KTRS
Pre Retirement
Seminar
For University
Gary L. Harbin, CPA
Executive Secretary
Office Hours 8:00 to 5:00
Presented by
Lorri Stepp
2013
AG E N DA
KTRS
Benefits
KTRS
1
Your
KTRS
Account
2
Your
Defined
Benefit
“Group
Retirement”
Plan
3
4
Health
Insurance
Benefit
5
PostRetirement
Employment
6
The
Retirement
Process
7
KTRS was Established by the General Assembly
in 1938 and Funded in 1940.
A Defined Benefit Group
Retirement Plan was
established to provide
retirement benefits for local
school districts and other
public educational agencies in
the state.
Current employers :
175 local school
districts
17 Department of
Education Agencies
KCTCS
Five Regional Universities &
all Community Colleges
THE BOARD OF TRUSTEES
Are the Fiduciaries of the System
Members Elect the Seven Trustees to a Four-Year Term on the Board.
ARTHUR
GREEN
Chair, Elkton
DR. JAY
MORGAN
Vice Chair, Murray
HOLLIS
GRITTON
Union
RONALD L.
SANDERS
Hodgenville
Ex-Officio
QUIN
SUTTON
Eddyville
ALI
WRIGHT
Georgetown
MARY
ADAMS
Brodhead
ALLISION BALL
State Treasurer
Ex-Officio
DR. STEPHEN PRUITT
Commissioner of the Dept.
of Education
4
Trustee Elections are Each Year in May
Trustee elections are conducted by Ballot.
All contributing full-time, part-time and substitute members
or those retired from KTRS have the privilege to vote.
5
How
BIG
is
Membership of
OVER 141,520
OVER 48,000
Receive a benefit
from KTRS
KTRS
Today?
1 in 4 members
eligible to retire
Distributes over $140
Million Monthly in
Retirement Benefits
Retired Teachers Have a Significant Economic Impact
All Across Kentucky
FY 2014/2015
Congressional District 4
$
Congressional District 3
$
301,752,255
261,701,051
6,633 Recipients
6,738 Recipients
04
Congressional District 1
$
294,773,382
03
7,901Recipients
06
02
01
05
Congressional District 5
$
Congressional District 2
Congressional District 6
$ 277,929,092
$ 304,554,954
7,165 Recipients
8,196 Recipients
327,651,236.75
8,950 Recipients
7
Your Defined Benefit
“Group Retirement” Plan
2
A Defined Benefit Plan is:
A type of pension plan which promises retirees a
specified monthly benefit based on a set formula
including the employee’s earnings history and
years of service. A Defined Benefit Plan pays a
lifetime monthly benefit.
Defined Contribution
“Individual Savings” Plan (DC)
Example: 401(k) Plan
•
•
•
•
•
Benefits depend on investment performance.
Investment individually managed by you.
No additional benefits available.
No guarantee of lifetime benefit.
Higher fees.
10
Why a Defined Benefit Plan is Superior to a
Defined Contribution plan….
Benefit is DEFINED by a Set Formula…
not the amount of member contributions
Investments are
Professionally
Managed
For You
Modest Life
Insurance Benefit
Disability Benefit
A Lifetime Benefit
Retiree
Medical
Insurance
Benefit
Teachers’ Savings + Employer Match are
Invested & Provide a Lifetime Benefit
Member
Contributions +
Interest
State
Contributions
KTRS Investment
Earnings
Years of Retirement
1
5
10
15
20
25
30+
The amount of member contributions does not determine the amount of
retirement benefit. Within the first six years, your contributions plus the
state matching are paid back to you.
0
Let’s Have a Big “Shout-Out”
to KTRS Retirees
LIVING LONGER!
As of Dec. 31st
2009
2010
2011
2012
2013
2014
2015
Age 100 years old
or more
38
46
56
62
50
54
39
Age 95-99 years old
278
279
276
233
220
196
Age 90-94 years old
710
708
705
707
743
758
211
764
Age 80-89 years old
3,890
4,074
4,239
4,295
4,522
4,684
4,875
TOTAL RETIREES
4,916
5,107
5,276
5,297
5,337
5,692
5,889
KTRS
Benefits
3
It’s all about the BENEFITS…
Active Member Benefits
•
Provides benefits in the event you become disabled.
