Showing posts with label FAP. Show all posts
Showing posts with label FAP. Show all posts

Pay Raise & Final Average Pay

Posted on
will the raise that we are suppose to get in 2020 effect my retirement?
if I am already on my backdrop and if I retire in dec of 2021.
Assuming the pay raise is included in the final state budget and goes into effect in January 2020, if you continue working and do not take BackDROP, the impact of a pay increase on your monthly retirement benefit payment would be dependent upon how long you continue working. 

Remember, in calculating your monthly benefit, one factor is your Final Average Pay, which is your highest 36 consecutive months of pay. So, if you got a raise and worked a few months past January 2020, the impact may be very small. If you got a raise and worked an additional 36 months, the impact would be bigger.

Any pay earned during your BackDROP period has no impact on either your monthly benefit amount or your BackDROP lump-sum amount. If you are eligible for and elect the BackDROP upon retirement, your FAP will be calculated using your MOSERS-covered work history prior to your BackDROP date. In other words, pay (and service) during the BackDROP period is excluded when calculating your monthly benefit amount.

But, after you retire, keep mind that MOSERS retirees receive an annual cost-of-living adjustment (COLA) between 0-5%. This amount is calculated each January and is based on the CPI (Consumer Price Index), which is unrelated to any pay raises state employees receive. You can find more information about the retiree COLAs on our website.

You can run benefit estimates under a variety of scenarios by logging in to MOSERS website, or ask a MOSERS benefit counselor to run them for you. You may find our Creating a Benefit Estimate video and our Comparison Calculator helpful in weighing your options.

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State Employee Pay Raise

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I am planning to retire 01/07/2019. My question is... IF we were to receive the much talked about raise in January of 2020 would that action have any impact on my retirement/backdrop?
No, if you retired before a pay raise was given to active employees, any such increase would have no impact on you as a retiree. 

If you continued working beyond January 2020, got a pay raise, and did not take BackDROP, the impact of a pay increase on your monthly retirement benefit payment would be dependent upon how long you continue working. 

Remember, in calculating your monthly benefit, one factor is your Final Average Pay, which is your highest 36 consecutive months of pay. So, if you got a raise and worked a few months past 2020, the impact may be very small. If you got a raise and worked an additional 36 months, the impact would be bigger. 

Any pay earned during your BackDROP period has no impact on either your monthly benefit amount or your BackDROP lump-sum amount. 

But keep in mind that, by law, MOSERS retirees receive an annual cost-of-living adjustment (COLA) between 0-5%. You can find more information about the retiree COLAs on our website. 

You can run benefit estimates under a variety of scenarios by logging in to your MOSERS Member Homepage, or ask a MOSERS benefit counselor to run them for you. You may find our Creating a Benefit Estimate video and our Comparison Calculator helpful in weighing your options.

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Final Average Pay Calculation

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I'd always thought retirement benefits were based on the highest pay of our state employment career. I was told by a coworker who recently attended a pre-retirement seminar that once you become eligible (under the rule of 80 for MSEP employees), that the highest pay rate considered for retirement benefits is already locked in and pay increases after that point will have no impact on retirement benefit. Please advise.
What you heard is not necessarily true – so thanks for checking with us! Whether or not pay for a given period will be considered in determining your final average pay (FAP) depends on if you elect BackDROP* (if eligible); not when you hit “80 & Out”.

To calculate your pension benefit, we will use your highest 36 full consecutive months of pay – wherever that occurs in your individual pay history. Practically speaking, most people earn their highest 36 consecutive months of pay in their last three years of state employment, but not always. 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. In other words, pay (and service) during the BackDROP period is excluded when calculating your monthly benefit amount.

If, at retirement, you do not elect BackDROP, we will review your entire pay history and find the 36-month period with your highest pay (regardless of whether that is before or after you might hit “80 & Out”) and will use that in calculating your monthly benefit. You may elect not to take BackDROP if you want all of your pay and service to count. In most cases, opting not to take BackDROP will increase your monthly benefit amount.

*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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Calculating Final Average Pay

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Does MOSERS use the pay period end date or the check issue date when calculating the highest 36 consecutive months?
In our calculation of final average pay, we credit you based on when the payroll was earned, rather than the month it was actually paid. To calculate your pension benefit, we will use your highest 36 full consecutive months of pay –wherever that occurs in your individual pay history. Practically speaking, most people earn their highest 36 consecutive months of pay in their last three years of state employment, 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. In other words, pay during the BackDROP period is excluded when calculating your monthly benefit amount.

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Final Average Pay and BackDROP Period

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MY PENSION IS BASED ON MY BEST 36 MONTHS EARNINGS. WAGES DURING MY 5 YEAR BACKDROP PERIOD ARE EXCLUDED. WHAT IF MY BEST 36 MONTHS ARE AFTER I COMPLETE MY 5 YEAR BACKDROP PERIOD?

Any pay earned after your BackDROP date (the beginning of your BackDROP period) does not count - it is excluded when we calculate your monthly retirement benefit. We will look at your entire pay history in your MOSERS-covered employment prior to your BackDROP period to find your highest 36 consecutive months of pay and use that to calculate your monthly benefit.

Remember, your BackDROP period, whether it is a 2-year or 5-year period, will always be immediately prior to your retirement date. That means, you wouldn’t continue to be employed in a MOSERS benefit-eligible position after your BackDROP period.

This is one of the factors to consider when making your elections about BackDROP. You can contact a MOSERS benefit counselor who can assist you in evaluating your options. You can also get benefit estimates based on different scenarios and use our Comparison Calculator to compare the long-term impact of different options. (Watch our Comparison Calculator video and our Creating a Benefit Estimate video for help getting started.)

For more information, see our recent post on Final Average Pay and on the 3-part formula we use to calculate retirement benefits.

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How is Final Average Pay Calculated?

Posted on
I thought retirement payments were based on last 3 years' salary of employment at the state. I heard over the weekend that retirement payment is actually based on 36 months of your highest paid salary throughout a state employment history. Would appreciate clarification. Thanks.
To calculate your pension benefit, we will use your highest 36 full consecutive months of paywherever that occurs in your individual pay history. Practically speaking, most people earn their highest 36 consecutive months of pay in their last three years of state employment, but not always.

Read below for more information. 

We calculate benefits for general state employees using this formula: 
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. In other words, pay during the BackDROP period is excluded when calculating your monthly benefit amount.) 
•         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 Multiplier - 1.6% (.016)

$2,600.00 x 25.25 x .016 = $1,050.40 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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