Retiring early? You need this info!

Are you a public employee in the PERS or TRS system? Are you planning to take early retirement? Early retirement = before age 60, or with fewer than 30 years for PERS (25 years for TRS).


If so, you need to know about changes made by the 2011 Legislature, as explained in the news article below.


Bottom line: if you are planning on retiring early:


Public Employee Retirement Administration:
Toll Free: 1-877-ASK-PERB



Teachers Retirement System:
Toll Free: 1-866-600-4045

  • Contact TRS or PERS right away. See contact information in the box at right.
  • Request estimates to compare if you retire this September or later.

You have until the end of September to get things done to your best satisfaction.


Changes in early retirement benefits will not negatively impact the vast majority of members of TRS and PERS.


The only people affected by the change are those who have worked fewer than 30 years (25 for TRS) or who are under 60 years old.


In any case, be sure to get the facts and act accordingly.


Extremely important to note: despite legislative attempts to the contrary, TRS and PERS are still defined benefit plans, as they should be. MEA-MFT will continue to fight to maintain them as such. 


Timing could cut pensions for some state, local early retirees

By CHARLES S. JOHNSON IR State Bureau | Posted: Sunday, July 3, 2011 12:00 am


Some Montana public employees who are taking early retirement this year may face a costly shock in reduced pension checks if they time their departures wrong.


They could be hit with an estimated 12 percent cut in their future pension checks if they quit their jobs after Aug. 31 instead of before then because of a little-noticed change made by the 2011 Legislature, the state Public Employee Retirement Administration (PERA) estimates. The exact amount will vary by individuals, their ages, their highest average monthly salaries and years of work.


The only people affected by this change are those who have worked fewer than 30 years or who are less than 60 years old and are under the Montana Public Employees’ Retirement System, or PERS, who are taking early retirement. The plan covers state and local government workers, as well as school employees who aren’t teachers or administrators.


Word is starting to get out about the change, although it’s uncertain how many people will be affected.


“We’ve had quite a few calls,” said Melanie Symons, chief legal counsel for the state Public Employee Retirement Administration.


Symons said the agency “does not track our early retirees vs. our regular retirees. Therefore, I can’t give you any idea how many individuals may be impacted.”


Eligible PERS members can retire effective the first day of the month following the month during which they quit their jobs, Symons said.


New early retirement factors go into effect Oct. 1, she said. To avoid these reductions, members must quit their jobs no later than Aug. 31.


Tom Schneider of the Montana Public Employees Association, one union representing state workers, urged employees considering early retirement this year to ask PERA to run pension comparisons for them before choosing a date.


“We made a big deal of it at our convention,” said Schneider, the union’s lobbyist and retired executive director. “We don’t want anyone not knowing that this change is taking place.”


How did it happen?

During the 2011 Legislature, the separate Teachers Retirement System had its own pension housekeeping proposal, House Bill 116, by Rep. Pat Ingraham, R-Thompson Falls, that changed its calculations of the actuarial reduction for current employees who retire under the early retirement provisions of the bill.


“We proposed it,” said David Senn, TRS executive director. “It was to update these features to provide a reduction equal to the value of the early retirement.”


PERS had its own separate measure, House Bill 122, by Rep. Sue Malek, D-Missoula, which made benefit and funding changes for newly hired employees.


When the bill reached the Senate committee, Sen. Joe Balyeat, R-Bozeman, amended into the bill similar early retirement adjustments for early retirements from the TRS bill.


“Whenever you make changes in statutes that affect financial matters, you’re always going to have winners and losers,” said Balyeat, a certified public accountant.


PERS ultimately agreed to support the same changes that were being made in TRS, he said.


The reason was to adjust the early retirement factors based on a more current actuarial factor that took into account the fact people today have longer life expectancies.


“They basically weighed the pros and cons and said we have to move the current actuarial factor down to keep it sound for all the other employees and retirees,” Balyeat said. “They felt on balance that this was one small step they could take. This doesn’t affect anyone with full retirement — 30 years’ (experience) or at least 60 years old.”


The new law took effect Friday, but the Legislature went along with PERD’s request that the early retirement changes be delayed until Oct. 1 “so that anyone considering retiring early could get the all the analysis done,” he said.


“It was worth it to let them retire a few months earlier so they can get the higher benefit based on the old law to move the statutes in a way that is more actuarially reflective in terms of current life spans,” Balyeat said.


Malek, for her part, found it discouraging and said she wasn’t really aware of this change because the Senate amendment came in late, and PERS “never said they were against it.”


“I really didn’t see it,” she said. “What’s disheartening is that PERS can’t notify all of the affected people. This going into effect Oct. 1 really makes it hard to notify people. My surprise is that it affects current employees. I hope they can learn about it.”


Malek said she fought hard to save the state’s “defined benefit” retirement system in the bill at a time when some legislators wanted to switch to a “defined contribution” plan.


State and local government employees now have defined benefit retirement plans that guarantee retirees a predetermined, fixed, monthly pension based on a formula that incorporates the years of employment and their salary, based on the average of their three highest years of salary for current workers. Retirees are guaranteed these fixed pensions, regardless of how state investments of pension funds have fared.


In contrast, defined contribution pension systems are like 401(k) funds for employees that many private businesses have. Both employees and employers contribute to the funds, managed by employees for their own use when they retire. Returns vary widely, depending on individuals’ investment choices and their returns. Defined contribution plans do not guarantee a fixed monthly benefit for employees when retire. Instead, they receive whatever money is in their accounts when they retire.


Symons, of PERA, said the early retirement factors are based on an experience study conducted by its actuary every five to seven years that evaluates members’ life expectancies and retirement experience. From that study, actuarial factors are established to adjust for increased life spans and other changes in the plans.


“The early retirement factors are based on this information, not on the unfunded status of the plans,” she said. “However, these new factors may help reduce PERS’ unfunded liability.”


Both TRS and PERS both have amassed huge unfunded actuarial liabilities, or potential debts, that the state is required to address over time.


As of mid-2010, actuaries said TRS had an unfunded liability of $1.56 billion, while PERS had an unfunded liability of $1.35 billion. Neither pension fund amortized over any length of time according to those reports a year ago.


As for the Teachers Retirement System, Senn foresees little impact from the change. He said the system has about 600 retirements a year, but only about 30 are early retirement.



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