Showing posts with label Benefit Payment Options. Show all posts
Showing posts with label Benefit Payment Options. Show all posts

Married State Employees & Survivor Benefits

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If I pass away and I am vested with the state for 14 yrs, can my spouse get my state retirement; in addition, can she draw off her state retirement while drawing off my state retirement? In other words, can she draw off both retirements?
Yes – Let’s look at different scenarios.

Death Before Retirement:

As a married, vested member, if you die before you retire and while still employed, your eligible spouse will receive your MOSERS survivor benefits. When she retires, she can draw her own MOSERS pension and the two will have no impact on each other. See a recent posting, Death of Member Before Retirement, for more information. (The rules are not the same for Social Security benefits. Consult the SSA for more information on their rules about spouse benefits.)

Death After Retirement:

When each of you retire, you will choose a benefit payment option. Options include: Life Income Annuity, Joint & Survivor options, and Guaranteed Payment options.

If you elect the Life Income Annuity option, your retirement benefit will not be reduced for the purpose of providing a survivor benefit. Your final payment will be sent to your designated beneficiary. Then, there will be no ongoing monthly survivor benefits payable to anyone after your death.

Since you are married, you may elect the Joint & 50% Survivor or the Joint & 100% Survivor option. Each provides a lifetime benefit to you. If you die first, your spouse will receive a lifetime benefit for the remainder of her life. Your benefit will be reduced to provide this benefit*. Your spouse can receive your survivor benefit even if she is receiving her own MOSERS pension.

If you elect a Guaranteed Payment option, you may name anyone as your beneficiary (does not have to be your spouse but she would have to waive her spouse benefit). Your retirement benefit will be reduced and if you die before all of the guaranteed payments have been made, the remaining payments will go to the beneficiary you designated at retirement.

For more information, please review the Death of a Member section of our website. You can read more about benefit payment options in the Retirement Guide on our website in the Ready to Retire section. If you would like more information specific to your situation, please contact a MOSERS benefit counselor. They can answer questions over the phone, or you can set up an in-person appointment.

*There is no reduction for members who retire under the MSEP and elect the Joint and 50% survivor option. 

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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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Comparison of MSEP & MSEP 2000

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What are the major differences between MSEP & MSEP 2000?
The MSEP and the MSEP 2000 have various differences including different multipliers in the formula used to calculate your monthly payment, different benefit payment options, different cost-of-living adjustments (COLA), and different eligibility criteria. To compare the provisions in each of these plans, there is a helpful document on our website: MSEP & MSEP 2000 Summary of Pension Benefit Provisions - General State Employees.  Also see the Which Plan Am I In section of our website for more information about each plan.

We have a helpful Comparison Calculator on our website where you can compare the long-term impact of electing MSEP versus MSEP 2000, different BackDROP* periods under the different plans, and various other options. The Comparison Calculator videos are helpful in demonstrating how to use this tool. Or, you can ask a MOSERS benefit counselor to provide you with various benefit estimates and Comparison Calculator results.

We also encourage you to attend a MSEP/MSEP 2000 PreRetirement Planning Seminar when you are within 5 years of eligibility. This free full-day seminar includes information on differences in the plans, benefit payment options, and BackDROP, among other topics.

Your defined benefit retirement plan through MOSERS includes a lifetime benefit, regardless of the plan or payment option you elect at retirement.

*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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Benefit Payment Options

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Can you please define "lifetime annuity" and "180 garanteed payments?" And can you tell me how they compare?
Life Income Annuity and Life Income with Guaranteed Payments are two types of retirement benefit payment options. Depending on your plan membership and marital status, you may have other options, too.

Part of step 2 of the retirement process, completing your Retirement Election Form, includes choosing your benefit payment option. This election determines if a benefit will potentially be paid to anyone else after your death. Regardless of the payment option you elect, once you complete the retirement process with MOSERS, you will receive a benefit payment each month for your lifetime.

If you choose Life Income Annuity, your retirement benefit will not be reduced but no survivor benefits will be paid to anyone after your death (other than the payment that is sent at the end of the month in which you die). If you are married and choose this option, your spouse must consent and waive their right to a survivor benefit by completing a form that MOSERS will send to you.

