How a Pay Raise Affects Your Future Benefit
If you’ve recently received a pay raise, you may be wondering how that pay increase will affect your future benefit.
Your pay is one of the important factors used to determine your future retirement payments. We use your final average pay to calculate your monthly pension benefit amount based on the following formula:
Final Average Pay (FAP) x Multiplier x Credited Service = Monthly Base Benefit
Final Average Pay (FAP) is the average of your highest 36 full consecutive months of pay. For most members, it is their last three years of employment, but not always. We will look at your entire pay history, find your final average pay, and use that to calculate your MOSERS defined benefit pension payments.
The impact of a pay increase on your monthly benefit amount will depend on how long you earn this higher pay rate before retirement. Take a look at the following examples to see how a pay increase may impact your retirement benefit amount, based on your retirement plan and your career stage.
| Your Career Stage | Impact of Pay Increase |
If you have 3 or more years until retirement eligibility | Then you will realize the full benefit of the pay increase to calculate FAP for your monthly benefit. |
If you are less than 3 years from retirement eligibility and you plan to retire when eligible | Then you will partially recognize the benefit of the pay increase to calculate FAP for your monthly benefit. |
If you are already in your BackDROP period and plan to elect BackDROP (MSEP and MSEP 2000 only) | Then you will see a limited or no increase in your FAP, depending on the BackDROP period you elect at retirement. |
If you are at or past retirement eligibility and do not plan to elect BackDROP (or are not eligible for BackDROP) | Then, depending on how long you continue to work, you will see a partial to full benefit of the increase in your FAP. |
You can now include a projected monthly pay rate in your retirement benefit estimate. To see how a pay increase will affect your benefit estimate, log in to myMOSERS and select Estimate My Retirement Benefit from the I want to… menu.
Enter your retirement date, spouse’s date of birth (if applicable), the last day you will work, and any unused sick leave hours or outside service months. Next, enter your projected monthly pay rate and projected pay rate start date, and select your benefit payment option. Then, click Calculate to view your estimated monthly benefit amount at retirement.
BackDROP provides a lump-sum benefit payment option in addition to a monthly benefit amount. It is available only to general state employees in MSEP or MSEP 2000.
The lump-sum payment is equal to 90% of the pension benefits (based on the Life Income Annuity option) that you would have received during your BackDROP period if you had retired.
If you become eligible for and elect BackDROP at retirement, only MOSERS-covered service credit and pay earned before your BackDROP period will be used to calculate your monthly pension payments.
This means that if you are more than three years away from normal retirement eligibility and continue to work at least two years beyond normal retirement eligibility, then, if you elect BackDROP, you will get the maximum impact of this pay increase on your BackDROP lump-sum amount.
If you are already in your BackDROP period, this pay increase will have little to no impact on your BackDROP lump-sum amount, depending on the BackDROP period you elect at retirement.
If you have any questions about your future benefit, contact a MOSERS benefit counselor or explore our Members page for resources and tools to learn more about your retirement benefits.