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MSEP 2011 FAQs

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FAQs Regarding MSEP 2011

  1. What changes were made to the MOSERS retirement plan?
  2. Who is affected by the changes to the MOSERS retirement plan?
  3. When will the changes to the MOSERS retirement plan be effective?
  4. Why were these changes being made?
  5. MOSERS is called a defined benefit plan – what does that mean and will that change?
  6. What is a defined contribution plan – is that different than MOSERS?
  7. Will current employees be required to contribute for their state retirement benefit?
  8. Is BackDROP going away?
  9. Will the provisions that allow employees to purchase or transfer prior service go away?
  10. Will eligibility for retirement - the age and service requirements – be different?
  11. Is the Rule of 80 (“80 and Out”) changing?
  12. Will the vesting requirement change?
  13. Is there language in the legislation that opens the door for legislators to change the MSEP 2000 for existing employees (those hired prior to 01/01/2011 )?
  14. Does MOSERS control what changes are made to retirement benefits?
  15. Does the legislation contain any retirement incentive or increase in the amount the state pays for retirees’ medical premiums?
  16. Will benefits for current retirees stay the same?
  17. Will benefits for legislators change – what about statewide elected officials and judges?
  18. Where does the money come from to pay retirement benefits?
  19. What is the contribution rate from the state to MOSERS for FY2011?
  20. Is MOSERS properly funded to pay benefits into the future?
  21. What kind of track record does MOSERS have in managing the state retirement fund?
  22. What kind of economic impact does the retirement system have in Missouri?
  23. Does this legislation create a state retirement investment board separate from MOSERS?
  24. Does the state auditor audit MOSERS?

1. What changes were made to the MOSERS retirement plan?
The changes affect state employees employed with the state in a benefits eligible position for the first time on or after 01/01/2011 . It:

  • Increases the age and service requirements for retirement eligibility
  • Increases the number of years of service to be vested
  • Requires employee contributions, and
  • Eliminates subsidized service purchases and BackDROP for new employees.

See these tables for details and comparison to the existing plan. (For simplicity and clarity, we do not include comparisons to the MSEP (the “old plan”) throughout this FAQ. The proposed legislation makes no changes to the MSEP.)

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2. Who is affected by the changes to the MOSERS retirement plan?
The proposed legislation affects only those new state employees employed with the state in a benefits eligible position for the first time on or after 01/01/2011.

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3. When will the changes to the MOSERS retirement be effective?
Changes are effective 01/01/2011 and affect only new state employees employed with the state for the first time in a benefits eligible position on or after 01/01/2011.

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4. Why were these changes being made?
The changes to the current plan for new employees will help the state of Missouri continue to provide financial security for all members by maintaining the defined benefit plan structure. It is important to point out that the state's defined benefit plan was preserved for all state employees, current and future. Legislation was introduced in the House and the Senate that would have terminated the defined benefit plan and replaced it with a defined contribution plan, which caused much concern. While a defined contribution plan is an excellent tool for supplemental retirement savings, it simply doesn't provide the security of a defined benefit plan.

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5. MOSERS is called a defined benefit plan – what does that mean and will that change?
A defined benefit (DB) plan is one that requires a member to be vested (work a set number of years in a benefit eligible position) and it provides a set benefit (based on salary and credited service) for life once a member meets the age and service requirements for retirement. In other words, the “benefit” is “defined” by the law.

A DB plan can be either contributory or non-contributory. MOSERS will remain a non-contributory DB plan for employees who worked in a benefit eligible position prior to 01/01/2011, but will become a contributory DB plan for employees hired on or after 01/01/2011.

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6. What is a defined contribution plan – is that different than MOSERS?
MOSERS is a defined benefit (DB) plan. See Question 5 for information about DB plans.

A defined contribution (DC) plan is one in which the employer makes contributions and the employee may or may not contribute. The “contribution” is “defined” by the law. The benefit the participant receives depends upon the amount of contributions made into the individual’s account and earnings on those contributions. Individual participants typically control how their funds are invested.

Missouri state employees can participate in the State of Missouri Deferred Compensation Plan. The Deferred Compensation Plan is a voluntary savings plan and its advantages include:

  • Lower income taxes
  • Tax-deferred growth of contributions
  • Flexibility
  • Low investment fees, and
  • Professionally managed, customized target date funds

Missouri state employees put money into their deferred compensation account to supplement the MOSERS DB and social security benefits they receive in retirement.

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7. Will current employees be required to contribute for their state retirement benefit?
No. The legislation requires only that new state employees employed with the state in a benefits eligible position for the first time on or after 01/01/2011 to contribute.

Existing employees hired prior to 01/01/2011 will not be required to contribute to their MOSERS defined benefit plan.

