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BackDROP OverviewMar 28, 2018, 11:16 AM By MOSERS
What is BackDROP?
BackDROP, or the Deferred Retirement Option Provision, gives you the option of receiving a lump-sum payment, in addition to your lifetime monthly benefit payments, at retirement. It is a benefit payment option available for general state employees in the MSEP or MSEP 2000 who work at least 2 years (or more) beyond their first normal retirement eligibility date.
The BackDROP lump-sum is 90% of the amount that you would have been eligible to receive during your BackDROP period if you had been retired during that time. If eligible, you will select your BackDROP period during the retirement process. The maximum BackDROP period is 5 years. The length of the BackDROP period you select will determine the amount of your lump-sum payment. Generally speaking, if you elect a longer BackDROP period, your lump-sum payment will be more, but your monthly payments will be less.
You are not required to take BackDROP, and you don’t have to notify MOSERS of any decisions about BackDROP until you retire. More information about payment options is available on the BackDROP page on our website.
BackDROP can be complicated to understand, so MOSERS benefit counselors are available to help by phone or in person by appointment. Call (800) 827-1063 to discuss your options. Counselor can also provide you with benefit estimates, with and without the BackDROP included, so you can compare.
Rule of 80 & Retirement EligibilityMar 26, 2018, 8:42 AM By MOSERS
What happens if I leave state employment prior to my eligible retirement date under the Rule of 80? How is my monthly retirement benefit calculated if that happens, and when will I first be eligible to begin receiving my retirement benefit? Also, under this scenario, what retirement benefits, if any, would I lose if I left state employment prior to my Rule of 80 date?
If you are vested with MOSERS (you have at least 5 years of service*) and then leave state employment, you will be eligible for a lifetime monthly benefit, which will begin once you meet the age requirement (and all other legal requirements) and retire under a MOSERS defined benefit pension plan.
If you are a general state employee, your retirement benefit is calculated using a three-part formula:
Final Average Pay (FAP) x Credited Service x Multiplier = Monthly Base Benefit
(The multiplier is determined by your plan; 1.6% for MSEP; 1.7% for MSEP 2000/MSEP 2011.)
General state employees who are in the MSEP are eligible for normal retirement once they meet one of the following sets of age and service criteria:
- Age 65 + 5 years of service
- Age 60 + 15 years of service
- “Rule of 80” – (at least age 48) Age + years of service = 80 or more.
See What’s My Plan? (bottom of the MOSERS website homepage) with information about plan membership, retirement eligibility requirements, and other plan provisions.
If you are a member of MSEP and you leave state employment before reaching normal retirement eligibility, you may still retire under “80 & Out” (the Rule of 80). Plan provisions in MSEP allow members who terminate employment to “age into” the Rule of 80. (This does NOT apply to members of MSEP 2000 or MSEP 2011**.) However, keep in mind that leaving state employment before reaching eligibility will likely delay when you reach “80 & Out” and reduce your benefit because you will no longer be accruing service. So, you may have to wait longer to begin receiving a smaller benefit if you leave state employment prior to reaching the Rule of 80.
Keep in mind any of the following may affect your retirement eligibility: your retirement plan (MSEP, MSEP 2011, etc.), age, service, and if you retire directly from active employment versus leaving state government and waiting to retire. Contact a MOSERS benefit counselor to discuss your specific situation. You may also contact a MOSERS benefit counselor to request benefit estimates for various scenarios (including a scenario of leaving employment prior to retirement eligibility).
*The 5-year vesting for MSEP 2011 member went into effect on 1/1/2018, and MSEP 2011 members must be actively employed on or after 1/1/2018 to be covered by this change.
**Plan provisions for MSEP 2000 do not allow members to “age into” the Rule of 80/80 & Out. Plan provisions for MSEP 2011, do not allow members to “age into” the Rule of 90/90 & Out.
BackDROP & Social SecurityMar 21, 2018, 8:34 AM By MOSERS
In looking over my Social Security application, I see that they want to know what my earnings will be in 2018. I plan to roll over my MOSERS backdrop--will the amount of my backdrop be considered earnings by the Social Security Administration? Or do I only submit my projected salary earnings for 2018?
Your MOSERS benefit is a public pension and, therefore, is not considered a salary or wage. It does not count towards the annual earnings limit for social security. Your BackDROP payment, however, is considered taxable income for the year in which you receive the payment unless you roll it over to a traditional IRA or another eligible employer plan, such as MO Deferred Comp. Depending upon your age, there could also be an additional 10% IRS penalty if you choose the cash payment.
