More specifically, does your retirement plan strategy function as a true employee benefit with the dual purpose of incenting employees to save for retirement while providing a motivating, tax-favorable form of compensation? For many of you the answer seems obvious. Look at your participation rate in the context of your overall employee population. Most importantly, you want the design of the plan to intentionally support the result.
Retirement FAQ - All Items
Why is your k plan? The idea is to examine the purpose behind your plan design. From a retirement standpoint, those three types of people are all over the board in terms of how they approach saving money and how they likely value the features of your retirement plan. Take, for instance, those nearing retirement age. Medicare, as it pays today, should cover just under two-thirds of those costs. There is an attitude of nonchalance toward retirement savings which is probably natural since retirement itself is, like, you know, a million years away or whatever.
But there is a practical side to the low interest among younger employees. If we look at what is competing for their money, we find the biggest culprit to be student loan debt. A recent Forbes article compared the net worth of the bottom three-fifths of Americans aged 18 — Recent graduates have nearly twice the student loan debt as borrowers from just 20 years ago. Twenty percent of all early withdrawals and hardship distributions out of a k plan are used to pay for tuition expenses or student loans.
Given the magnitude of health and education costs, along with the other savings vehicles that actually provide for tax-free benefits health savings accounts HSAs , plans as opposed to merely tax-deferred benefits, we can see how difficult it is for an employer to choose among k plan design features that best fit the needs of its varied employees. So now that we know our audience, is it even possible to design a plan to reach all of them? Remember, people ignore a design that ignores people.
Perhaps a k plan with automatic enrollment and acceleration of contribution with the proper investment options and educational resources is a good place to start. The concept of auto-enrollment helps new employees save without realizing they are saving. With their first paycheck employees begin contributing to their k accounts without the conscious longing for the cash they might otherwise see in their take-home pay.
In this simple set-up, employees are automatically enrolled in a k plan at a pre-determined contribution rate and may opt out or elect to contribute a different amount. This design allows employees to withdraw automatic contributions, including earnings, within 90 days of the date of the first automatic contribution, if the proper notice procedures are followed.
Recently, the IRS has also provided relief for plan sponsors who make a mistake. Recognizing the stiff penalties for plan failures and missed contributions, the IRS was fearful that employers were reluctant to adopt an auto-enrollment plan design for fear of making a mistake. Under the new rules, if an employer fails to deduct employee deferrals in accordance with an automatic enrollment feature, the employer has a few options to correct this failure without incurring penalty.
Retroactive salary —increase paid to an employee who worked during the period covered by the retroactive payment increase is a salary or wage for services rendered and is reportable. While payment is paid in a lump sum to cover the increase earned during the earlier period, the employer must report the compensation in the month s it was earned. Refer to WAC for payments that qualify.
Sick leave used —is accumulated over time and paid to a person during a period of excused absence. Time off with pay —includes sick leave, vacation leave or personal leave accumulated over time and paid to a person during a period of excused absence. In general, payments cannot be considered reportable compensation unless they are for services rendered. However, some payments are authorized by RCW A description of these payments is included in WAC through The following are payments not for services rendered that may be reportable.
Duty Disability Leave —If a member applies to purchase lost service credit, the regular salary an employee would have received had he or she not been absent due to an injury that occurred on the job is reportable. In order for this to be reportable compensation, the employee must be receiving benefits under Title 51 RCW Industrial Insurance or a similar federal workers' compensation program.
Refer to RCW Refer to Retirement Reporting Reminders - Temporary Duty Disability for rules for reporting employees who are on a leave of absence due to a temporary duty disability. Note: Whether this salary is reported on the monthly transmittal or the service credit is purchased retroactively, no more than 12 consecutive months of service credit will be granted. If a member returns to work for at least one month, he or she may be eligible for another 12 consecutive months of service credit regardless of whether the disability leave is due to a flare-up of the original injury.
Types of Compensation Table. Legislative leave —if the member takes leave without pay from an eligible PSERS employer to serve in the legislature and elects to participate in PSERS as a legislator, then for any year in which the member serves in the legislature, the employee may choose between:. Note: If the employee selects Option 1, he or she is responsible for paying the additional employer and employee contributions on any difference between the Option 1 and Option 2 amounts. Paid leave —may be reportable to the extent authorized by RCW Payment from an employer while on authorized leave of absence is reportable if:.
Reinstatement Payments— if an employer makes payments to an employee for periods the employee was not employed and those payments are made upon reinstatement or in lieu of reinstatement, the payments are reportable. The payment will be prorated over the entire period that the employee was suspended, terminated, or otherwise absent from work. Shared Leave, State Employee —the compensation received due to a leave-sharing program qualifies as reportable compensation. If the employee is not a state employee, shared leave payments are not reportable.
Standby pay —is is specifically identified as reportable compensation in [ RCW Temporary Duty Disability —see Duty Disability. Unpaid leave of absence —For certain periods of unpaid leave of absence identified by statute, such as authorized leave for education purposes, family or medical leave, or other unpaid employer-approved leave, a member may apply for and purchase lost service credit.
