Getting Ready for Retirement: Navigating

the MTRS

Thomas F. CampbellDirector of Human Resources

October 29, 2015

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First Things FirstThe Massachusetts Teacher’s Retirement

System are the experts on retiring!

Volunteer to jot down questions I don’t know the answer to, but will find out

This presentation has been emailed to you with links embedded

I ’m happy you are here!

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MTRSThe MTRS website is an excellent source of

information as you consider retiring. Your homework is to spend time on the MTRS website and take a look at all of the information

MTRS offers several training programs that you might want to take advantage of in the future

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What We Hope to Accomplish Today

Help you better understand the retirement process

Eligibility

Notice to Needham Public Schools to be eligible for sick leave buy back

Credible Service and the purchase of past service

Retirement options

When will I get my first check?

Health Insurance

Retirement Application

Working after retirement

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Thinking About Retirement?

At the end of the 2015-2016 school year, 1900 teachers are expected to retire 2013-2014: 2000 2014-2015: 2000 2015-2016: 1900 2016-2017: 1800 2017-2018: 1750 2018-2019: 1700 2019-2020: 1600

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Your New Best Friend…The Massachusetts Teacher’s Retirement System

(MTRS)

The website is http://www.mass.gov/mtrs/Click on members, then active members. Spend some time at this website. Retiring is a process and there is lots for you to know!

MTRS’ phone number is 617-679-6877

Their mailing address is One Charles Park, Cambridge 02142-1206. They are across the street from the Cheesecake Factory at the Cambridgeside Galleria. (Most navigation tools do not recognize One Charles Park. Enter 100 CambridgeSide Place)

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The MTRS are the Experts

“Ready for Retir ement” program is a great source of information. Offered 4-6 pm:Woburn 11/5; Cambridge 12/3; Hanover 11/23

and other locations (S. Yarmouth, Auburn, Northhampton, Beverly, Norton)

MTRS offers group counseling which is very helpful

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Did You Know…Regular Compensation?

The maximum benefit you can earn in retirement from the MTRS is 80% of the average of your three highest consecutive years of salary

Generally speaking, stipends, extra days and longevity are included in the average of your three highest years. The NEA contract will dictate if this money can be included in the calculation. If it is not in the contract, it cannot be included. The amount of money must be listed in the contract as a stipend figure, not hourly rate (except payment for lunch duty)

Bonuses, sick leave buy back, expense reimbursement, tuition reimbursement, summer school teaching or curriculum work are not included in the calculation

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Am I Eligible to Retire? Understanding “Vested”

If you have 20 years of credible service regardless of age OR

You are at least 55 and have at least 10 years of credible service

If you are in Retirement Plus, you need to have 30 years of credible service, of which 20 years are teaching service with MTRS or the Boston Retirement System (i.e. direct payroll contribution to MTRS, not purchased service)

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How Much Will I Get?Most MTRS members are interested in

knowing how much they will receive in retirement (can I get to 80%?)

MTRS has an estimator on their website (PC works best)

The MTRS is a defined benefit plan under Section 401(a) of the Internal Revenue Code

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Notice to Needham: Sick Buy Back

Teachers are eligible to purchase sick time if they have work in Needham for 10 years.

Notice must be by November 1 of the year prior to retirement (19 months notice)

Up to 200 days at $40 per day ($8,000). Lump sum payment on last day teaching

You must retire between June 30 and August 31

Will not count in retirement calculations

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What is Credible Service? Credible service is time that you have worked as a

teacher, administrator or other Massachusetts public employee, for which you paid or transferred retirement contributions to the MTRS

You may be able to purchase credit for prior substituting, teaching in an out-of-state school, certain non-public school teaching, other Massachusetts public service and active military duty

Purchasing past service may help you get to the maximum of 80%

Madden Rule: If you are less than full time today and were less than full time prior to 1990, you get full time credit for service.

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Purchasing ServiceTypes of service you may be able to

purchase (most with an 8.00% interest rate): Regular Massachusetts public teaching service (20 years) Out-of-State public school teaching service (10 years) Overseas dependent school teaching service (5 years) Nonpublic school teaching service (10 years)

Private school pre 1973 Mass publically funded (4%)

Public school substituting, temporary or part-time teaching or tutoring service (10 years)

Vocational education (3 years) (4%) Peace Corps service (3 years) (4%) Other Massachusetts public service Authorized LOA or sabbatical from MA public school Authorized LOA for military service (4 years) Active military service in the armed forces (4%)

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Purchasing ServiceYou must purchase this service before you

retire. In some cases, you can only purchase the service while an active member of MTRS

There are loads of restrictions for the purchase of all services (i.e. the service must have occurred prior to a certain date, if you contributed to another retirement system (other than social security, etc.)

