Teacher Retirement System, the Public Employee Retirement System, - - PowerPoint PPT Presentation
Teacher Retirement System, the Public Employee Retirement System, Supplemental Benefits System and 403b Plans Prepared by Dan Polta S uperintendent Denali Borough S chool District Updated for AS A, November 2018 Disclaimer This
Prepared by Dan Polta – S uperintendent Denali Borough S chool District Updated for AS A, November 2018
Prepared by Dan Polta – updated November 2018
The TRS
and PERS syst ems provide ret irement benefit s (money and healt h insurance), as well as disabilit y and deat h benefit s for t eachers and public employees in Alaska
Teachers and public employees in Alaska do not
part icipat e in S
ecurit y. Please note, that if you qualify for social security from
reduced if you receive a TRS
benefit.
Contact the S
ecurity Administration for specifics.
Any cert ified t eacher or administ rat or who works for a
school dist rict in a j ob t hat requires a cert ificat e.
Any t eacher or administ er in t he Universit y of Alaska
system.
Depending on when you st art ed working as a t eacher in
Alaska you have a different plan design under TRS .
Tier I –Teachers ent ered t he syst em before July 1,
Tier II –Teachers who ent ered t he syst em on or aft er
July 1, 1990 but before July 1, 2006. - Defined Benefit
DCP (Defined Cont ribut ion Plan) –Teachers who ent ered
t he syst em on or aft er July 1, 2006 (Kat hy will address).
Vesting
Full rights to the benefits is called being “ vested”
in the system
For TRS
this happens after 8 years of service.
If you leave TRS
before 8 years of service – no access to TRS benefits or the District’s financial contribution
Employee does own his/ her contributions Withdraw at any point (and pay income tax on it) Leave it in TRS
and earn interest until your retirement
2%
per year of service for the first 20 years.
2.5%
per year of service for each additional year.
survivorship options.
Depending on when you st art ing working you have a different plan design under PERS .
Tier I – Employees who ent ered t he syst em before
July 1, 1986. – Defined Benefit
Tier II – Employees who ent ered t he syst em aft er July
1, 1986 but before July 1, 1996. - Defined Benefit
Tier III – Employees who ent ered t he syst em aft er July
1, 1996 but before July 1, 2006. - Defined Benefit
DCP (Defined Cont ribut ion Plan) – Employees who
ent ered t he syst em on or aft er July 1, 2006. - Defined Cont ribut ion. (Kat hy will address t his).
et yearly by the S tate
Vesting
Full rights to the benefits is called being “ vested” For PERS
this happens after 5 years of service. Employees who work less than a full year either have a
prorated calculation to determine their length of service or can use a 172 day school term to define one year of service*
If you leave PERS
before 5 years of service – no access to PERS benefits or the District’s financial contribution
Employee does own his/ her contributions
Withdraw at any point (and pay income tax on it)
Leave it in PERS and earn interest until your retirement
* LWOP of more than 10 days in a year prevents that year
from counting as a year of service.
After 30 years of service or age 55 Tier 1 or age 60 for tiers 2 and 3.*
Based on the average earnings of your top 3 (TI&2) or top 5 (T3)
years.
All service credit in PERS is modified to consider the months within the year actively employed.
2% per year of service for the first 10 years.
2.25% per year of service for the second 10 years.
2.5% per year of service for each additional year.
Adj usted for survivorship options
*LWOP of more than 10 days in a year prevents that year from counting as a year of service
What questions do you have about the financial side
Next we’ ll look at the health side of retirement.
DBP (TRS I and II and PERS I, II, and III) Division of Ret irement and Benefit s DCP (TRS III and PERS IV) Y
Visit -
akdrb.gwrs.com
All informat ion about t he various plans comes from t he
Division of Ret irement s and benefit s and t he plan informat ion booklet s available on t heir websit e
ht t p:/ / doa.alaska.gov/ drb/ ret irement / index.ht ml
videos-5 minute introduction to Plan
Summary
Investment information
The system is in arrears by several Billions
(FY16). ( Kathy might have current proj ections).
The TRS
and PERS trust funds do not have enough money invested to pay the proj ected benefits for everyone in the defined benefit tiers.
What happened?
The S
tate did not structure the withholdings in the plans to provide enough money in the investment funds to pay for the financial and health benefits of the early tiers.
This really hit the fan when the stock market crashed in
2008.
What ’s t he plan t o fix t his?
Actuaries calculated how much money should be added to
the investment fund.
The S
tate made some large, one-time payments to the the trust funds.
