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Purchasing Military Service with Deferred Comp FundsFeb 13, 2019, 8:34 AM By MOSERS
I was told that I could use the money from my Deferred Comp to purchase my military time. Is that correct? If so, how would I do so? I could not find any details about in on the website.
Yes, your MO Deferred Comp 457(b) – excluding Roth 457 assets – and 401(a) funds are available to use for purchasing prior military service. If you have not already done so, complete the Application to Purchase Active-Duty Military Service, required documentation and submit it to MOSERS. We will provide you with an estimate of the cost to purchase your prior military service and a Tax-Free Rollover to MOSERS form that you can use to perform that transaction.
For additional information, here is a description of this service purchase option from page 6 of our Purchasing and Transferring Service Credit brochure (MSEP & MSEP 2000):
You may purchase up to four years of active-duty military service credit performed prior to last becoming a member of MOSERS. This may include active-duty military training. To be eligible to purchase military service credit, you must be:
- A vested, actively employed member of MOSERS, or
- A terminated-vested member of MSEP (eligible for future benefits, but no longer working for the state).
If you elect to purchase your active-duty military service, you must purchase all that you served (total months and days) up to a maximum of four years. In connection with such a purchase, MOSERS requires that you submit a copy (not the original) of your military DD 214 or NGB 23 discharge form, which verifies the following:
- Your service was active duty.
- Your service was in an eligible branch of the U.S. Armed Forces or reserve component (Army, Air Force, Navy, Marine Corps, Coast Guard, Army National Guard, or Air National Guard).
- Your dates of service.
- You were honorably discharged.
Any active-duty military service you wish to purchase must have been performed prior to last becoming a member of MOSERS. Active-duty military service performed after you last leave state employment is not eligible for purchase or automatic credit.
You may only acquire active military service that is not being used for credit or benefits under another retirement plan, other than the U.S. military.
BackDROP Lump-Sum PaymentFeb 8, 2019, 10:14 AM By MOSERS
I keep being told that if a person work at least 2 years backdrop pass their normal retirement, they will receive their monthly lifetime benefits, plus whatever their lump sum amount is. Is the second part of this statement true?
Yes--If you are eligible for and elect BackDROP at retirement, you will get the one-time lump-sum payment plus monthly pension benefit payments for life.
The tradeoff is that, in most cases, your monthly benefit payment will be less than it would have been if you hadn’t elected BackDROP.
The reason most people have a lower monthly benefit when they elect the BackDROP is because any service and any salary earned during your BackDROP period (up to five years) doesn’t count when we calculate your monthly benefit amount. We use your years of service and your final average pay from BEFORE your BackDROP period.
Your BackDROP lump sum will be equal to 90% of what you would have received during your BackDROP period if you had been retired during that time (based on the life income annuity amount).
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. Call (800) 827-1063 to discuss your options. Counselors can also provide you with benefit estimates with and without the BackDROP so you can compare.
State Employee Pay RaiseJan 31, 2019, 1:00 PM By MOSERS
I am planning to retire 01/07/2019. My question is... IF we were to receive the much talked about raise in January of 2020 would that action have any impact on my retirement/backdrop?
No, if you retired before a pay raise was given to active employees, any such increase would have no impact on you as a retiree.
If you continued working beyond January 2020, got a pay raise, and did not take BackDROP, the impact of a pay increase on your monthly retirement benefit payment would be dependent upon how long you continue working.
Remember, in calculating your monthly benefit, one factor is your Final Average Pay, which is your highest 36 consecutive months of pay. So, if you got a raise and worked a few months past 2020, the impact may be very small. If you got a raise and worked an additional 36 months, the impact would be bigger.
Any pay earned during your BackDROP period has no impact on either your monthly benefit amount or your BackDROP lump-sum amount.
But keep in mind that, by law, MOSERS retirees receive an annual cost-of-living adjustment (COLA) between 0-5%. You can find more information about the retiree COLA on our website.
You can run benefit estimates under a variety of scenarios by logging in to myMOSERS or asking a MOSERS benefit counselor to run them for you. You may find our Creating a Benefit Estimate video and our Comparison Calculator helpful in weighing your options.
Tax Information for RetireesJan 28, 2019, 2:26 PM By MOSERS
If you are receiving a retirement check from the state of Missouri are you required to claim it on your state tax income tax return as income?
Yes, you are required to claim your MOSERS benefits on your state taxes if you are a Missouri resident. (If you are not a Missouri resident, contact your state department of revenue or a qualified tax advisor for the answer to this question.) Below is some additional information that MOSERS retirees often need when filing their taxes:
- MOSERS is a public defined benefit (DB) pension plan and the benefit you receive through MOSERS is considered a “public pension”.
- MOSERS withholds state taxes only for Missouri residents.
- As long as you reside in Missouri, your retirement benefits are subject to Missouri state income tax and federal tax. However, you may qualify for the Missouri state tax Public Pension Exemption on your Missouri state tax return.
