and are age 67 or under the “Rule of 90”. Under the “Rule of 90”, they must be at least age 55 and their age plus years of service equal 90 or more. For example, if someone is age 60 and has 30 years of service, they would meet the Rule of 90.

Not sure if you are in MSEP, MSEP 2000, or MSEP 2011? See Which Plan Am I In?

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Credited Service for Army Reserve?

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I just have a question regarding having Served in the Army Reserve. Can a state employee receive any credit for having served as a Reservist? 
Yes, it is possible, depending on when your military service was performed relative to your state employment. There are provisions that allow you to 1.) purchase or 2.) receive automatic credit at no cost* for your eligible active-duty military service. Short duration active-duty military service such as two-week annual trainings in the reserve forces may qualify for service credit. This additional service credit will be used in determining your eligibility for retirement and calculating the amount of your benefit.

We encourage anyone interested in purchasing prior active-duty military service to speak to a MOSERS benefit counselor, who can provide cost estimates. The primary timing issue for you to consider when making a service purchase is that, the longer you wait, the more it will cost. In other words, it is often to your advantage, in terms of cost, to purchase service sooner rather than later to avoid additional interest costs. See the Acquiring Service MSEP/MSEP 2000 brochure (page 6) for more information. Any eligible purchases must be applied for and paid for in full prior to applying for retirement. 

*Note: Members of the MSEP 2011 may get automatic credit if they were employed by the state immediately prior to entering the armed forces and return to state employment within the timeframe specified by USERRA. However, purchase of prior active-duty military service credit is not available to members of MSEP 2011.

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BackDROP Decisions

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I was eligible for retirement on 06/01/2017 on the 80 and out. I am just getting one year of backdrop in. Do I need to submit any paperwork advising of my intentions of working on the backdrop? 
The answer is no. You just keep working. You don’t need to notify MOSERS of any decisions about BackDROP until you retire. If you retire online, you may make your BackDROP election when you choose your benefit payment option. 

However, you must work at least two years beyond when you are first eligible for normal retirement to be eligible for BackDROP. BackDROP provides a lump-sum payment in addition to your ongoing monthly benefit payment in retirement. MOSERS has many different resources to find out more about BackDROP.* Besides the member handbook, there is a BackDROP page with links to many resources on our website, including the BackDROP brochure.

* Note: The BackDROP is available only to general state employees in the MSEP and the MSEP 2000.

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Sick Leave & BackDROP Period

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Questions regarding sick leave. I have around 22 months of employment remaining before I reach the 80 and out. I have around 1900 hours of sick leave currently. Does sick leave still contribute towards your credible service period? If I elect to backdrop, does this apply to the backdrop period if I do not count this towards credible service? Thank you!
 Yes, you will get one month of credited service for each block of 168 hours of unused sick leave you have at retirement. While this will increase the amount of your benefit, unused sick leave cannot count toward eligibility for retirement or as part of the BackDROP period. That is, the months of unused sick leave will not make you eligible for retirement (or BackDROP) sooner, but will increase the amount of your payment once you have retired. Print Friendly and PDF

70 & Out Rumor

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I was hearing that there may be a 70 & out for one to retire from Corrections? Is this true or another rumor....
 No, this is not true. MOSERS administers retirement benefits but we do not have the authority to change plan provisions. Any change to the Rule of 80/”80 & Out” (or any other state employee pension provisions) would require a change in the law. The 2018 regular legislative session ended on May 18th and there were no such proposed changes. Keep in mind that the Rule of 80/”80 & Out” is not the only way to reach normal retirement eligibility.

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

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

MSEP 2000 Members
•         Age 62 + 5 years of service
•         “Rule of 80” – (at least age 48) when age + years of service = 80 or more

MSEP 2011 Members
•         Age 67 + 5 years of service
•         “Rule of 90” – (at least age 55) when age + years of service = 90 or more at time of termination

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

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Final Average Pay & Rule of 80

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Note: we receive this question a lot, so we thought it would be helpful to repost it as a reminder.
Is our retirement benefit based on the 3 highest years of wages?
or the 3 highest years of wages before you hit 80 and out?
I keep hearing both, so not sure which is right.
The answer depends on if you elect BackDROP* (if eligible); not when you hit “80 & Out”.