Completing all of the requirements to purchase service can take a very long time…start early!

You can purchase service with a rollover ot trust-to-trust transfer from a 403(b) or IRA

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Purchasing ServiceThe cost of purchasing past service is based

upon the percent of contribution that was in effect at the time you performed the service (plus 8.25% interest)

Your contribution rate is... Before January 1, 1975 - 5% January 1, 1975 through December 1, 1983 - 7% January 1, 1984 through June 30, 1996 - 8% July 1, 1996 through June 30, 2001 - 9% July 1, 2001 or after (automatically enrolled in

RetirementPlus) 11% All RetirementPlus participants - 11%

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The Three Retirement Options

Option A - Maximum benefit, no survivor benefit

Option B - Approximately 1% less than option A. Survivor will get lump sum payment of what remains in your annuity savings account (see the 4th bullet!)

Option C - Approximately 9-11% less than option A. Survivor will get two-thirds of your monthly benefits (survivor must be member’s parent, child, sibling, spouse or former spouse who has not remarried) (See the next bullet!)

Did you know…your annuity savings account pays approximately 20% of your retirement benefit and the pension fund pays 80%? Your annuity will be depleted in 10-12 years Think about this and do the math for options B and C: Is

it more cost effective to take option A and buy a term life insurance policy? Consult your financial advisor!

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Sample Math on the Options

If you have made an average of $90,000 and retire at 80%, your pension check will be $72,000/year Option B is about 1% less or $720/year. This option

allows you to give the balance of your annuity to a survivor. The balance depletes about 20% a year and will be gone in 10-12 years. Can you buy a $250,000 term (10 year?) life insurance policy for less than $720/year?

Option C is trickier: 9-11% less than option A (or more!), beneficiary receives two-thirds of your pension until they die. In the example above, 11% less is $7,920/year Your beneficiary would get $47,520 a year (two-thirds less than your

pension amount) for their lifetime. If they live 20 years beyond you, they would earn $950,400. Can you buy a $1 million, 20 year term life insurance policy for less than $158,400? ($7,920 x 20).

But don’t listen to me! I’m only trying to get you to think and work with your financial advisor!

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When Will You Get Your First Check?

Up two months after you retire, but likely sooner. Some have reported no waiting for their first check. The first check is payable in July. Your check will be a direct deposit

You should plan accordingly and have a small amount set aside in case your first check is delayed

Cost of living (COLA’s) are given when the legislation votes an increase. The percent is based on $13,000, not your entire retirement amount ($390)

At least every two years, you must prove you are alive - notarized Benefit Verification Form will be sent to you

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TaxesThere will be no State taxes paid on your

retirement benefits

There will be federal taxes withheld based upon the simplified method. Since January 1988, all money sent to MTRS is pre-tax dollars. Prior to January of 1988, money is after tax dollars

Visit the website: http://www.mass.gov/mtrs/benefit-recipients-retirees-and-survivors/taxation-of-your-benefit/

If you are moving out of state, check with that states’ DOR as they may have a state tax

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Health BenefitsYou will continue in your current insurance

program, and the town will continue to make their share of the payments

Your portion can be deducted from your retirement check

Your coverage could be different as a retiree. Contact Chuck Murphy-Romboletti at Town hall (ext. 295) for more information

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The Application18 page application on the MTRS website

You should start early…lots of paper to collect and people to see!

The earliest you can submit your application to MRTS is January 1If you are earning a stipend, please give us

part II after we have made all the payments for that stipend

The member must submit an original birth certificate or notarized copy. If you elect option C, your beneficiary must include one as well.

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Working After Retirement You have limitations for any Massachusetts public sector

employment. (You have no restrictions on any private sector or Federal employment)

Cannot exceed 960 hours in a calendar year (January - December)

60 day waiting period for the same employer unless you are earning the maximum (80%) or age 62 or older for the same employer. No waiting period for a new employer

Earnings: You cannot earn more than the difference between what you would have earned if you did not retire, and your retirement earnings. After one full January-December of being retired, you can add $15,000 to that number

You can opt to freeze your retirement and therefore no earnings limitations, but MTRS won’t pay your premium as you won’t have a retirement check

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Working After RetirementExample:

Robin Smith retired from a teaching position that paid her $75,000

Robin would be earning $78,750 if she did not retire

Robin’s annual MTRS pension is $60,000Robin’s allowable earnings is $18,750After Robin has been retired for 12 months, her

allowable earnings would be $33,750

If Robin chose option C, she would be able to earn more as her pension would be less