- We have mailed 1099-R tax forms to all retirees/benefit recipients.
Continuing Basic Life Insurance at RetirementJan 28, 2019, 1:54 PM By MOSERS
My wife also worked for the state of Missouri for 29 years. Her office closed just before she reached 80 and out. A year later she started collecting her state retirement when she turned 51. Does she still get the $5,000 life insurance like I do. I stayed for 35 years and received full backdrop at age 55.
No. Anyone who does not retire directly from state employment ;(within 60 days from their last day of state employment), does not get the automatic $5,000 in basic life insurance coverage at no cost to them.
The state will continue to pay for $5,000 of basic life insurance coverage for life for retirees who meet the following conditions:
- They had basic life insurance coverage as an active employee and did not terminate coverage at retirement.
- They have a MOSERS retirement date that is within 60 days of when they left state employment.
BackDROP & State TaxesJan 25, 2019, 4:05 PM By MOSERS
Does my backdrop withdrawals add to my state pension income which adds to my state taxable income that effects my state tax exemption?
Yes, the BackDROP distribution 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. 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?
Any withdrawal after retirement is taxable in the year of the withdrawal.
We suggest you speak to a tax professional or financial advisor for advice specific to your situation . For more information about state taxes, or the Missouri State Tax Public Pension Exemption, please contact the Missouri Department of Revenue or go to: www.dor.mo.gov/personal/ptc/pension.php.
Final Average Pay CalculationJan 23, 2019, 9:15 AM By MOSERS
I'd always thought retirement benefits were based on the highest pay of our state employment career. I was told by a coworker who recently attended a pre-retirement seminar that once you become eligible (under the rule of 80 for MSEP employees), that the highest pay rate considered for retirement benefits is already locked in and pay increases after that point will have no impact on retirement benefit. Please advise.
What you heard is not necessarily true – so thanks for checking with us! Whether or not pay for a given period will be considered in determining your final average pay (FAP) depends on if you elect BackDROP* (if eligible); not when you hit “80 & Out”.
To calculate your pension benefit, we will use your highest 36 full consecutive months of pay – wherever that occurs in your individual pay history. Practically speaking, most people earn their highest 36 consecutive months of pay in their last three years of state employment, but not always. If you become eligible for and elect the BackDROP upon retirement, your FAP will be calculated using your MOSERS-covered work history prior to your BackDROP date. In other words, pay (and service) during the BackDROP period is excluded when calculating your monthly benefit amount.
If, at retirement, you do not elect BackDROP, we will review your entire pay history and find the 36-month period with your highest pay (regardless of whether that is before or after you might hit “80 & Out”) and will use that in calculating your monthly benefit. You may elect not to take BackDROP if you want all of your pay and service to count. In most cases, opting not to take BackDROP will increase your monthly benefit amount.
*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.
Public Pension ExemptionJan 23, 2019, 8:57 AM By MOSERS
Will state pension still be tax exempt for 2018 pension?
If you are referring to the Public Pension Exemption, we are unaware of any changes to it compared to the previous year. This means that you may not have to pay Missouri state taxes on some or all of your MOSERS pension. See the Missouri State Tax Public Pension Exemption flyer. For more information about taxes, please contact the Missouri Department of Revenue or go to: www.dor.mo.gov/personal/ptc/pension.php.
1099-R Tax FormJan 23, 2019, 8:44 AM By MOSERS
We received two questions about 1099-Rs recently:
- When will 2018 1099-R be on-line?
- Why can I not receive/access my 1099R online? It would seem to me that it would save thousands of dollars.
You can access an electronic copy of your 1099-R after we have mailed it, which will be by the end of January. Simply log in through myMOSERS to your MOSERS Member Homepage and you will find it listed under Personal Information. Watch our website for more information.
We appreciate your comment indicating you would be ok getting it online only and that it would save money. We have taken that approach with our other publications and correspondence - based on individual member preference. The 1099-R is one document that we still make available to all retirees both in hard copy and online. The decision to do so is based on our experience with retiree preference and needs. However, we will certainly take your suggestion into consideration for future planning.
Calculating Final Average PayJan 18, 2019, 12:52 PM By MOSERS
Does MOSERS use the pay period end date or the check issue date when calculating the highest 36 consecutive months?
In our calculation of final average pay, we credit you based on when the payroll was earned, rather than the month it was actually paid. To calculate your pension benefit, we will use your highest 36 full consecutive months of pay –wherever that occurs in your individual pay history. Practically speaking, most people earn their highest 36 consecutive months of pay in their last three years of state employment, but not always*.
*Note: If you become eligible for and elect the BackDROP upon retirement, your FAP will be calculated using your MOSERS-covered work history prior to your BackDROP date. In other words, pay during the BackDROP period is excluded when calculating your monthly benefit amount.
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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.