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  • State Taxes and BackDROP

    Mar 23, 2022, 1:31 PM By MOSERS
    As a recent retiree, I had a bad shock from my 2021 taxes when I discovered state withholding taxes were not taken out of my lump sum retirement benefit.  Despite the language on the BackDrop distribution form mentioning state and local taxes were my responsibility, I assumed since MOSERS took care of the Federal taxes they would take care of state taxes.  I don't recall this being covered in various pre-retirement information. You may want to make this information more prevalent to retirees,

    Thank you for your email. While we mention the member’s responsibility for state taxes on BackDROP cash payments in the Ready to Retire seminar (and reference book) and on the BackDROP Distribution form, we appreciate your feedback and will try and highlight this point in the future. 

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  • High 36 and the Rule of 80

    Feb 23, 2022, 3:56 PM By MOSERS

     A co-worker told me that any pay I earn after my "Rule of 80" date doesn't count toward by 3 highest years. I am currently in back drop, but wanted to postpone my retirement if the state raises salaries by 5.5%. This co-worker said they talked to a MOSERS benefit counselor and were told anything past the date they can "80 and out" isn't used for the 3 highest years to calculate benefits. I have never gotten that impression in the retirement seminars I've attended. Please help! Thank you

    When you make an application to retire with MOSERS, you will have options regarding how your retirement benefit will be paid. BackDROP is simply another payment option available to you if you have worked at least 2 years beyond eligibility for normal retirement (“Rule of 80” or any other age & service eligibility criteria).   

    If you work beyond when your reach eligibility for normal retirement (under the “Rule of 80” or any other eligibility criteria), your pay can be included in your highest 36 months of pay IF it is not in your BackDROP period.

    Any pay or service you get during your BackDROP period is not counted when calculating your monthly benefit payment. If you become eligible for and elect the BackDROP upon retirement, your highest 36 consecutive months would be determined from your MOSERS-covered work history prior to your BackDROP date.

    But keep in mind, you are not required to take BackDROP, regardless of how long you work beyond normal retirement eligibility, and you don’t have to notify MOSERS of any decisions about BackDROP until you retire.

    Options:

    • You may elect not to take BackDROP, if you want all your service and pay to count and, likely, increase your monthly benefit, or,
    • You could elect to take a shorter BackDROP period, or
    • You could work additional years, if you want to take advantage of a significant increase in pay being included in your Final Average Pay.

    Our BackDROP page, with a BackDROP graphic near the bottom, may help you visualize how it works or you can read the BackDROP brochure for more information. BackDROP can be complicated to understand, so MOSERS benefit counselors are available to help by phone or through an in-person appointment.

    Note: BackDROP is available only to general state employees (including university employees) in MSEP and MSEP 2000. 

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  • Tax Penalty and BackDROP

    Feb 15, 2022, 1:45 PM By MOSERS
    This year(2022) I will be 54 and will have completed 32 years working for the State. I will have my 5 year backdrop complete in 2024 at age 56. I plan to roll over my back drop sum. Will I be penalized for collecting my monthly retirement checks before 59-1/2? 

    Once you meet both the age and service requirements for normal retirement, there is no tax penalty for collecting your monthly defined benefit pension payment from MOSERS prior to age 59 ½.

    Given a retirement of age 55 or later and a rollover of a BackDROP payment to a qualified retirement account *(such as MO Deferred Comp), future withdrawals from that account prior to age 59 ½ would not be subject to a 10% early withdrawal penalty.

    For further reference, please see the Special Tax Notice brochure for more details.

    *Excludes Individual Retirement Accounts (IRA’s).

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  • A Breakdown of BackDROP

    Jun 21, 2021, 4:15 PM By MOSERS
     I have never understood what "back drop" means. I do not think it was ever explained to me at the time of retirement.

    In order to be eligible for the BackDROP, a member must work at least 2 years past their first normal retirement date. The "DROP" in BackDROP stands for Deferred Retirement Option Provision. With BackDROP, eligible members can get a one-time lump-sum payment in addition to their monthly pension payments from MOSERS. Members can make the choice to take BackDROP on their Retirement Election form.

    The BackDROP period is the period of time between a member’s BackDROP date (the day their BackDROP period begins) and their actual retirement date. The maximum BackDROP period is five years. The lump-sum payment is equal to 90% of the pension benefits (based on the Life Income Annuity option) that the member would have received during the BackDROP period had they been retired. Choosing BackDROP will, most likely, reduce the amount of their monthly benefit. 