•
Provides benefits to your survivors in the
event of your death.
•
Life insurance benefit of $2,000.
Retirement Benefits
•
•
•
•
Defined benefit plan with lifetime guaranteed annuity.
Retiree medical benefits.
$5,000 Life Insurance.
Annual cost-of-living increases.
Reciprocity Benefits
KERS … CERS … SPRES … KJRS … KLRS
+

Years will be added together for eligibility purposes
(retirement, KEHP insurance).

Retirement date must be the same in each system.

Two applications completed, one for each system.

You will get two checks, one from each system.

Highest earned salaries, regardless from which system you
retire.
16
Disability Retirement
Eligibility
•
•
•
•
Must have 5 or more years of full time service.
Be an active contributing member.
Have a disabling condition expected to last 12 months.
Condition must be certified by a specialist.
Approval
•
Must have approval by the KTRS medical review committee.
Benefits
• 60% of average salary during entitlement
• Health Insurance
• Service credit awarded at the end of entitlement period
(Maximum 27 years)
Restrictions
• No work similar to KTRS positions.
• Income limit.
Ask to speak to a KTRS Disability Counselor for more information.
Survivor Benefits*
Spouse Benefits if Death is Prior to Retirement
Level
I
Years of
Service
Initial
Benefits
Increase in
Benefits
Termination of
Benefits
1st day to 9.99th
year
$180 or $240
None
Remarriage
Eligible
Benefit at
member’s
age 55
Remarriage
COLA
No Termination on
Annuity
Level
II
10 to 26.99th year
Under age 55
$180 or $240
Level
III
Age 55 & 5 years
or any age with 27
Full Eligible
Benefit
*Spouse must be named as Primary Beneficiary
18
After Retirement …
Your Annual COLA
Cost of Living Allowance
Not …
Every July 1st
a 1.5% COLA is added to
your annuity.
All COLAS are prorated when retired
less than 12 months.
COLA
Health Insurance
Benefit
4
Kentucky Retired Teachers’ Health
Insurance is provided through two plans:
• Kentucky Employees Health
Plan (KEHP)
For Retirees Under Age 65 and not
Medicare eligible.
• Medicare Eligible Health Plan
(MEHP)
For Retirees Medicare Eligible or
Age 65 & Over
* University and Medicare eligible Retirees- please visit the web site
for insurance information.
21
House Bill 540
A Solution of
Shared
Responsibility for
Long-Term Funding
of Retiree Health
Care
22
22
Shared Responsibility
House Bill 540 is a Shared Responsibility solution
that provides permanent funding for retiree
health care and ends the long history of
underfunding this important benefit.
Shared Responsibility calls upon each party
(active teachers, retired teachers, school districts,
and the state) to share in a piece of the solution by
investing a little more now to receive substantial
returns later.
Time-line of Contribution Changes for Active Teachers
Effective July 01, 2010, most active contributing members are contributing an additional ¼ of 1% of
salary on a pre-tax basis to the Medical Insurance Fund. This will be gradually increased to an
additional 3% over a six-year period. The total contribution will be 3.75% on July 1, 2015. The
additional rates will phase in as follows:
Effective
Date
Non-University
University
July 1, 2010
10.105%
6.330%
July 1, 2011
10.355%
6.500%
July 1, 2012
10.855%
6.840%
July 1, 2013
11.355%
7.160%
July 1, 2014
12.105%
7.680%
July 1, 2015
12.855%
8.185%
HB 540 SHARED RESPONSIBILITY
For Non-Medicare Eligible Retirees
Retirees under age 65, regardless of retirement date, who receive medical
benefits through the Kentucky Employees’ Health Plan, began contributing
an additional amount to the Medical Insurance Fund effective July 1, 2010.
This amount is based on the standard Medicare Part B premium that is
currently paid by retirees age 65 and over.
