Understanding your retirement benefits will help you plan for a secure future. Membership in the State retirement system is mandatory for nearly all State employees.
If you retire before becoming Medicare-eligible, you will be automatically enrolled in the State Health Plan. You will be notified of this auto-enrollment approximately 30 days before your Medicare effective date.
Defined Benefit Plan
A defined benefit plan, sometimes called a pension plan, guarantees you a fixed payout at retirement. This amount is determined by a formula that factors your age, years of service and average salary. Professional managers manage the plan’s assets; investment returns generally cover 75 percent of the benefits. This type of plan differs from 401(k)-style retirement savings plans, which allow employees to make their investments and determine their future payout amounts.
Employees contribute a portion of their pay on a pre-tax basis to the defined benefit plan, and the state adds the amount. The system also invests these funds in various investment funds that offer different rates of return.
Members are vested after three years of plan participation. They may withdraw their accumulated contributions or roll them into an individual retirement account (IRA) once they reach their minimum retirement age of 55.
The system also offers three payment options for monthly benefits at retirement. Your chosen option will impact your lifetime income, so it’s important to carefully review the options and consult a financial and tax advisor if necessary.
Defined benefit plans are typically more expensive for employers to operate than other retirement accounts, so you should consider this a significant factor when choosing whether or not to participate. However, the benefit payments are not subject to stock market fluctuations, so this type of retirement plan is often considered more stable and predictable.
Retirement Annuity
As retirement age approaches, you can withdraw or roll over your accumulated deductions (total deferrals plus interest) from your annuity reserve account. One of the benefits of a state retirement plan, if you annuitize, is a lifetime stream of income payments will be paid to you.
If you choose Option A, your total annuity reserve will pay your lifetime allowance monthly until your death. Upon your death, your surviving beneficiary of record or, if no beneficiary is living, the person appearing in the judgment of the State Retirement Board to be entitled will receive a benefit equal to the amount of the accumulated annuity reserves.
Your annuity reserves are invested in several investment fund options with varying rates of return. You can review the historical returns for these investments in mine.
If you choose Option C, your lifetime allowance is based on a factor determined by your group classification and life expectancy for you and your designated beneficiary. You can only name a spouse, parent, unmarried former spouse or sibling as your beneficiary for Option C. This option is subject to the rules and regulations of the State Retirement Board.
Life Insurance
As you near retirement, a state-facilitated life insurance policy is provided to pay a lump sum benefit (often equal to two times your annual salary) in the event of your death. It also provides benefits for accidental death and dismemberment. You can learn more about your coverage and the cost of my mowers.
Call your agency’s retirement board to discuss options if you consider retiring. They can tell you if you meet the eligibility requirements for a state pension and what your monthly check will be, and they can help you with any other questions.
States are introducing state-mandated retirement plans to nudge (or push) employers into helping their employees save for their futures. These mandates can make it difficult to understand which plan is best for your company.
Illinois, for example, requires companies of certain sizes to automatically enroll their employees into an IRA or other qualifying plan, and there are penalties for non-compliance. Conversely, Employees can join the plan or shop for other options on the state-run marketplace. This makes the program unique among state-mandated plans. Read more about the new plan here.
Health Insurance
Managing health care costs in retirement is a big concern for many people. Many employers offer retiree health coverage, but in most cases, the premiums increase in retirement, and it is often difficult to find affordable insurance on the private market.
The same carrier providers that offered PEBB insurance to active state workers are available in retirement, but the rates and coverage options may differ. The Employee Benefits Division of the Civil Service Commission negotiates the carriers, coverage and rates for retirees just as it does for active state workers.
If you continue your PEBB health insurance into retirement, the carrier will bill you, and your premium will be deducted from your pension payment. If you cancel your coverage, you must submit a completed state health benefits program enrollment form for retirees, survivors And LTD participants (A10601) or login to my account and complete an online change request (R0452G). Change requests are effective the first day of the month after VRS receives your request and the required proofs.
