RETIREMENT & BENEFIT SERVICES DIVISION MEMORANDUM

June 9, 1997

TO THE HEADS OF ALL STATE AGENCIES

1. INTRODUCTION
   As part of the 1997-1999 biennial budget, the General Assembly enacted and the Governor subsequently ratified an Early Retirement Incentive Program (Program). In general, this Program offers three incentive years of credit (commonly referred to as "chips") to certain Tier I and Tier II members of the State Employees Retirement System (SERS) who retire during a limited window of opportunity.
   

   In that connection, the purpose of this memorandum is to discuss (1) eligibility requirements for participation in the Program, (2) administration of the Program's provisions, and (3) the manner in which the Program will be implemented by the Retirement & Benefit Services Division (Division).
   

2. ELIGIBILITY REQUIREMENTS
   Because entitlement to the three incentive years of credit is expressly conditioned upon retirement from SERS under specified circumstances, this memorandum will initially explain the requirements that a member must meet in order to obtain these chips.
   
   The 1997 Early Retirement Incentive Program provides three incentive years of credit to a SERS member:
   1. Who is a full-time or part-time state employee on the work day immediately preceding his or her effective date of retirement; and
   2. Who is at least age fifty-two years of age on or before August 1, 1997 with a minimum ten years of qualifying retirement credit prior to the effective date of retirement, exclusive of the incentive chips provided by the Program. (This means Tier I members under age 60 must have at least ten years of actual state service credit. Tier I members age sixty and older must have at least ten years of any combination of the following types of credited service: actual state, war-time military, leaves of absence without pay and municipal. Tier II members need ten years of vesting service.); or
   3. Who has twenty or more years of retirement credit for qualifying hazardous duty service prior to the effective date of his or her retirement, exclusive of the incentive chips provided by the Program, at any age; and
   4. Who elects to retire on April 1, 1997, May 1, 1997, June 1, 1997, July 1, 1997, or August 1, 1997, provided that the member's written application is received by the Division prior to the effective date of retirement; and
   5. Whose application is for early, normal or hazardous duty benefits, whichever is applicable.

   In no event shall the 1997 Early Retirement Incentive Program be available to the following SERS members:

   1. State-aided institution employees as defined by Section 5-175, operators of a vending stand covered by Section 5-175a, teachers at E.O. Smith School, elected officials, or employees of the United States Purchasing and Finance Office;
   2. State employees whose service terminated earlier than the working day immediately preceding their effective dates of retirement, except for members otherwise eligible hereunder who were laid off from state service and retired on April 1, 1997, May 1, 1997 or June 1, 1997; and
   3. State employees who retire on a disability retirement.

   At the State's option, for hazardous duty members only, the effective date of any retirement may be deferred on a case by case basis to not later than August 1, 1998. This deferral clause will be addressed in a separate memorandum.

3. ADMINISTRATION OF PROGRAM PROVISIONS

   A SERS member who meets the eligibility requirements set forth in Section II of this memorandum shall be entitled to three incentive years of credit. These chips must be utilized in the following manner:

   1. Non-hazardous duty SERS members under age fifty-five on their effective retirement dates will have the three incentive years added to age until fifty-five is reached, with the remainder, if any, applied to retirement service credit;
   2. Non-hazardous duty SERS members age fifty-five or older on or before their effective retirement dates will have all three incentive years added to retirement service credit; and
   3. Hazardous duty SERS members will have all three incentive years applied to retirement service credit.

   Any augmentation of a member's age by incentive chips shall be used exclusively for eligibility purposes and the calculation of the basic straight life annuity benefit. The actual age of the member shall be used for all other purposes, including but not limited to optional payment form factors and the timing of the Plan B adjustment to retirement income.

   The additional credit for the incentive years shall be considered actual full-time state service for all retirement purposes, except for the calculation of salary used to compute the retirement benefit.

   Accrued vacation days at the date of retirement will be credited as increased service time. Any employee participating in the program will be eligible for payment of accrued sick and vacation days in accordance with existing rules.

   Any employee who retires under the Program will be entitled to retirement health insurance under the provisions of the SEBAC V agreement as if he or she had retired on or before June 1, 1997.

   It should be noted that if a member participates in the Program and subsequently reenters state service for more than one hundred and twenty days in a calendar year, the incentive years will be excluded from the calculation of pension benefits when the member next retires.

   The following examples illustrate the application of the three incentive chips under different circumstances.

   Example 1

   Membership: Tier I, Plan C (non-hazardous duty)
   Age at retirement: fifty-six
   Retirement credit, exclusive of incentive years: twenty years, six months
   Average salary for three highest years' earnings: $30,000.00

   In this example, referring to the Benefit Percentage Chart on page 10 of the Tier I Summary Plan Description (Booklet), revised to May 1, 1991, the member's basic retirement allowance at date of retirement without the additional incentive years would be 34.44% (20.5 years X 1.68%) of $30,000.00, or $10,332.00 yearly.