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             a multiplier

FAP is determined using your highest 36 full consecutive months of pay when looking at your entire work history covered under MOSERS. Practically speaking, for most, that is their last three years, but not always.

The exception to this would occur under the BackDROP (if eligible). If you become eligible for and elect the BackDROP upon retirement, your highest 36 consecutive months would be determined from your MOSERS-covered work history prior to your BackDROP date. (Some people find BackDROP easier to understand if they think of the BackDROP period as being “cashed in” because salary and service during that period don’t count in the calculation of your monthly benefit amount.)

So, to reiterate, if you don’t elect BackDROP, your monthly benefit will be based on your highest 36 full consecutive months of pay, regardless of whether that is before or after you might hit “80 & Out”.  See the MSEP/MSEP 2000 General Employees Retirement Handbook for an example and more detailed information. Also, keep in mind that “80 & Out” is not the only way to become eligible for retirement. For example, as a general state employee in MSEP 2000, you might become eligible for normal retirement at age 62 with 5 years of service before you would become eligible for “80 & Out”.  See Which plan am I in? with a list of plan provisions including criteria for normal retirement eligibility in each plan.

*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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Becoming Vested

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When do you become vested? Is the 5 years calculated by your date of hire (to the exact date?) or the end of month in which you were hired? 
Vesting occurs 5 full years from your date of hire in a benefit-eligible position. Therefore, barring any non-creditable leave periods, a member who began employment on February 21, 2018 would become vested on February 21, 2023. 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.

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Non-Missouri Retirees & Taxes

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Are Public Pension benefits taxable if the MOSER retiree now resides in a state other than Missouri? I understand Missouri does not tax MOSER pensions.
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.

As we reminded our retirees in the Fall/Winter issue of RetireeNews, remember that pension benefits are subject to federal taxes.

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Sustainability of MOSERS

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I have recently read articles that indicate a decline in MOSERS viability, ie. their ability to cover promised benefits into the future. I am also concerned about the increased incentives for early retirement. So I wonder how much I should be concerned.
There have been no recent incentives for early retirement for active state employees. Any such incentives would require legislative action.

With regard to MOSERS’ ability to cover promised benefits into the future, we received a similar question and have a May 1 post about MOSERS’ funding status on Rumor Central. As of June 30, 2017, retirement benefits for general state employees are 67.5% pre-funded. Money to pay retirement benefits comes from:

employer contributions
employee contributions (if first employed on or after 1/1/2011), and from
investment returns.

Over that past 20 years, 61% of the assets in the MOSERS Trust Fund have come from investment returns. Beginning in FY17, the MOSERS Board adopted a funding policy to gradually lower MOSERS’ investment return assumption. This more accurately reflects capital market expectations and confirms the Board’s commitment to sound financial practices. (In other words, the board decided that we should expect less income from investments. So, the income that we are not expecting from investment income will have to come from the employer/the state.) It results in higher annual employer contribution requirements (and a lowered funded status) in the short-term. However, it is the board’s expectation that these changes will strengthen MOSERS’ financial position and will ultimately enhance the retirement security of our members. (See Chairwoman’s Message for more information.)

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Annual Leave and Medical Premiums

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I have heard that at the time of retirement that you can use your AL balance to pay for medical coverage for up to a year.  Is this true and if so how does it work?
Yes, this is true. Check with your HR staff and MCHCP for specific information as it relates to you, but here is some general information we received from MCHCP on the topic: Your employer’s payout for your unused annual leave/vacation can be used to pay your medical insurance premiums during the remainder of the year in which you retire. When you fill out your MCHCP Retiree Enrollment Form, you may elect to deduct your premiums using your one-time lump-sum annual leave payout as long as you did not opt out of the Cafeteria Plan’s premium only category and current premiums are deducted pre-tax. Depending on how many hours of annual leave you have, this can be a sizeable amount and can result in tax savings!

After you send the form in, MCHCP will contact your department’s payroll representative to verify your lump-sum payout amount. You may only pre-pay for the remaining premiums in the year you have retired. For example, if you retire in July, you may potentially pay for your August-December premiums with your unused annual leave payout.

For more information about your particular situation, please contact MCHCP at (800) 487-0771.