Effective
Date
Medicare Part B Cost to
Retiree Age 65 & over
Shared Responsibility
Cost to Retiree Under Age 65
January 1, 2015
$104.90
$104.90
January 1, 2016
$121.80
$121.80
Kentucky
Employees
Health
Plan
(KEHP
Under
Age 65)
And
Medicare
Eligible Health
Plan
(MEHP
Age 65
& Over)
Percentage of Health Insurance Paid by KTRS
Years
of Service
Entry prior
to 07/01/02
Entry on or
after 07/01/02
Entry on or
after 07/01/08
27.0
100%*
100%*
100%*
26 - 26.99
100%*
95%
95%
25 - 25.99
100%*
90%
90%
20 - 24.99
100%*
65%
65%
15 - 19.99
75%
45%
45%
10 - 14.99
50%
25%
not eligible
5 - 9.99
25%
10%
not eligible
*supplement provided by KTRS
(minus the Medicare Part B equivalent)
100% is not equivalent to free
100% = The Maximum Available Supplement
26
MEDICARE ELIGIBLE HEALTH PLAN (MEHP)
Medicare Eligible or Age 65 & Over
•
Upon Retirement, if you are Medicare eligible, you are not
eligible for the KEHP and must enroll in the MEHP if taking
insurance through KTRS.
•
Medicare eligible or age 65 and over retirees must
enroll in Medicare Part B through Social Security.
•
Spouses must have Medicare Parts A and B to be
eligible to enroll in MEHP with KTRS.
•
MEHP is currently composed of :
Medicare Advantage Plan administered by United
HealthCare (UHC)
Medicare Part D prescription drug plan administered by
Express Scripts
MEDICARE ELIGIBLE
HEALTH PLAN
Spousal Shared Risk Waiver
Effective January 1, 2013
At Retirement, if the Medicare eligible spouse does not enroll in the
MEHP, the spouse will only be eligible to enroll again if they
experience one of the following KTRS qualifying events:
28
Qualifying Events
•
•
•
•
•
•
Marriage
– New Spouses have 30 days from the date of marriage to enroll.
Spouse Losing other Employer/Retirement-Sponsored Coverage
– Spouse must provide proof from employer/retirement system providing
insurance termination date and reason for termination.
– Cannot be self-terminated.
Spouse’s COBRA Expires
– Spouse must provide a COBRA termination letter showing the date COBRA
expires.
– Cannot be self-terminated.
Tag-along with Retiree
– Spouse can be enrolled when Retiree enrolls because Spouse was unable to
be covered due to Retiree not having KTRS coverage.
Death of Retiree
– Spouses have 30 days from the Retiree’s death to elect coverage or decline
coverage. If coverage is declined or waived, it is a permanent election – no
Qualifying Event will allow the surviving spouse to re-enroll.
Spouse Turning Age 65
– Spouse must enroll in Medicare Parts A and B and enroll in the KTRS MEHP
within 30 days of their 65th birthday.
29
Your KTRS
Account
5
KTRS ID
name
address
Member
Account
Details
Report
Page 2
FY Account Summary
Your KTRS
Annual
Statement
Retirement Account
Beneficiary
Life Insurance Beneficiary
Page 3
Your Service Record by FY,
Employer, Earnings,
Retirement Contributions,
Interest & Accumulated
Balance
UNIVERSITY
For members who entered the system prior to
July 1, 2008
*2% multiplier
*Pay into Social Security
*8.185% Contribution
Rate for 2015/16 year
*Sick Leave Service
Credit (and State
Agency)
34
Vesting
5
 Vesting is the length of
service needed to
qualify for a retirement
benefit.
 Vesting requirement is
5.0 years of service
credit.
Terms to Become Familiar With…
NOTICE:
Entry Date Prior
To 07/01/2008
Retirement Eligibility
 27 years service at any age
 5 years service at age 55*
* Retirement Actuarial Reduction 5% for each year service is below 27 or
5% for each year age is under 60, whichever is less
36
Terms to Become Familiar With….
NOTICE:
Entry Date On or
After 07/01/2008
Retirement Eligibility
 27 years service at any age
 5 years (Vested) service at age 60
10 years service at age 55*
* Retirement Actuarial Reduction (6% for each year service is below 27
or 6% for each year age is under 60, whichever is less)
Do not confuse retirement eligibility with being
financially able to retire.
Are you
prepared
for
retirement?
Financial planners recommend retirement income of
80% to 100% of your final salary depending on the
adequacy of provided health insurance.
38
Kentucky Teachers’ Retirement System
HOW TO CALCULTATE A RETIREMENT ANNUITY
Service Credit
(SC)
Multiplier
Final Average
Salary
• Service credit is the total
• Multiplier is the value
• High 5
number of years an employee for each year of service
(27 years OR age 55)
has contributed into KTRS.
credit earned with KTRS. • High 3
(27 years AND age 55)
Aim for the
High 3!