The S
tate is paying additional money into the fund based
district and municipality.
TRS
PERS
These funds technically flow into and then out of our budgets
and are reported in our audits along with “ our” total liability.
We never actually hold this money, it is paid, “ on our behalf.”
What’s the risk?
The additional contributions rates are
determined each year based on updated calculations considering the additional contributions and investment growth.
In FY16 the legislature considered cutting the on
behalf payments from the state and pushing these costs onto school districts and municipalities.
As proposed this would have increased DBS
D operating costs by close to $300,000 per year by 2020 (3%
budget).
What questions do you have about PERS / TRS
behalf payments?
General ret irement advice is t hat people should
probably save and invest an addit ional 10-15%
earnings each year for ret irement . Remember to consider that working for a school district in
Alaska you do not pay into nor earn social security.
Participating in PERS
/ TRS can also reduce any proj ected payment you may receive from social security.
Check with S
ecurity Administration for details on this. Its called the “ Windfall Elimination Provision.”
S
upplement al Benefit s S yst em is an opt ional financial ret irement plan t hat polit ical subdivisions in Alaska may ent er int o wit h t he S t at e.
For school dist rict s, classified and some exempt st aff
part icipat e but t eachers cannot .
Part icipat ion is for t he ent ire group and individuals may
not choose t o opt out if your dist rict part icipat es.
Classified personnel working 20 or more hours per week. Cont ribut ions
Employee contribution = 6.13%
(pre-tax)
District contribution = 6.13%
.
NO VES
TING PERIOD
Invest ment direct ed by employee int o funds designed
and approved by t he Division of Ret irement and Benefit s and managed by Empower. This is similar to, but different and separate from
PERS / TRS
Payout – At departure from service 10%
penalty if before 59 ½
Options for structured payment similar to PERS
DCP
This is a only a financial system. It has no medical
All money may pass to a beneficiary.
Therefore you pay lower taxes and keep more
money for yourself
S
ince earnings in a 403(b) are tax deferred, more money is earning you money
Direct investments from payroll deduction help
you avoid the temptation to spend that money today.
Inside of a 403(b) or 457, the individual directs the money to be invested in his/ her choice of funds. All investment companies offer a wide variety of stock, bond, or balanced funds for one to choose from Most companies also allow one to invest money in funds with a targeted retirement year.
These balance between stocks and bonds and transition to more
conservative investments as you approach retirement .
Early Wit hdrawals from a 403(b) The IRS
charges a 10% penalty for early withdrawals from a 403(b)
Income tax must be paid on the full amount withdrawn
A withdrawal can also push you into a much higher tax bracket
These facts encourages you to keep the money invested for
retirement
S
your 403(b) – not Vanguard.
403(b) and 457 are employer sponsored plans.
Therefore t he employer must est ablish a
relat ionship wit h an invest ment company t hat in t urns offers t he specific plans t o t he employees.
Districts can work with in any fund company who
is willing to work with them. S
like DBS D, work t hrough a clearing house t hat will connect us wit h mult iple fund companies.
457 are similar t o t he 403(b) wit hout t he 10%
penalt y. Not all investment companies offer 457 plans. Most 457 plans that I’ ve reviewed have higher fees than
you can easily find for 403(b) plans.
The 457 plan offered by the S
tate with Empower offers fees competitive with low fee brokerages such as Vanguard, TIAA, Fidelity, etc.
Vanguard, TIAA, Fidelity, etc.
if time permits
If you elect to participate in an FS A you choice an amount of money for the calendar year to be withheld from your
This withdrawal is averaged over your monthly salary payments and held for you by the management company. To access the money you either use a special debit card or file and easy online claim.
Money that has been allocated to an FS A can reimburse you for approved medical expenses. This includes your
(medical, dental, vision)
2018)
Without an FS A
Gross Income $50,000.00 Estimated Taxes @ 25% $12,500.00 Out of Pocket Health $1,200.00 Take Home $36,300.00
With an FS A
Gross Income $50,000.00 FS A for Health $1,200.00 Estimated Taxes @ 25% $12,200.00 Take Home $36,600.00
Savings with an FSA $300.00
Money withheld into an FS A but not used in that year are forfeited by the employee and given to the employer.
An employer may choose to allow $500 from your FS
A to carry over to the next calendar year.
This forfeiture can help cover costs of administering the
reductions in payroll taxes of the employer. An FS A of ~$5,000 is also available for approved child-care expenses.
What questions do you have about the FS A?