   In this example, because the member attained age fifty-five prior to the effective date of retirement, the three incentive years of credit are applied exclusively to the length of service, increasing the retirement credit to twenty-three years, six months. The age at retirement and the average salary remain fifty-six and $30,000.00 respectively.

   Referring again to the Benefit Percentage Chart in the Tier I Booklet, the member's basic retirement allowance, inclusive of the incentive years, would be 43.95% (23.5 years X 1.87%) of $30,000.00, or $13,185.00 yearly.

   Example 2

   Membership: Tier I, Plan B (non-hazardous duty)
   Age at retirement: fifty-three
   Retirement credit, exclusive of incentive years: twenty-six years, zero months, four days
   Average salary for three highest years' earnings: $40,000.00

   This member has not attained the minimum age of retirement; therefore, a portion of the three incentive years must be utilized in order to bridge the difference between this member's exact age at retirement and age fifty-five.

   In this illustrative example, assume the member is retiring on August 1, 1997 and her date of birth is May 28, 1944.

   The first step in applying the incentive years is to determine the length of time needed to bridge the difference between the member's exact age on August 1, 1997 and age fifty-five. As her exact age is fifty-three years, two months, three days, this means that one year, nine months, twenty-seven days of incentive years are required to reach fifty-five. The remainder of the three incentive years, one year, two months, three days, are added to the retirement credit.

   Applying the incentive years in Example 2, this member's age at date of retirement for calculating her basic benefit is fifty-five; the retirement credit is twenty-seven years, two months. The average salary figure remains at $40,000.00. Remember, that after all service credit is totalled, any days not divisible by thirty are dropped from consideration; credit is awarded in years and months only.

   Referring to the Benefit Percentage Chart on page 10 of the Tier I Booklet, this member's annual basic retirement allowance is calculated as 54.33% (27.1667% years X 2%) of $40,000.00, or $21,732.00 yearly.

   If this same member elected a fifty percent spouse option, the factor used to reduce the $21,732.00 basic benefit would be determined by utilizing her closest age at retirement, fifty-three; similarly, her spouse's closest age would be used for option calculation purposes. Additionally, the Plan B reduction would occur on May 28, 2009, the member's sixty-fifth birthday, barring receipt of a Social Security Disability Award. Health insurance coverage would also be dictated by the member's actual age.

   Example 3

   Membership: Tier II, (non-hazardous duty) with eight years and six months of full-time service and four years of part-time service at 50% of a full-time schedule
   Age at retirement: sixty-two
   Vesting Service: Twelve years, six months
   Credited Service: Ten years, six months adjusted to full-time equivalent (FTE), exclusive of incentive years.
   Average salary for three highest years' earnings: $42,000.00
   1997 Breakpoint: $25,800.00

   In this example, because the member had attained age fifty-five prior to the effective date of retirement, the three incentive years of credit are applied exclusively to the length of credited service, increasing the FTE credited service to thirteen years, six months. The age at retirement and average salary remain sixty-two and $42,000.00 respectively. Please note that regardless of when part-time service was rendered, the incentive years will be added as full-time credit. Even when all service has been performed on a part-time basis, the incentive years will be treated as full-time state service.

   In this example, referring to the normal retirement formula found on page 11 of the Tier II Booklet, the member's basic retirement allowance, inclusive of the incentive years, would be calculated as follows: .0133 X $42,000.00 plus .005 X $16,200.00 ($42,000.00 - $25,800.00) X 13.5 years of FTE credited service equals $8,634.00 yearly.

4. PROGRAM IMPLEMENTATION
   1. Counseling Workshops

      The provisions of the Program have created an immediate need on the part of an extremely large number of SERS Tier I and Tier II members for retirement information; under these circumstances, however, individual counseling services are unrealistic. Therefore, the Division will conduct a series of eighteen workshops over a five week period, commencing on June 24, 1997 and concluding on July 24, 1997, from 1:00 p.m. to 4:00 p.m., in accordance with the schedule set forth in Attachment "A"to this memorandum. All workshops will be held in the auditorium at the Department of Veterans' Affairs, 287 West Street, Rocky Hill, CT 06067.

      Directions: Traveling south on Interstate 91, use Exit 23 and turn left at the end of the ramp onto West Street. Traveling north on Interstate 91, use Exit 23 and turn right at the end of the ramp onto West Street. The Department of Veterans' Affairs is located approximately 1.5 miles from Interstate 91, on the left.

      While parking is adequate, it is not unlimited; therefore, encourage SERS members who will attend the workshops to carpool.

      The Division is conducting these workshops for all affected SERS Tier I and Tier II members as well as union pension representatives and agency personnel with responsibilities for providing retirement information and processing benefits applications.