When you retire with MOSERS, you will be asked if you want to elect BackDROP* (if eligible), and, if so, how you want to receive that distribution: cash option, rollover option, or combination cash and rollover option. State employees eligible to receive a lump-sum BackDROP payment get this payment in addition to a lifetime monthly benefit payment and can choose to roll the lump sum into the MO Deferred Comp Plan at retirement. This option is available to all state of Missouri employees, even if they have never participated in the deferred compensation plan. A popular reason to roll the lump-sum payment into the deferred compensation plan is that it allows employees to defer taxes on the payment until those assets are distributed in retirement. There is a helpful publication on MO Deferred Comp’s website called Thinking About the BackDROP?
We suggest you speak to a tax professional or financial advisor for advice specific to your situation and to discuss all of your options at retirement. For more information about Social Security, the Social Security Administration website is www.ssa.gov or call them toll-free at (800) 772-1213.
*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.
COLA CapMar 19, 2018, 9:44 AM By MOSERS
With regard to the following statement in the most recent MOSERS emailed information:
If you retire under the MSEP and were hired before August 28, 1997, you will receive a COLA of at least 4% each year (maximum 5%) until you reach your COLA cap. The COLA cap is when the sum of your COLAs equal 65% of your initial benefit amount.
Question: Please explain in more detail how the COLA cap is figured.
Is the amount of the annual COLA, for example, a 4% COLA in 2015, again in 2016, again in 2017, and again in 2018 (that amounts to about $40/month in each of those years) multiplied by 12 to get the total annual COLA ($480) for each of those years and then all of the annual totals are added together to determine when the 65% limit has been reached?
For ex.: $40 X 12 X 4 = $1920
Or perhaps it’s figured as follows: $40/mo. COLA x 8, 9, 10, 11, 12 years etc.
If not, please explain in detail how the COLA cap of 65% is figured. Thank you.
The COLA cap* is calculated based on the initial base benefit amount, rather than on the COLA itself. Your estimated date to reach the COLA cap can be found on your annual benefit statement in the COLA section. It says “Estimated Date to Reach 65% COLA Cap….” and a date. Typically, it is around 12-13 years after you’ve retired.
Example of Calculating the 65% COLA Cap:
$1,000 (Initial Base Benefit) x .65 (65%) = $ 650 (COLA Cap)
So, when you look back at your initial base benefit, once it has increased by 65% due to COLAs, you will no longer get the minimum 4% COLA; instead, your COLA will be based on 80% of the increase in the CPI and be between 0 and 5% each year. For example, for those who have their COLA calculated this way, it is 1.704% in 2018.
*The COLA cap does not apply to MSEP 2000 members; it applies only to members of MSEP hired prior to 8/28/97, who receive a minimum 4% COLA until meeting their COLA cap.
MSEP 2011 Retirement EligibilityMar 14, 2018, 8:31 AM By MOSERS
Vesting is changed to 5 years, so why is the monthly benefit not payable until 10 years? If I were to retire after 8 years, would I receive a lump sum payout of my contributions plus any amount vested by the plan, or would the benefit be deferred until after 10 years?
Vesting is one part of retirement eligibility. The other part is age. Both vesting and age requirements must be met in order to retire under a MOSERS defined benefit plan. As a member of MSEP 2011, you will become eligible for normal retirement when you have at least 5 years of service and reach age 67 OR under the “Rule of 90” which is when you are at least age 55 and your age plus service equals 90 prior to you leaving state employment.
Once you are vested with MOSERS, even if you leave state employment, you will be eligible for lifetime monthly benefit payments once you also meet the age requirement (and any other legal requirements) and retire under a MOSERS defined benefit pension plan. The 5-year vesting for MSEP 2011 members went into effect on 1/1/2018 and MSEP 2011 members must be actively employed on or after 1/1/2018 to be covered by this change.
Your contributions go toward helping pay for your future lifetime monthly benefit payments. You will receive a lump-sum payment only if you request a refund of your employee contributions. By taking a refund, your forfeit all your credited service. If you are vested and take a refund, you give up your future lifetime monthly benefit payments.
Comparison of MSEP & MSEP 2000Feb 26, 2018, 4:09 PM By MOSERS
What are the major differences between MSEP & MSEP 2000?