Total Service Credit X Total Multiplier X Final Average Salary =
Annual Benefit
39
KTRS Financial Plan…..ways to achieve the 80%
Increase Your Final Average Salary
Perform extra duties for additional pay
Increase your Multiplier
Work additional years…aim for your High 3
Make Eligible Service Credit Purchase
Save the maximum sick leave allowed
Supplement Your Retirement
Individual Savings Account
40
UNIVERSITY MULTIPLIERS
Years of Service
Entry
PRIOR to
07/01/08
Entry
AFTER
07/01/08
1-10
2.0%
1.50%
10.01 - 20
2.0%
1.70%
20.01 – 26.99
2.0%
1.85%
27.0 +
2.0%
2.0%
41
KTRS Financial Plan…ways to achieve the 80%
Multiplier
Increase your
multiplier – work
more years
Non-University Multiplier
2.5% for each year up to 30
3.0% for each year 31 +
University Multiplier
2% for Each Year
Increase your final
average salary
Years of
Service
NonUniversity
University
27
28
29
30
31
32
33
34
35
36
37
38
67.50%
70.00%
72.50%
75.00%
78.00%
81.00%
84.00%
87.00%
90.00%
93.00%
96.00%
99.00%
54%
56%
58%
60%
62%
64%
66%
68%
70%
72%
74%
76%
Your retirement annuity is calculated by a
BENEFIT FORMULA
Service Credit x Multiplier x FAS =
Annual Benefit
Non-University
SC x M x FAS = Annual Benefit*
27 x 2.5% x $56,000 = $38,080 Annual Benefit*
UNIVERSITY
SC x M x FAS = Annual Benefit*
27 x 2.0% x $56,000 = $30,240. Annual Benefit*
plus Social Security
*Apply discount if applicable
EXAMPLE A (University)
Years of Service
Service Credit Multiplier Total
1988-89
2015-16
27.00
2.0% 54.0%
School Year Salaries
10 - 11 $75,000
11 - 12 $76,000
12 - 13 $77,000
13 - 14 $78,000
14 - 15 $79,000
Final Average
Salary
$385,000/5=$77,000
27.0 x 2.0% = 54.0%
54% x $77,000 = $41,580 Annual Benefit
$41,580 / 12 = $3,465 Monthly Benefit (Option I)
$41,580 / $77,000= 54% of Last Salary
Individuals with thirty years or more of gainful employment and contributions to the Social
Security System can usually expect 25% of their last year’s salary to be replaced by the
Social Security Benefit when eligibility occurs.
44
How a Retirement Pension can Grow
KTRS + Social Security = Pension Income
On average, Social Security benefits will be 20 - 25% of the last year’s salary
Years of Service
27
30
32
Multiplier
54%
60%
64%
Average Salary
$77,000
$80,000
$81,000
Option I Benefit
$3,465
$4,000
$4,320
Last Earned Salary
$79,000
$82,000
$84,000
% of Last Salary
KTRS alone
54%
60%
64%
% of Last Salary
SS + KTRS
79%
84%
88%
45
Ways to Improve
Your Retirement
Sick Leave
and
Purchases
Recognize the Value of Your Sick Leave
Non-University
Your Sick Leave
payment is paid to
you by your
employer….AND is
added to your FAS!!
UNIVERSITY
And State Agency
Your sick leave is
converted to sick
leave credit and
used in your
calculation!!
Win/Win
Situation!!
47
How is Sick Leave and Annual Leave Calculated?
Sick Leave Service Credit
Annual Leave Payment
Number of Sick
Leave Hours / 7.5 /
185 = Service Credit
Monthly Rate / 162.5 x
Number of Annual
Hours = Payment
EXAMPLE
693.75 hrs / 7.5 =
92.50
92.50 / 185 =
.50 yr
EXAMPLE
$4,666.67 / 162.5 =
$28.72
28.72 x 450 Hours =
$12,924.00
Sick Leave Credit does not count for 27 year
eligibility.
The state allows a maximum of 450 Annual
hours and 240 Comp hours
48
These Purchases Have Deadlines …
Fractional/Part-time Service
•
•
•
•
Full-time service – did not work a full year.