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8. Is BackDROP going away?
Yes – for new hires only. The legislation removes the BackDROP provision for new state employees only – those employed with the state in a benefits eligible position for the first time on or after 01/01/2011.

BackDROP remains an option for those who are otherwise eligible and employed with the state prior to 01/01/2011.

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9. Will the provisions that allow employees to purchase or transfer prior service go away?
Yes – for new hires only. The legislation removes provisions providing for the subsidized purchase or transfer of prior service for new state employees only – those employed with the state in a benefits eligible position for the first time on or after 01/01/2011.

Purchase of prior service remains an option for existing employees hired prior to January 1, 2011 who otherwise meet purchase or transfer of prior service eligibility requirements.

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10. Will eligibility for retirement - the age and service requirements – be different?
Yes – for new hires only. The age and service requirements for retirement eligibility for new state employees - those employed with the state in a benefits eligible position for the first time on or after 01/01/2011 will be age 67 with 10 years of service, or age 55 or older under the Rule of 90.

The age and service requirements for existing employees hired prior to 01/01/2011, remain the same at age 62 with 5 years of service, or age 48 or older under the Rule of 80 in the MSEP 2000. [Members eligible to retire under the closed MSEP who elect MSEP at retirement must meet retirement eligibility requirements for that Plan of age 65 with 5 years of service or age 60 with 15 years of service or age 48 or older under the Rule of 80].

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11. Is the Rule of 80 (“80 and Out”) changing?
Yes – for new hires only. The eligibility under an age and service combination for new state employees - those employed with the state in a benefit eligible position for the first time on or after 01/01/2011 - will be a minimum of age 55 and their age and years of service must equal at least 90.

The age and service requirement for existing employees hired prior to 01/01/2011 remain the same at age 48 or older and their age and years of service must equal at least 80.

Here is an example:

For Rule of 80, or "80 and out" - employee begins work at age 22, works for 29 years.

So, age is 22 + 29 = 51. Age 51 + 29 years of service = 80

For Rule of 90, or "90 and out" - employee begins work at age 22, works for 34 years.

So, age is 22 + 34 = 56. Age 56 + 34 years of service = 90

Because employees get 1 "point" for each year of age and 1 "point" for each year of service, changing from Rule of 80 to Rule of 90 would mean new employees employed with the state in a benefit eligible position for the first time on or after 01/01/2011 would have to work 5 additional years to qualify under this provision.

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12. Will the vesting requirement change?
Yes – for new hires only. New state employees employed with the state in a benefits eligible position for the first time on or after 01/01/2011 will be required to have 10 years of service to be vested.

The requirement of 5 years of service to be vested remains the same for existing active employees who were employed with the state in a benefits eligible position prior to 01/01/2011.

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13. Is there language in the legislation that “opens the door” for legislators to change the MSEP 2000 for existing employees (those hired prior to 01/01/2011 )?
No. However, the changes to retirement plan provisions create a “new tier” of benefits within the MSEP 2000, and language contained in subsection 9 of section 104.1091.1. (below) allows legislators to make changes to the “new tier” that would be effective going forward from the date of any change:

The employee contribution rate, the benefits provided under the year 2000 plan, and any other provision of the year 2000 plan with regard to members covered under this section may be altered, amended, increased, decreased, or repealed, but only with respect to services rendered by the member after the effective date of such alteration, amendment, increase, decrease, or repeal, or, with respect to interest credits, for periods of time after the effective date of such alteration, amendment, increase, decrease, or repeal.

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14. Does MOSERS control what changes are made to retirement benefits?
No. MOSERS does not control decisions made by the legislature to change the provisions of the state employees’ retirement plan

MOSERS administers the state employees’ retirement plan in accordance with state statute and within the parameters set by our board of trustees.

MOSERS has a solid 50-year track record of excellent investment returns, outstanding customer service and efficient administration. While we cannot control what changes are made to retirement plan provisions, we can assure members that their retirement system is stable and promised retirement benefits are secure.

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15. Does the legislation contain any retirement incentive or increase in the amount the state pays for retirees’ medical premiums?
No. There were several versions of this legislation as it made its way through the general assembly. Ultimately, the final bill did not include such a provision.

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16. Will benefits for current retirees stay the same?
Yes. The legislation creates a “new tier” in the MSEP 2000 and will only affect those who are employed with the state for the first time in a benefit eligible position on or after 01/01/11.
Retirement benefits remain unchanged for those already retired.

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17. Will benefits for future legislators change – what about statewide elected officials and judges?
Yes. The changes affect legislators employed for the first time on or after 01/01/11. It increases the age required for retirement eligibility, requires employee contributions and eliminates subsidized service purchases for new legislators. The legislation also contains changes for statewide elected officials and judges who are employed with the state for the first time in a benefit eligible position on or after 01/01/11 . See these tables for details and comparison to the existing plans.