The MSEP and the MSEP 2000 have various differences including different multipliers in the formula used to calculate your monthly payment, different benefit payment options, different cost-of-living adjustments (COLA), and different eligibility criteria. See the pages linked above or What’s My Plan? (bottom of the MOSERS website homepage) with information about plan membership, retirement eligibility requirements, and other plan provisions.We have a helpful Comparison Calculator on our website where you can compare the long-term impact of electing MSEP versus MSEP 2000, different BackDROP* periods under the different plans, and various other options. The Comparison Calculator videos are helpful in demonstrating how to use this tool. Or, you can contact a MOSERS benefit counselor to ask that they provide you with various benefit estimates and Comparison Calculator results.
We also encourage you to attend a MSEP/MSEP 2000 Ready to Retire/PreRetirement Planning Seminar when you are within 5 years of eligibility. This free full-day seminar includes information on differences in the plans, benefit payment options, and BackDROP, among other topics.
Your defined benefit retirement plan through MOSERS includes a lifetime benefit, regardless of the plan or payment option you elect at retirement.
Rollovers & MO Deferred CompFeb 26, 2018, 3:59 PM By MOSERSWhen I began employment with the State I did a 401k rollover of my previous employer. How does this effect my retirement and Backdrop ? Is it already in the "benefit estimate." ?
A 401(k) rollover has no impact on retirement eligibility or monthly or BackDROP lump-sum payment amounts. The rollover is not shown on the “MSEP 2000 Benefit Estimate” from MOSERS. See below for more details.
First, it is important to clarify where your rollover funds are kept. As a state employee, you have both a defined-benefit pension with MOSERS and a supplemental defined contribution account with MO Deferred Comp. If you had retirement funds from a previous employer, it was rolled over into MO Deferred Comp.
The Defined Benefit (DB) Plan (MOSERS)
The DB plan is non-contributory for members employed before January 1, 2011. As such a member, you do not pay money toward your DB plan. Your employer pays the necessary contributions to MOSERS while you are actively employed so that you may receive a future monthly retirement benefit and potential survivor benefits. Since you do not pay contributions, you are not eligible to withdraw funds from the retirement system. You do not have a separate account, rather the state’s annual contribution toward your benefit is pooled with investment returns and employee contributions (from members first employed on or after 1/1/2011) to fund the retirement system. Once you are vested with MOSERS, even if you leave state employment, you will be eligible for a lifetime monthly benefit once you meet the age and all other legal requirements and retire under a MOSERS defined benefit pension plan.
The Defined Contribution (DC) Plan (MO Deferred Comp)
The MO Deferred Comp Plan is a voluntary governmental 457(b) plan designed to help employees save additional income to supplement their defined benefit pension and Social Security benefits in retirement. The deferred comp plan provides a convenient way to save extra money for retirement through payroll deduction. Unlike pension and Social Security benefits, YOU have control over how much you save in this plan throughout your career, how your dollars are invested, and how you will withdraw those savings in retirement. While voluntary, many employees find this plan crucial for accumulating additional savings that can add another layer of financial security in retirement.
Once you leave state employment, you can keep your money in deferred comp, even if you're retired or simply working outside state employment. Furthermore, you are not required to start withdrawing your savings until you reach age 70½. Keeping your money with MO Deferred Comp is a smart way to maintain access to all of the great features you enjoyed while you were working. Once retired,the deferred compensation plan provides a variety of manual and automatic payment options to help you access your hard-earned savings.
When you retire with MOSERS, you will be asked if you want to elect BackDROP * (if eligible), and, if so, how you want to receive that distribution: cash option, rollover option, or combination cash and rollover option. State employees eligible to receive a lump-sum BackDROP payment get this payment in addition to a lifetime monthly benefit payment and can choose to roll the lump sum into the MO Deferred Comp Plan at retirement. This option is available to all state of Missouri employees, even if they have never participated in the deferred compensation plan. Doing so is an attractive choice for many because it allows employees to consolidate the lump-sum payment with their existing retirement savings. This makes managing their savings in retirement easier and grants them continued access to the Plan’s low fees and custom investment solutions. Another popular reason to roll the lump-sum payment into the deferred compensation plan is that it allows employees to defer taxes on the payment until those assets are distributed in retirement. We suggest you speak to a tax professional or financial advisor for advice specific to your situation and to discuss all of your options at retirement.