Part-time service – employed at least 7/10 of the year.
Deadline to Purchase – December 31 following the fiscal.
year in which the Lost Services occurred.
Employer must complete a Lost Service Certification.
Current Leave of Absence
•
•
•
Official leave – Board minutes required.
Deadline to Purchase – June 30th of following year.
Employer must complete a Leave of Absence Certification.
USERRA Military Service
•
Employer must complete USERRA Certification.
These purchases may be bought anytime prior to retirement …
Non-Current Leave of Absence
If membership is prior to 7/1/2008, entry after that date the cost is actuarial.
•
•
•
•
Only reasons Health, Child Rearing, or Educational.
No more than two years may be purchased.
Interest of 8% compounded annually.
Must pay the state matching, plus interest.
Withdrawn Account (Reinstatement)
•
•
Eligibility - Active status & one year or more in any Kentucky
retirement system.
Annual interest of 8% is charged from date of withdrawal to
date of payment.
This purchase may be bought at the time of retirement …
Actuarial Purchases
Purchasable only at retirement
May not be used for vesting (first 5 years)
Non-qualified *(If entry date is prior to 7/1/2008) (must have 20 years to purchase)
Public Out-of-State Service
Peace Corp Service
Head Start
Civil Service
Military Service
National Guard or Military Reserves
Mental Health/Mental Retardation Service Program
Non-Current Leave of Absence *(If entry date is on or after 7/1/2008)
Non-Qualified may not be used as a 3% multiplier.
Purchase of Optional
Retirement Plan Years (ORP)




You are Permitted to make a one time switch from an
ORP to KTRS.
If you have less than 6.5 years of ORP service prior to
KTRS membership, you are eligible to purchase that
service in KTRS.
After the 6.5 year deadline, you may switch to KTRS but
you can’t purchase previous ORP years.
Purchased years do not count toward eligibility for :
 Medical insurance
 Survivor benefits
 Disability benefits
How to obtain cost for ORP
purchase
Complete OS-3 University Form and send
to KTRS
KTRS will provide a cost breakdown for
each year of employment
You decide how many years you want to
purchase
(must be the most recent years first)
Make payment with personal check or
direct rollover from present ORP
The Retirement Process
6
Request an
ESTIMATE of
Your Retirement
Benefits
1. Name,
Address, & KTRS
Member Number
2. Current Year Salary
3. Beneficiary’s Date of Birth
4. Projected Retirement Date
5. If your employer pays for
sick days, provide balance
of unused sick leave
6. Projected salary increases
for each year beyond the
current year
Download one from our website!!
www.ktrs.ky.gov
Retirement Options
Selecting a retirement option is an important
decision, requiring careful study regarding
your future financial commitments.
Retirement Options
Option I – Maximum Monthly Benefit
payable for your lifetime
Refundable Balance to Beneficiary
Option II – Five Year Certain
Ten Year Certain
Fifteen Year Certain
Twenty Year Certain
No Benefit to
Beneficiary after
certain period
Option III – Joint Survivor Annuity
Option III A – Joint Survivor Annuity with Pop-Up
Option IV – Joint Survivor Annuity
One-half Benefit to Beneficiary
Option IV A – Joint Survivor Annuity
One-half Benefit to Beneficiary with Pop-up
Lifetime Benefit
for Member and
Beneficiary
57
Retirement Application
Form 23
 Must be received ONE MONTH PRIOR TO RETIREMENT
 Health insurance enrollment is
attached as part of the application.
 Complete application thoroughly
including all signatures, even when
waiving insurance.
 Member and Spouse must sign.
 Must be witnessed by two people.
 Do NOT detach any pages of the
retirement application.
Application for
Service
Retirement, Form
23
SECTION I
Important
Retiree
Information
SECTION II
Option Section
Beneficiary
Designation
SECTION III
Electronic Funds
Transfer
(EFT)
SECTION IV
Federal Tax
Withholding
Information
SECTION V
Reciprocity
Purchase for
Insurance
SECTION VI
Life Insurance
Beneficiary
SECTION VII
Retiree
Completes
Certification of
Retirement
Information
SECTION VIII
Employer
Completes
Earnings
Information
(To be completed
by EMPLOYER!!)