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  • BackDROP Lump-Sum Payment Explained

    Apr 28, 2021, 4:08 PM By MOSERS
    I am planning to retire in 2024 and at that time, I would receive my full backdrop. I need a better understanding of the "backdrop". After retiring, can I draw from my back drop as needed or is there a set amount of money that I will get monthly? 

    With BackDROP, you will get a lump-sum payment at retirement in addition to your monthly pension payments from MOSERS. Choosing BackDROP will, most likely, reduce the amount of your ongoing monthly benefit payments. We will provide you with Benefit Estimates at the time of retirement to show your BackDROP options and the impact of taking BackDROP on your monthly benefit payments. You can get estimates at any time by logging in to myMOSERS or by contacting a MOSERS benefit counselor.

    At retirement, we will ask you if you want to elect BackDROP or not and, if so, how you want to take your BackDROP lump-sum payment. Your choices are to take it as a cash payment, as a direct rollover to an individual retirement account or eligible employer plan such as MO Deferred Comp, or as a combination of cash and rollover

    Along with your first monthly pension benefit payment, we will issue your BackDROP payment (as either cash, rollover, or a combination) on the last working day of the month in which you retire.

    Your question about how much you can draw from your BackDROP is really about taxes and possible IRS penalties.

    • Cash Option: This is either one lump-sum payment at retirement or three annual installments. From any amounts paid in cash, we will deduct 20% for federal income tax (as required by the IRS) and any Missouri state income tax withholding you choose. You will be responsible for any IRS early withdrawal penalties that may apply.
    • Rollover Option: We will send your tax-deferred distribution directly to a qualified employer plan. See the MO Deferred Comp flyer, Thinking About the BackDROP?, for more information.
    • Combination Cash & Rollover Option: You can take a portion of the lump sum in cash (less 20% for federal income tax, as required by the IRS, and any Missouri state income tax you choose to have withheld) and roll the rest over to a qualified employer plan. You will be responsible for any IRS early withdrawal penalties that may apply.  

    Visit the BackDROP page on our website for additional information.

    Note: BackDROP is available only to general state employees in MSEP and MSEP 2000 who work at least two years beyond normal retirement eligibility.

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  • 5 Year vs. 4 Year Backdrop Period

    Oct 21, 2020, 1:57 PM By MOSERS
    What is the difference between taking a 5 year vs. a 4 year backdrop?  Do you wait one year after you retire for the 4 year backdrop?  

    When we calculate your monthly benefit we use your final average pay (FAP) and credited service as of your BackDROP date. This is where the difference between 4 and 5 years would come into play. The 5-year milestone significance is that it is the longest BackDROP period allowed by the state statutes. It is likely that your monthly payments will be lower if you take BackDROP than they would be without BackDROP. You may be able to increase your monthly payment by not electing BackDROP or by electing a BackDROP period of 4 years rather than 5. On the other hand, if you elect a 4-year (or shorter) BackDROP period, you should expect that your lump-sum amount will go down. A MOSERS benefit counselor can provide you with estimates for all your options.

    If you elect BackDROP, we will issue your lump-sum payment on the same day as your first monthly benefit payment.

    Please see our BackDROP page or contact a MOSERS benefit counselor for more information.

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  • Purchasing Military Service

    Oct 7, 2020, 4:19 PM By MOSERS
    Is there a way to purchase 48 months of military time, where Mosers deducts the purchase amount from the Back Drop total. ??? 

    No. You must complete any purchase of military service prior to applying for retirement. BackDROP funds are distributed after retirement. However, if you have money in your MO Deferred Comp account, as a member of MSEP or MSEP 2000, you can use those funds to purchase prior military service (exception: Roth 457 assets cannot be used to purchase service credit). You can view our Purchasing and Transferring Service Credit brochure (MSEP & MSEP 2000) for more information. If you have additional questions, feel free to contact a MOSERS benefit counselor or contact MO Deferred Comp.

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  • Electing BackDROP at Retirement

    Oct 6, 2020, 8:46 AM By MOSERS
    Hi, If I choose not to receive drop back may I in the future draw money from drop back? Thank you.