On your MOSERS defined benefit plan “MSEP 2000 Benefit Estimate”, if you are eligible for BackDROP, your benefit payment amounts and options at retirement will be shown, both with and without BackDROP. We encourage you to discuss your options with a MOSERS benefit counselor, and use our onlineComparison Calculator to see which option might be most advantageous to you over the long-term. This short Comparison Calculator video provides an overview of how the calculator can be helpful in comparing various benefit payment options. MOSERS benefit counselors are available by phone at (800) 827-1063 or you may make an appointment to meet with a counselor in person.
*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
Base Benefit & COLA CapFeb 23, 2018, 10:47 AM By MOSERSWhere can one find one's base benefit for the purpose of determining the 65% of base benefit when COLA's will end?
Your COLA does not end once you meet your COLA cap*—it is simply calculated differently. If you retire under the MSEP and were hired before August 28, 1997, you will receive a COLA of at least 4% each year (maximum 5%) until you reach your COLA cap. The COLA cap is when the sum of your COLAs equal 65% of your initial benefit amount. Then, your annual COLA will be equal to 80% of the percentage increase in the average Consumer Price Index (CPI) with a minimum of 0% and maximum of 5%.
Your estimated date to reach the COLA cap can be found on your annual benefit statement in the COLA section. It says “Estimated Date to Reach 65% COLA Cap….” and a date. Typically, it is around 12-13 years after you’ve retired.
*The COLA cap does not apply to MSEP 2000 members; it applies only to members of MSEP hired prior to 8/28/97, who receive a minimum 4% COLA until meeting their COLA cap.
Optional Life Insurance Premium ChangesFeb 15, 2018, 3:04 PM By MOSERS
President Trump gave us a tax break which was (for me) $12.92 but then my life insurance went up $17.60. Why is that?
Changes to your optional life insurance coverage or premium amount could be a result of one or more of the following factors:
(1) your annual salary as of July 2017 or your eligibility date,
(2) your age bracket as of January 1, 2018,
(3) your coverage election, or
(4) the optional life insurance rates.
MOSERS Optional Life Insurance Rates effective January 1, 2018. Age Monthly Premium per $1,000 of Coverage Under 35 0.08 35-39 0.10 40-44 0.16 45-49 0.24 50-54 0.43 55-59 0.76 60-64 1.18 65-69 1.90 70 & Over 3.33
Many of our members saw their optional life insurance premiums decrease this year, depending on which age bracket they were in as of January 2018.
Saver's Tax CreditFeb 15, 2018, 1:30 AM By MOSERS
A friend under tier 2011 wants to know if their 4% contribution towards retirement is eligible for the federal saver's tax credit. Some places on the web seem to call the employee contribution a 457 (deferred comp) plan. No where else is it referred to by any plan name (IRA, 403B, 401K) that would clarify what it is. To make it more confusing, the contribution is in box 14 of their W-2 with code EE after it. If it was in box 12, code EE would mean it was a 457 plan and would be saver's credit eligible, but there is no definition of what this means in box 14. Did they make a mistake?
No, the 4% employee contributions made by members of the MSEP 2011 or the Judicial Plan 2011 to MOSERS do not qualify for the retirement Savers Credit because these contributions are mandatory contributions. The MOSERS defined benefit plan is classified as a qualified retirement plan. However, only voluntary contributions to a qualified retirement plan are eligible for the retirement savers credit. The 4% contributions are made on a pre-tax basis and used to help pay the cost of future retirement benefits. On the W-2 form, contributions to the MOSERS defined benefit plan should be listed in Box 14, but there are no standard codes to indicate the type of contribution. It is optional for the employer to report these contributions on the W-2.
The MO Deferred Comp Plan is a voluntary governmental 457(b) plan designed to help employees save additional income to supplement their defined benefit pension and social security benefits in retirement. The deferred compensation plan provides a convenient way to save extra money for retirement through payroll deduction. Voluntary contributions to MO Deferred Comp, or another governmental 457(b) plan, are eligible for the Saver’s Credit. Keep in mind, the credit is for low- to moderate-income taxpayers and calculated using their adjusted gross income (AGI) and filing status. Learn more about the Saver’s Credit on the IRS website. On the W-2 form, contributions to MO Deferred Comp, a 457(b) plan, are listed in Box 12. A code of G indicates a 457(b) plan and a code of EE indicates designated Roth contributions under a governmental section 457(b) plan.
Please see the instructions for IRS Form 8880 for more information concerning this credit.
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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.