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Unused Sick Leave at Retirement

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I know any sick leave balance you have at retirement can go toward years served. I also know that if you have 26 years of service with the state at retirement, the state will pay 65% of your insurance premium. I have approximately 1700 hours of sick leave. Will that time count toward the years of service for the 65% reduction of my insurance premiums?
Yes. You will get one month of credited service for each 168 hours of unused sick leave you have at retirement. If you have 1700 hours of unused sick leave, you will get 10 additional months of credited service. (This service does not count toward eligibility for retirement but will increase the amount of your pension benefit payments.) MOSERS will report your actual service plus any additional service for unused sick leave to MCHCP. Note below, that their calculation for the subsidy is based on FULL years of service.

Here is additional information from the MCHCP website

The retiree premium is based on years of service with the state at retirement. The state contribution is calculated by using the number of full years of service as reported by MOSERS or another retirement system multiplied by 2.5 percent. The contribution for non-Medicare retirees is based on the PPO 600 Plan premium with the tobacco-free incentive and wellness premium. The contribution for Medicare retirees is based on the PPO 600 Plan total premium. The maximum state contribution cannot exceed 65 percent.

Employees whose premiums are collected pre-tax through the cafeteria plan have the opportunity to pre-pay premiums pre-tax as a retiree. Prepaid premiums may only be paid within the same calendar year*. To prepay, retirees must submit their enrollment request at least 31 days prior to their retirement date. The first month’s premium for retiree coverage will be divided between the last two active paychecks. Additional prepaid premiums may be collected from the retiree’s last two active paychecks and/or lump sum vacation/compensatory time payroll. Verify this payroll amount with the HR/Payroll personnel to determine how many months of retiree premiums can be prepaid.

* Employees with a retirement date of Dec. 1 cannot prepay premiums, since future premiums would be for a different plan year. Employees with a retirement date of Jan. 1 can only prepay premiums using funds from their final active payroll (usually Jan. 15) and/or their vacation and compensatory time payroll.

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Taxes on BackDROP

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If MOSERS benefit is a “public” pension and, therefore, is not considered a salary or wage why would I have to pay taxes on the backdrop? Isn't the backdrop considered part of an employee's pension?
You can find the answer to your question in a previous post on Rumor Central about the taxability of BackDROP. Print Friendly and PDF

Senate Bill 1007

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How would Senate Bill 1007 impact state merit employees who are eligible for retirement (past 80 and out)but have not yet retired? 
 SB 1007 does not currently contain any changes to any MOSERS benefit provisions. It modifies and repeals several provisions relating to the State Personnel Law (SPL), commonly referred to as the merit system. In order for those proposed changes to go into effect, the House must also pass the legislation and the Governor must approve it.

We will monitor any legislation affecting MOSERS and inform our members of any changes that become law. The 2018 legislative session ends on May 18th. You can visit our legislative webpage for more information.

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MOSERS' Funding Status

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What is the status of the MOSERS fund? My wife heard on the radio that it is in fiscal trouble. Could you tell me the fund status or direct me to a site where I can review it's status. 
 As of June 30, 2017, retirement benefits for general state employees are 67.5% pre-funded. This information is contained in our Comprehensive Annual Financial Report. It was also included in our Summary Annual Financial Report, an insert in the fall/winter 2017 issue of our RetireeNews and PensionsPlus newsletters.

Money to pay retirement benefits comes from employer contributions, employee contributions (if first employed on or after 1/1/2011), and from investment returns. Over that past 20 years, 61% of the assets in the MOSERS Trust Fund have come from investment returns. Beginning in FY17, the MOSERS Board adopted a funding policy to gradually lower MOSERS’ investment return assumption. This more accurately reflects capital market expectations and confirms the Board’s commitment to sound financial practices. It results in higher annual employer contribution requirements (and a lowered funded status) in the short-term. However, it is the board’s expectation that these changes will strengthen MOSERS’ financial position and will ultimately enhance the retirement security of our members. (See Chairwoman’s Message for more information.)

While the dollar amount has increased, retirement benefits remain 1.5% of the total state budget. This is the same percent of the total state budget in FY2019 as it was 20 years ago in FY1999. For the past 60 years, the state of Missouri has honored its commitments to state employees and consistently funded the employer contributions recommended by our actuaries.


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