If you choose Life Income with Guaranteed Payments, your retirement benefit will be reduced for your lifetime. The guaranteed period starts on the effective date of your retirement (not at the time of your death) and extends for the term selected: 60 Guaranteed Payments (available in the MSEP), 120 Guaranteed Payments (available in MSEP and MSEP 2000), or 180 Guaranteed Payments (available in the MSEP 2000). At minimum, the guaranteed number of payments you elected will be paid by MOSERS either to you, to your beneficiary, or as a combination with some paid to you and the remainder paid to your beneficiary. If you have received all payments in the guaranteed period, you will continue to receive your monthly benefit for your lifetime but your beneficiary(ies) will receive only the payment that is sent at the end of the month in which you die. Life Income with Guaranteed Payments is an option sometimes elected by members who are not married, have no minor children, and think they may not live long in retirement. It allows them to have any remaining payments in the guaranteed payment period go to another person, an organization, or a trust. You may name more than one beneficiary with this benefit payment option.

It may be helpful to generate a benefit estimate on our website or request one from a benefit counselor to compare your options. We also have a Comparison Calculator online where you can input different benefit payment options and compare them over time.

Benefit payment options for general state employees in the MSEP and MSEP 2000 are explained in more detail during our PreRetirement Seminars and on pages 18-21 of the PreRetirement Seminar reference book.

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Marriage After Retirement

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What happens if you are single but marry after you retire. Is there a way to change your election so that your spouse receives your benefits after you die?
Yes, but only under specific circumstances. If you were single at retirement, and you elected the Life Income Annuity option, then you married after retirement, you have one year from the date of your marriage to change your election to either of the joint & survivor options (within the plan you elected at retirement). Please contact MOSERS for a Designation of New Spouse as Beneficiary for Retirement Benefits form. You must submit a copy of your spouse’s proof-of-age document and marriage certificate with this form.

There is one other situation in which you may change your benefit payment option after retirement:  If you were married at retirement and elected a joint and survivor payment option and your spouse died, resulting in your benefit reverting to the Life Income Annuity, and you remarry, you have one year from the date of remarriage to elect a joint and survivor option and name your new spouse as beneficiary. If your spouse dies, please notify MOSERS as soon as possible. You may be eligible for the “pop-up” provision, which would increase your monthly retirement benefit. Please contact a benefit counselor regarding your specific situation.

This information is included in the winter issue of RetireeNews.

Please note: This information primarily applies to general state employees. If you are a judge, administrative law judge, statewide elected official or a legislator, please refer to your MOSERS handbook or contact a MOSERS benefit counselor for specific guidelines.

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Designating Retirement Beneficiaries

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Since I have no spouse and my children are over 21 can I withdrawal all the money I contributed over the years, without a fee or penalty, and invest somewhere else where I can be sure my children will receive the money when I die and it will not go to the state? 
MOSERS administers both defined benefit (DB) and defined contribution (DC) retirement plans. It is unclear which you are asking about, so we will respond about both.

The Defined Benefit (DB) Plan
The DB plan is non-contributory for members hired before January 1, 2011. As such a member, you do not pay money toward your DB plan. Your employer pays the necessary contributions to MOSERS while you are actively employed so that you may receive a future monthly retirement benefit and potential survivor benefits. Since you do not pay contributions, you are not eligible to withdraw funds from the retirement system. You do not have a separate account, rather the state’s annual contribution toward your benefit is pooled with investment returns and employee contributions (from members first employed on or after 1/1/2011) to fund the retirement system.

At retirement, you will elect a benefit payment option that determines whether or not a benefit will be paid to anyone after your death. Since you are single, one of the options you may wish to consider is life income with a set number of guaranteed payments. This allows you to name a beneficiary or beneficiaries to receive any remaining payments if you do not live long enough to collect the minimum guaranteed amount. Your monthly payment will be reduced in order to provide this potential survivor benefit. However, you will receive a payment each month for YOUR life, even if you live beyond the guarantee period. No survivor payments will be paid if you have received ALL payments in the guaranteed period (other than the final payment due at the end of the month in which you die).

For example, if you elect Life Income with 120 Guaranteed Payments (10 years), but die after collecting only 60 monthly payments (5 years after you retire), MOSERS will pay the remaining 60 monthly payments to the beneficiary(ies) you named.