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18. Where does the money come from to pay retirement benefits?
Currently pension funds come from state contributions and investment earnings. For MOSERS, employer contributions account for approximately one-third of system funding. The rest comes from investment earnings. Beginning 01/01/11, new employees will begin contributing 4% of pay to the retirement fund.

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19. What is the contribution rate for the state to MOSERS for FY2011?
Effective July 1, 2010 , the contribution rate for general state employees from the state to the MOSERS trust fund is 13.81% of state employee payroll.

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20. Is MOSERS properly funded to pay benefits into the future?
Yes. The state of Missouri makes payments in full and on time to the MOSERS trust fund. MOSERS is stable and secure, funded at 83%. For perspective, by industry standards a retirement system is considered to be in good shape if it is funded at 80%. The state of Missouri has consistently contributed the amount recommended by the actuary and certified to the state by the MOSERS board of trustees.

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21. What kind of track record does MOSERS have in managing the state retirement fund?
MOSERS has a solid 50-year track record of excellent investment returns, outstanding customer service and efficient administration:

  • MOSERS outperformed its 8.5% investment return target in sixteen out of nineteen 10-year periods from 2009 back to 1982.
  • MOSERS is ranked #1 in customer service among peer retirement systems.
  • MOSERS’ administrative costs (cost-per-member) are below our peer median and below the expected benchmark.

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22. What kind of economic impact does the retirement system have in Missouri ?
Public pension benefits have a significant economic impact, and they support and sustain jobs and tax bases.

In 2009:

  • MOSERS paid nearly $535 million in benefits.
  • Members had nearly $12 million in state taxes and $43 million in federal taxes withheld from their benefit payments.

Pensions provide Main Street benefits.

  • Dignity after a career of service - A lifetime income stream reduces the need for public assistance.
  • The average monthly benefit payment for new retirees is $1,569 ($18,828 per year).
  • This modest benefit provides those who served the public during their working years with income to meet their basic needs.

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23. Does this legislation create a state retirement investment board separate from MOSERS?
No. There were several versions of this legislation as it made its way through the general assembly. Ultimately, the final bill did not include provisions creating a state retirement investment board.

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24. Does the state auditor audit MOSERS?
Yes. The Missouri State Auditors office, in accordance with Section 104.480 RSMo, has conducted many audits of MOSERS. They are currently wrapping up their review of MOSERS which covers the period July 1, 2004 to June 30, 2009. Their report is expected in late summer, early fall. The SAO’s last completed audit report which is number 2006-02, which is available on their website (http://auditor.mo.gov/auditreports/pr2006.htm), covered the four years ending June 30, 2004.

The MOSERS fund is also audited every year by an outside auditing firm. Williams Keepers has audited the fund every year since FY 2006 and are currently working on their audit of FY 2010. KPMG audited MOSERS for many years before that dating back to at least FY 1999. The auditor’s opinion letters are contained in each Comprehensive Annual Financial Report (CAFR) and MOSERS’ CAFRs are available on our website.
Additionally, MOSERS employs two internal auditors who conduct many audits each year and MOSERS has a policy to audit the actuary every four years. The board hired an outside firm to conduct a fiduciary audit in FY 2006.

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Member Contribution Brochure

Get more in-depth information about member contributions in this PDF brochure.

MSEP 2011 Examples

This listing of common examples will help you understand which plan employees belong to based on their hire dates.

MSEP 2011 Forms

Read about the 2 new forms associated with the MSEP 2011 Plan: the Beneficiary Contribution and Request for Refund of Contribution Application.

MSEP 2011 for Judges

The following briefly highlights benefits administered by MOSERS for judges. For detailed information you may download specific publications regarding retirement benefits.

MSEP 2011 for Legislators

The following briefly highlights benefits administered by MOSERS for legislators. For detailed information you may download specific publications regarding retirement benefits.

MSEP 2011 for State Officials

The following briefly highlights benefits administered by MOSERS for state officials. For detailed information you may download specific publications regarding retirement benefits.

The MSEP 2011 Retirement Plan Video

Watch a short video created by MOSERS staff outlining the specifics of the MSEP 2011 Retirement Plan.

Plan Comparison Tables

Legislation passed in 2010 creates a new tier of retirement plan provisions affecting general state employees, statewide elected officials, legislators and judges working in a benefit eligible position for the first time on or after 1/1/11. Compare the differences here.

MOSERS
Missouri State Employees' Retirement System
Address: 907 Wildwood Dr., Jefferson City, MO 65102
https://www.mosers.org/images/mosers-logo-bg-375-280.jpg Phone: 800.827.1063 URL: Email: mosers@mosers.org Founded On: September 1, 1957