SECTION IX
Employer
Completes
Certification by
Employer
(To be completed by
your employer)
Documents Required for Retirement
Member
Requirements
 Retirement Application
(Form 23)
 Copy of your Birth
Certificate & Social
Security Card
 Copy of your Marriage
Certificate
Requirement for a
Beneficiary
(If option III, III a, IV, or IV a is
selected)
 Copy of your
Beneficiary’s Birth
Certificate
 Copy of the
Beneficiary’s Social
Security Card
Copies of Certified Documents only
Post-Retirement
Employment
7
“Bona Fide”
Retirement
•
According to the IRS, a bona fide retirement means
there can be no pre-arranged agreement for returning
to work.
•
KTRS must maintain compliance with the IRS to
remain a qualified retirement plan.
Post-Retirement University
All KTRS retirees returning to a KTRS
University or Community College Part-time
• For July retirees (Prorated for later retirements)
• In a University Teaching position under KTRS
• 12 credit hours can be taught in a fiscal year, no salary limit
• In a University Non-teaching position under KTRS
• 100 days may be worked in a fiscal year, no salary limit
University Retirees ONLY
• Full-time employment is allowed only after a complete
6 month break in service from ALL KTRS employers
• Begin under an Optional Retirement Plan with no limits
Return to work in Universities and Community Colleges
Return to Work Options for University or Community college Retirees Returning to Positions in the
Universities or KCTCS Community Colleges
Return to Work in Universities and Community Colleges
Return to Work Options for University or Community College Retirees
Returning to Positions in the Universities or KCTCS Community Colleges
Return to
Work
Options
WAIVER
PARTTIME
PROGRAM
FULLTIME
PROGRAM
ORP
Retirement
Compensation
Limitation
None
None
None
Required
Break in
Service
Employment
Period
Limitation
Eligibility
None
None
All
Retirees
None
Up to 12
semester
hours or 100
days
All
Retirees
6 months
None
All
Retirees
Qualified
Positions by
Employer
Results for
Returning
Members
Special
Conditions
Working a
minimum of one
consecutive year
Contact KTRSunder the Waiver
file Form 29
program permits
improvement to
pension
If days worked
exceeds 12
semester hours or
N/A
100 days original
pension is reduced
by that amount
No Limit
Suspend annuity
and add to first
pension account
N/A
Continue drawing
original pension
N/A
Retirement voided
if 6-month break
Continue drawing
in service is not
original pension
met by university
retirees
Only University retirees have this break in service
What's my
next step?
Only for University
& Community College
retirees
N/A
Post Retirement Consequences
If limitations are not met:
Return to any KTRS work
too soon
paid or unpaid
Retirement Will Be
Voided
Things to remember when returning to KTRS
work after retirement!
Retirement Can Only Continue Successfully IF . . .
1) You terminate all KTRS work during your break in
service. (6 month break for full time University.)
2) No work of any kind is done during your break in
service. Retirees may not volunteer or consult.
STAY
INFORMED
KTRS is keeping in touch with you!
www.ktrs.ky.gov
Special Mailings
and Newsletters
479 Versailles Road
Frankfort, Kentucky 40601
Call
Center
1-502-848-8500 or 1-800-618-1687
8:00 – 5:00 EST Monday - Friday
It is Very Important to Keep Your Address Current with KTRS!!
73
Your on-line access for …
Active Members
Retired Members
74
https://www.facebook.com/KyTeachersRS
Keep In Touch With KTRS!
At all times be sure we have your
current address & phone number
We must be able to contact you one
month before and after retirement.
We may need your
help with some
unfinished business!
Things to Remember….
The KTRS Board of Trustees
is an INDEPENDENT board,
Elected by the members
to serve the members.
Nationally ranked one of the top pension plans for teacher benefits.
1 of only 3 states providing a high level of retiree health care for their
public educators.
You have a lifetime benefit with your KTRS Defined Benefit Group
Retirement Plan.
The inviolable contract protects your pension plan.
Teachers’ Retirement System
of the State of Kentucky
Our Members
Come First!
Please complete the
“Seminar Survey” and
let me know any
suggestions or
comments you may
have!
Protecting & Preserving Teachers’ Retirement Benefits
78
Thank You
for your service to educate
Kentucky’s children.
You have
EARNED YOUR
Retirement .
Let’s make sure the Kentucky
Teachers’ Retirement System
is a top priority of State
Funding.
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