    No. If you retire and do not elect BackDROP, you will get your ongoing monthly benefit but there is no option for a BackDROP lump-sum payment in the future once you have retired. 

    You may continue working longer than 5 years beyond your normal retirement date if you wish, and still have the option of electing BackDROP at retirement. 

    Once eligible (members of MSEP and MSEP 2000 who work at least two years past their normal retirement eligibility date may elect BackDROP), you will make your decision about whether or not to elect BackDROP during the retirement process on your Election Form. 

    Please see our BackDROP page for more information and feel free to contact a MOSERS benefit counselor to discuss all your options. 

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  • Temporary Benefit and BackDROP

    Aug 10, 2020, 5:48 PM By MOSERS

    Next year I'll be five years into my backdrop. I'm hearing that if you work past that you'll actually lose money. True? What's the particular significance of the five-year milestone? Thank you!

    The amount of a BackDROP lump sum could decrease if you were eligible to retire before age 62 but worked beyond age 62 and retired under MSEP 2000. This is due to a provision in MSEP 2000 called the Temporary Benefit. The Temporary Benefit is an amount paid to you in addition to your Base Benefit but the Temporary Benefit ends at age 62. The 5-year milestone significance is that it is the longest BackDROP period allowed by the state statutes.

    Since your BackDROP lump-sum amount is 90% of what you would have received if you had been retired during the BackDROP period, it can max out at age 62 under the MSEP 2000 and begin decreasing if you work beyond age 62 (and retire under MSEP 2000).

    The Temporary Benefit is not available to those who retire under MSEP, so your MSEP BackDROP lump-sum amount will not decrease if your work beyond age 62 and retire under MSEP.

    You are not required to take BackDROP, regardless of how long you work beyond normal retirement eligibility, and you don’t have to notify MOSERS of any decisions about BackDROP until you retire.

    The BackDROP is simply a benefit payment option that is available to eligible members. Members who are or may become eligible for BackDROP are encouraged to attend a Ready to Retire/PreRetirement Planning Seminar and/or contact a MOSERS benefit counselor to make an appointment for further explanation.

    *BackDROP is available only to general state employees who are members of MSEP & MSEP 2000 and who work at least two years beyond normal retirement eligibility

    I would encourage you to utilize our Comparison Calculator to look at different scenarios. Additionally, our benefit counselors would be happy to provide you with a more in-depth explanation of BackDROP, your options, and various benefit estimates under different scenarios. Contact us to schedule an appointment or virtual counseling session.

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  • Rule of 80

    Jul 21, 2020, 2:00 PM By MOSERS
    Since I am in backdrop currently, I am very curious about the possibility of 70 and out and the medical premium being paid for or reduce to entice early retirement. Is there any basis to these rumors. It would save the State a lot of money long tern and make some seasoned employees retire early. Do we know anything but a rumor?

    No, we are not aware of any legislative proposals related to these rumors. MOSERS administers retirement benefits but we do not have the authority to change plan provisions. Any retirement incentive, such as paying retiree medical insurance or changing retirement eligibility rules, would require legislative authorization. There were no retirement incentives that passed during the recent legislative session, which ended May 15. Any time the Missouri General Assembly is in session, you can follow any bills affecting MOSERS on our Legislation page. If the Governor were to call a special session of the General Assembly having to do with the state employee benefits that we administer, we will post that information on our website. Otherwise, the General Assembly will meet again in January 2021. 

    RETIREMENT ELIGIBLILITY  REQUIREMENTS

    MSEP Members

    • Age 65 + 5 years of service
    • Age 60 + 15 years of service
    • “Rule of 80” – (at least age 48) when age + years of service = 80 or more

    MSEP 2000 Members

    • Age 62 + 5 years of service
    • “Rule of 80” – (at least age 48) when age + years of service = 80 or more

    MSEP 2011 Members

    • Age 67 + 5 years of service
    • “Rule of 90” – (at least age 55) when age + years of service = 90 or more at time of termination
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Disclaimer

We strive to provide the most accurate information possible in our answers to Rumor Central questions. However, occasionally, laws, policies or provisions change and individual circumstances may vary. Please contact a MOSERS benefit counselor or see the handbooks in our website Library for more detailed information. If there is any difference between the information provided in this blog or on the MOSERS website and the law or policies that govern MOSERS, the law and policies will prevail. See our Privacy, Security & Legal Notices for more information.