| ATTENTION: | All Human Resources and Payroll Officers |
| SUBJECT: | Deadline Extension: SEBAC 2017 - Tier IV Enrollment for Employees Hired On or After 7/31/17 and Erroneously Placed in Tier III |
I. INTRODUCTION
The purpose of this memorandum is to:
(1) advise all state agencies; specifically higher education agencies that the Office of the State Comptroller has agreed to an extension of the February 28, 2018 deadline date stated in Retirement Services Division Memorandum 2018-02 for those eligible employees who were first hired on or after July 31, 2017 and on or before September 14, 2017 and were erroneously placed in the State Employees Retirement System (SERS) Tier III plan (including the Tier III Hybrid ) to make a one-time irrevocable retirement plan election and (2) in light of the absence of a summary plan description (SPD), provide general information to for all state agencies and specific information for higher education agencies about the different retirement plans available to individuals employed in a position that is statutorily defined as a state teacher or a professional staff member in higher education. This will enable the agencies to assist their employees in making an informed decision as they compare and choose between the retirement plans available to them.
As discussed in the Division'
s Memorandum 2018-02, the State Employees
Retirement Commission ("Commission") at its January 18, 2018 meeting unanimously
approved a recommendation to direct the Division to work with the agency
employers to alert their employees who were first hired on or after July 31,
2017 and were erroneously placed in Tier III that their proper placement was
Tier IV.
Pursuant to the Commission's decision, the subset of employees within this population that were hired by a higher education institution in a position that is statutorily defined as a state teacher or a professional staff member in higher education between July 31, 2017 and September 14, 2017 and were erroneously placed in SERS Tier III ("Higher Education Employees Erroneously Placed in Tier III") had a deadline date of February 28, 2018 to make a one-time irrevocable retirement plan election into one of the following plans: (1) the Alternate Retirement Program; (2) the SERS Hybrid Plan, (3) if eligible the Teachers Retirement System; or (4) SERS Tier IV.
This date has been extended to March 16, 2018.
II. RETIREMENT PLAN INFORMATION
As the 2017 SEBAC agreement established and requires the implementation of a new State Employees Retirement System plan (?SERS Tier IV?), the following will serve to provide basic information about the retirement plans available to Higher Education Employees Erroneously Placed in Tier III. The "best" choice for any particular employee will depend on many individual factors.
Since this is a one-time irrevocable decision, Higher Education Employees Erroneously Placed in Tier III are urged to carefully review the following descriptions and to consult with any advisors they deem appropriate.
In addition to agency human resources staff, Higher Education Employees Erroneously Placed in Tier III are encouraged to reach out to their union representatives for additional information regarding the differences among the available retirement plans and factors to consider in making this irrevocable decision.
The Tier IV Plan provides elements of both a defined benefit and defined contribution plan.
1. DEFINED BENEFIT PORTION: Under the defined benefit portion of the Tier IV plan, participants that satisfy the minimum eligibility criteria will qualify for a pre-defined monthly retirement income for life, with the amount being determined by years of service, retirement age and Final Average Earnings. Tier IV participants are required to pay employee contributions to the plan at the rate of 8% of salary for hazardous duty participants and 5% for all other Tier IV participants.
Hazardous duty participants are required to complete 25 years of hazardous duty credited service to be eligible for a hazardous duty benefit. All other participants are eligible for an early retirement benefit at age 58 with 10 years of service or for a normal retirement at age 63 with 25 years of service.
2. DEFINED CONTRIBUTION PORTION: The defined contribution component of Tier IV plan requires a mandatory 1% employee contribution with a 1% employer match. Additional employee contributions may be made to a 457 plan. Upon retirement, the participant will be entitled to collect both the employee and employer contributions along with any earnings on those contributions.
3. RISK SHARING: This plan also has a risk sharing component wherein for any
given year the employee contribution can be up to 2% higher depending on the
plan'
s performance for the previous year. This contribution will be computed by
the plan's actuaries.
The Tier IV Hybrid plan also provides elements of both a defined benefit and defined contribution plan, but also provides participants to "hedge their bets" between a defined benefit and defined contribution plan. The difference is that Tier IV Hybrid participants pay more in employee contributions than SERS Tier IV participants in exchange for the option to elect to receive a refund of a portion of their contributions in lieu of receiving a lifetime defined benefit.
1. DEFINED BENEFIT PORTION: Under the defined benefit portion of the Tier IV
Hybrid plan, participants that satisfy the minimum eligibility criteria will
qualify for a pre-defined monthly retirement income for life, with the amount
being determined by years of service, retirement age and Final Average Earnings.
For those participants hired on or after July 31, 2017, employee contributions
are required at the rate of 8% of salary.
All Tier IV Hybrid participants are eligible for an early retirement benefit at
age 58 with 10 years of service or for a normal retirement benefit at age 63
with 25 years of service.
2. REFUND OPTION: The Tier IV Hybrid plan provides participants the same benefits as provided under Tier IV with the option at the time of retirement to elect a lump sum payment of 5% of their contributions with an employer match and 4% interest in lieu of a lifetime defined benefit.
3. DEFINED CONTRIBUTION: The defined contribution component of Tier IV Hybrid plan requires a mandatory 1% employee contribution with a 1% employer match. Additional employee contributions may be made to a 457 plan. Upon retirement, the participant will be entitled to collect both the employee and employer contributions along with any earnings on those contributions.
4. RISK SHARING: This plan also has a risk sharing component wherein for any given year the employee contribution can be up to 2% higher depending on the plan's performance for the previous year. This contribution will be computed by the plan's actuaries.
Under this retirement savings program, any unclassified employee of a higher education institution is eligible to participate. For employees hired on or after July 31, 2017 there is a choice in the contribution rate of either 5% or 6.5% of salary. The employer contribution is 6.5%. All contributions are fully vested immediately for the purpose of providing you with a lifetime retirement income or to provide a death benefit in the event you die before you begin your retirement income.
Although offered amongst the choice of retirement plans for those employees
who meet the eligibility requirements for membership, the TRS is not
administered by this Division. Therefore for information regarding this plan
please visit the TRS website.
III. CONCLUSION
Although this memorandum does not provide a comprehensive overview of all the retirement plans available, the main purpose was to inform you of the extension of the deadline date to March 16, 2018 that certain employees now have to make their one-time irrevocable retirement plan election. The Division will continue to provide agencies with information as it becomes available in the implementation of SEBAC 2017.
Any questions you have concerning the information provided herein may be addressed to Assistant Division Director, Colin Newman at 860 702-3482 or by email at colin.newman@ct.gov.
Very truly yours,
STATE EMPLOYEES RETIREMENT COMMISSION
KEVIN LEMBO, SECRETARY EX OFFICIO
BY:
John Herrington, Director
Retirement Services Division
JH/cn
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