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Why is My BackDROP Estimate Lower?

For MSEP/MSEP 2000 members

[Posted on 01/21/2016 at 2:16 PM]

If you have not yet retired and you received a retirement benefit estimate in 2015 or earlier that includes BackDROP, your estimated BackDROP amount may decrease when calculated again in 2016 due to lower-than-assumed cost-of-living adjustments (COLAs). The COLA for 2016 is 0.095%.

COLAs affect the amount of your BackDROP lump sum because the lump sum is equal to 90% of what you would have received in retirement benefits, had you been retired during the BackDROP period – including any COLAs that would have been applied during that time.

Whenever future estimates are produced, certain assumptions must be made. The benefit estimate program uses the current year's COLA (1.298% for 2015) and projects it for every future year. If the COLA for any year during your BackDROP period is less than it was during the year in which your estimate was produced, your projected future BackDROP estimate will decrease. This occurs whenever COLAs decrease during the BackDROP period or any assumption turns out to be different than what actually occurs.

If you would like a new estimate of your monthly retirement benefit, contact a MOSERS benefit counselor or log in to your Member Homepage, select Estimates, then Estimate Your Retirement Benefit. (Note: The "Project COLAs" button on this page will allow you to see the impact of different COLAs on your monthly benefit payment but it will NOT allow you apply different COLAs to future estimated BackDROP lump sums.)

BackDROP is one of the provisions addressed in our PreRetirement Planning seminars, which are conducted around the state for members of the MSEP and MSEP 2000. Most members find that an in-person presentation and discussion of this topic is very helpful! View the 2016 schedule, and log in to register for a location in your area. You will also receive a benefit estimate by attending a PreRetirement seminar, and you can specify when you register that you would like the estimates to include BackDROP.

Examples of the Impact of a Lower COLA on BackDROP Lump Sums:

   Member A  Member B
 2015 Estimate  $51,182.52  $112.832.14
 2016 Estimate  $51,157.76  $112.557.17
 Difference  -$24.76  -$274.97
 Why?  The lower 2016 COLA affects only 1 month of her BackDROP period  The lower 2016 COLA affects 23 months of his BackDROP period
 Retirees who elect BackDROP have COLAs payable on the anniversary of their BackDROP date.

Please note that all benefit estimates must be verified, meet all legal requirements, and if necessary, be corrected before any payments can be made. Corrections could change the amount of the service and benefits you receive or even your eligibility to receive a benefit.

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Missouri State Employees' Retirement System
Address: 907 Wildwood Dr., Jefferson City, MO 65102 Phone: 800.827.1063 URL: Email: Founded On: September 1, 1957