It is true that as a member of MSEP or MSEP 2000, if you die PRIOR to retirement, with no eligible spouse or minor children, no DB retirement benefits are payable on your behalf. (Survivors of members first hired on or after 1/1/2011 will either receive monthly survivor benefits or a refund of contributions plus any interest, depending upon various factors.)

Please see our website to determine which plan you are in, find more information in your retirement handbook, or contact a benefit counselor to discuss all your options.

On a related issue, we encourage you to make sure your life insurance beneficiaries are current (if you have life insurance with MOSERS) so proceeds will be paid according to your wishes.

The Defined Contribution (DC) Plan
As for any money you’ve contributed to the State of Missouri Deferred Compensation Plan (the DC plan), you can keep those dollars invested in the Plan after you leave state employment. In order for your savings to be transferred to your children after you die, you must designate beneficiaries for your account. You can do this by logging on to your account at www.modeferredcomp.org, clicking on My Profile in the left menu, then Beneficiaries. You can also call the Plan at 800-392-0925 to make your designations over the phone. The dollars you contribute to the deferred compensation plan are yours and will remain invested until you withdraw them. As a general plan guideline, you cannot access your savings in the deferred compensation plan until after separation from state employment. Those distribution guidelines differ when your beneficiaries assume control of your savings after your death. We encourage you to carefully read the Distribution Options Guide for more information.

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Survivor Benefit

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If an employee dies before retirement or after retirement what happens to their retirement funds? Does it go their children? Minor children? or does the employee lose this benefit if not married? 
For general state employees who are vested, the following applies:

Death BEFORE Retirement
If there is no eligible spouse, a survivor benefit may be paid to your natural or legally adopted child(ren) younger than age 21. This benefit is dependent on the law in effect at the time of your termination. If there is more than one eligible child, the benefit will be divided equally among them. The survivor benefit for each child will stop when the child becomes age 21 (unless a child is totally disabled and you terminated service with the state on or after 8/28/2001). Benefits can begin the month following the member’s death if all necessary documentation is provided.

If you die without any eligible beneficiaries, no retirement benefits are paid.

Death AFTER Retirement
At retirement you will elect a benefit payment option that determines whether or not a benefit will be paid to anyone after your death, e.g. life income annuity, life income with 120 guaranteed payments, life income with 180 guaranteed payments.

In General
No benefits will be paid for a deceased general state employee who is not vested (unless the employee’s death is determined to be duty-related). However, a designated beneficiary of an MSEP 2011 member may request a refund of contributions paid by that member plus any interest.

If you aren’t sure which plan you belong to or the vesting requirement, check the Which Plan Am I In? section of MOSERS’ website.

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BackDROP options

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What do most retirees elect to do with backdrop funds? What are options with keeping them with the state for disbursement?
To answer your first question, 78% of the total amount of BackDROP distributions was rolled over to tax favored savings arrangements such as IRAs or the Missouri State Employees Deferred Compensation Plan as of January 2015.

State employees eligible to receive a lump-sum BackDROP payment can choose to roll that money into the State of Missouri Deferred Compensation Plan at retirement.  This option is available to all state of Missouri employees, even if they have never participated in the deferred compensation plan. Doing so is an attractive choice for many because it allows employees to consolidate the lump-sum payment with their existing retirement savings. This makes managing their savings in retirement easier and grants them continued access to the Plan’s low fees and custom investment solutions. Another 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. In 2014 alone, just under 500 state of Missouri employees rolled their BackDROP payment in to the deferred compensation plan.

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.  


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Life Income with Guaranteed Payments

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For retirement you have 60, 120, and 180 guaranteed payments. If I choose 120 will my benefits stop being paid to me at the end of 120 months?
No. As the MOSERS member, you will receive payments each month for life. The 60, 120 or 180 guaranteed payments refer to what your beneficiary(ies) may receive if you die PRIOR to receiving that number of payments.

For example, if you elected Life Income with 60 Guaranteed Payments and lived for 24 months after retirement, your beneficiary(ies) would receive the 36 remaining payments. If you were to live 200 months beyond your retirement date, you would receive a payment each month for your life but, because payments would have been made in excess of the guarantee period, there would be no remaining payments to be paid to anyone else after your death (except the final payment for the month in which you die).

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