Under RCW Note: A member shall be eligible to receive a maximum of two years service credit during a member's entire working career for those periods when a member is on an unpaid leave of absence authorized by an employer. One exception is interruptive military service which may entitle a member for up to five years of military service. Annual leave cash out —If an employee receives payment instead of using accrued leave, the payment is a cash out and is not reportable.
Car Allowance in Lieu of Expenses —some employers pay car allowances instead of reimbursing for actual miles driven in the employee's car for the employer's business. These payments are not for services rendered and are not reportable. Car Provided by Employer —the value of an employer-provided vehicle is not reportable. Cash out payments for sick, annual and personal leave —if an employee receives payment instead of using accrued leave, he or she receives a "cash out" for the accrued leave.
Cash outs are excluded by statute from the definition of reportable compensation.
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Disability Insurance Payments —for disability insurance are not for services rendered and are not reportable. These payments are made to an employee because he or she is not able to render services due to a disability. Fringe Benefits —payments made by an employer to a third party to provide benefits for an employee are not part of the employee's salary or wage and are not reportable.
Examples of these payment types are insurance premiums and employer retirement contributions. Illegal Payments —made by an employer in excess of the employer's legal authority aren't reportable. NonMoney Payments —Nonmoney compensation is compensation provided in a form other than money and is not reportable. Examples include: living quarters, food, board, equipment, clothing, laundry, transportation, fuel and utilities. For Retirees, please verify that you are imputing the correct net benefit amount the amount of the benefit after taxes have been taken out. I heard there was talk of making changes to our pension system.
Description - 9 Credit Package: Retire RIGHT
What is this about? The Commission, made up of government employees and retirees, Human Resource experts, and private sector leaders, met throughout to deliberate on the design of the Retirement Systems. Choice between a defined benefit DB and defined contribution DC plan for all current and future employees.
Minimum unreduced retirement age of 55 with 30 years of service for all future hires other than law-enforcement officers. Give current and new non-vested members interest on withdrawn contributions. Automatic enrollment in a supplemental DC plan specified by each state agency or local governmental employer. Study of centralizing b administration in local school systems with one or more providers across the State.
Who should I contact? Pierce will mail information to you after your first retirement benefit has been issued. For more information, contact Pierce toll-free at or visit their website at www. I had been retired just a few months when the amount of my retirement benefit changed. Your retirement benefit is generally based, in part, upon the salary earned and reported to the Retirement System during your last 4 consecutive years of employment.
Many times, verification of the salary paid for your final month of employment is not received in the Retirement Systems Division until after your first retirement payment has been issued.
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Consequently, your retirement benefit amount must be adjusted, either up or down, in the event the projected salary figures provided by your employer prior to your retirement do not equal the actual payments of salary you received. I did not receive my R, how can I request a duplicate copy?
I am terminating my employment. When should I apply for my monthly retirement benefits?
If you are no longer working in a position covered by the Retirement System, as a general rule you should apply for your monthly benefit as soon as you become eligible, whether you will be in receipt of an unreduced service retirement allowance or early, reduced benefits. Historically, post-retirement benefit increases have significantly reduced, or completely eliminated, the difference between the amount of your benefit should you begin reduced benefits as soon as possible as opposed to delaying the payment of your benefits until a later date.
If you are a local governmental employee or retiree, you should consult your employer for information about possible health insurance coverage as a retiree. I am leaving my job. Should I withdraw my retirement contributions or leave them in? The correct answer to this question is usually dependent on three things: i whether you anticipate a return to employment covered by either the State or Local Governmental Retirement System; ii whether you are vested see question below ; and iii your age.
The best way to give a general answer is as follows: If you are reasonably sure that it is unlikely you will ever accumulate the retirement service credit you need to be vested, you may be better served by withdrawing your contributions due to the fact that, if you are not vested, you do not qualify for a monthly benefit. Please keep in mind that if you withdraw your retirement contributions, you forfeit your retirement service credit and rights to all benefits associated with the service for that time period, including medical coverage through the State Health Plan, if applicable.
If you are close to meeting the eligibility requirements for retirement, you may wish to consider leaving your contributions in the Retirement System so that you may receive a monthly benefit when you become eligible. If you withdraw your contributions you will lose service credit and forfeit a future retirement benefit, if eligible. I am having difficulty getting my health benefit carrier to pay some of my medical bills.
Can the Retirement Systems help me with this problem? Although the Retirement Systems Division has been designated as the Health Benefits Representative HBR for retired teachers and state employees, our duties do not include claims processing or appeals. The Retirement Systems is responsible for making premium deductions from monthly retirement benefits, reconciling group billings, and remitting premiums to the third party administrator.
I am about to retire. When will I receive a packet to elect supplemental insurance? My doctor has recommended that I stop working and apply for disability benefits from both the state and Social Security. What are my options?