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Critical ShortageYou can return to teaching in a critical shortage

approved by DESE without financial or other restrictions. The district hiring you must apply for the waiver

Retirement Plus folks cannot work for two years under a critical shortage. You can come back earlier than 2 years, but subject to the 960 hours and financial limit

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FAQ’s Q: Can I purchase time that I was on a leave of absence for maternity

leave? A: You can, but with the following restrictions: The years on maternity leave

must be prior to December 31, 1974 and you must have applied and paid for that time before December 31, 2001

Q: I elect Option C, which allows my survivor to collect two-thirds of my pension if I die. If I choose Option C, my benefits, while I'm living, will be reduced 9-11% as compared to Option A which has no survivor benefit. If I die, will my survivor collect two-thirds of entire pension, or two-thirds of my 9-11% reduced pension?

A: The survivor will get the same amount the member was getting (two-thirds of the 9-11% reduction). By the way, the MRTS told me that the 9-11% reduction for Option C is if you choose a person who is similar in age as the member. If the member chooses a survivor who is considerably younger (i.e. the member's child), then the 9-11% reduction will be more like a 20% deduction

Q: If you are not currently taking health benefits from the Town of Needham, can you elect to do so?

A: Yes, you can elect our health insurance before or after you retire, as long as you have 10 years working in Needham and Needham was your last job before retiring

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FAQ’s Q: What happens to my portion of paying health insurance

premiums if my pension check will be delayed 2-4 months? A: If you retire in June, your summer checks will pay September's

premium. The Town will inform MRTS that they need to double your health insurance deduction if the checks are delayed beyond September

Q: When I turn 65, who pays for supplementary benefits? A: If you elect to purchase Medigap, you are responsible for the

premiums. Remember that Medicare will pay for 80% of your bills, so Medigap may be a good option for you

Q: If you have a family plan for health insurance and your spouse reaches age 65 before your do, what happens?

A: Your spouse can stay on your insurance until you reach age 65 Q: Can I switch from my spouses insurance to Needham’s

insurance during open enrollment, even after I retire? A: You can join Needham's plan, even after retirement. If your husband

lost his insurance, you can get Needham's insurance at any time. Otherwise, you can switch during open enrollment in the spring

Q: How do I learn more about Medigap? A: The Town's website has some information on Medigap at

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FAQ’s Q: I have never paid payroll taxes to Medicare. Am I

eligible for Medicare when I turn age 65? A: If you have never paid into Medicare and you are single,

you can remain (or join) the regular insurance programs offered by the Town. If you have been married for over 10 years, you are eligible for Medicare under your spouse. This applies even if you are divorced from your spouse. As long as you have 10 years of marriage, you are eligible through your (ex) spouse

Q: If the cost of health insurance premiums increases when I'm retired, am I subject to pay the increase just as I did when I was working for Needham?

A: Yes. If there are increases in the premiums after you retire, you will pay more just as you did when you were working

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FAQ’s Q: As a retiree, do we start paying social security? A: No! Q: Will the dental plan be available after we retire? A: Yes Q: Does the Town pay any portion of a supplemental

insurance plan when we switch to Medicare? A: Yes. The Town's portion varies depending on the plan

that you choose.

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FAQ’s Q: Annuity:  When a member retires, is the pension allocated 100% from their

annuity account first, then from the State fund when the annuity reaches $0? 

A: No, the money does not come out of their annuity account first. This is a generalization but, when retired, the member will receive about 80% of their yearly benefit from the state (pension fund and state appropriated assets) and about 20% of their yearly benefit from their own annuity savings account.  It usually takes about 10 years or so for their annuity savings account to spend down to $0.00. So, if a member chooses option B they would only be able to leave money to someone if they happen to pass away within the first ten years or so of their retirement. 

Q: Option C:  A member chooses a beneficiary.  If the beneficiary dies before the member, can they select another beneficiary, or is the pop-up provision the only option?

A: Under option C if a members beneficiary pre-deceases them, they automatically pop up to option A and start to receive their maximum benefit from the date of their beneficiaries death forward. They cannot choose a new beneficiary for option C.  Under Option B they can change their beneficiary at any time for any reason.

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Pension ReformThere is much happening in the way of pension

reform, and you need to keep posted by checking for guidance on the MTRS website Cap on pension for members new to MTRS on January

1, 201164% of the Internal Revenue Code section 410(a)(17)

which changes year to yearA special committee was appointed by the

Governor in 2009 and made recommendations for reform

Pension ReformLegislative watch

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Questions?

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