      At each workshop, the agenda will include (1) a speaker's presentation, (2) a period where employees will utilize a workbook to derive their estimated retirement benefits under the program, and (3) instruction on how to determine the actuarially reduced benefit required by the variety of optional payment forms available. There will also be discussion of the health insurance coverage after retirement. Members will be apprised of other important issues, such as the retirement application process, paid-up life insurance policies, taxability of retirement income, and cost of living adjustments. Several trained staff members from the Division will be present to answer any individual questions at the conclusion of the general portion of the workshop.

      If the workshop series is to be successful in accomplishing its purpose, it is absolutely essential that agency personnel disseminate the workshop schedule and participate in the following reservation procedure.

      Each agency must designate a contact person (contact) to handle the reservations for the members of such agency who qualify to retire under the Program and wish to attend a workshop. The name of the agency contact, as well as other pertinent information, must be supplied to the Division on Attachment "B" to this memorandum by June 18, 1997.

      It should be noted that certain workshops will address Tier I members, others Tier II and others Hazardous Duty. It is therefore imperative that the members attend the workshop specifically reserved for them.

      The agency contact will be responsible for immediately submitting the names of employees who wish to attend a workshop by completing the appropriate Attachment "C" to this memorandum, entitled: "Reservation List". Attachment C-I should be used to reserve for Tier I members only; Attachment C-II for Tier II members only; and Attachment C-HD for Tier I and Tier II Hazardous Duty members. Duplicate the reservation lists as needed. Because reservations will be accepted on a "first come first served" basis, requests should be submitted as the lists are completed. The Division will return the reservation lists to the contact, indicating the workshop the employees should attend. It will be the responsibility of the agency contact to notify affected employees of their reservation dates. Reservation lists will not be accepted after July 7, 1997.

      The agency contact may address questions relating to the reservation process to Enid Sanabria at (860) 702-3493; Fax (860) 702-3489.

      In order for the workshops to achieve the goal for which they were designed, there must be adherence to the following instructions:

      1. As advised by the agency contact, employees must attend the specific workshop reserved for them by the Division.
      2. Employees must bring the below-listed information with them to the workshop or they will be unable to derive their retirement benefit:
         1. Tier I employees should bring an estimate of their years of credited service for retirement purposes; this includes state employment for which required retirement contributions have been made, purchased retirement credit for miscellaneous service, and periods during which temporary Workers' Compensation payments or benefits under Section 5-142 of the Connecticut General Statutes were received; it should exclude unpurchased leaves of absence without pay, periods of non-employment, or any other time for which required retirement contributions have not been made. Tier II members should bring an estimate of their total qualifying vesting and credited service for retirement purposes; this includes state employment, qualifying severance periods, qualifying leaves of absence, periods during which temporary Workers' Compensation payments or benefits under Section 5-142 of the Connecticut General Statutes were received, and qualifying periods of miscellaneous service obtained under the military, out-of-state, or Connecticut municipal service provisions.
         2. an approximation of their average salary for the three highest years' earnings;
         3. the date(s) of birth for any person(s) to whom they may wish to provide survivor benefits;
         4. full-time employees with prior part-time service or part-time employees must know the average portion of a full-time schedule they have worked during their part-time service; and
         5. a current pay stub
      3. Employees should be encouraged to bring the following equipment to the workshop:
         1. a writing instrument;
         2. a clip board or other writing surface;
         3. writing paper; and
         4. a hand held calculator.

      Spouses and significant others will be accommodated at workshops only as space permits.

   2. Retirement Application Process

      The worksheet contained in Attachment "D" to this memorandum must be completed for all employees retiring July 1, 1997 or August 1, 1997 under the 1997 Early Retirement Incentive Program.

      On Attachment "E" to this memorandum is a Form CO-898, entitled: "Application for Retirement Benefits", which reflects the location where incentive years should be designated. Incentive years applied to service credit appear in Part II; incentive years applied to age appear in Part I in the vacant space below the box labelled "other".

      As referenced earlier in this memorandum, the calculation of the average salary used to compute the retirement benefit is unaffected by the incentive years. Accordingly, Part III of the retirement application should be completed routinely, reflecting actual wages earned; to emphasize, the program does not provide for projection of wages on account of the incentive years.

      As August 1, 1997 approaches, it is anticipated that the volume of retirement applications will increase. The 1997 Early Retirement Incentive Program requires that the member's written application for retirement be submitted to the Division before the effective date of retirement. If an application is received on or after August 1, 1997, its late submission will result in forfeiture of the incentive years, regardless of the member's length of state service. Therefore, it is imperative that all agency personnel staff share responsibilities as fully as possible and assist their employees.

      For easy reference, refer to Attachments "F", "G", and "H" to this memorandum for a summary of the forms and documents required to process a retirement application.

5. CONCLUSION

   A message concerning the 1997 Early Retirement Incentive Program will be included with paychecks dated June 20, 1997 and July 3, 1997. A copy of the check insert appears in Attachment "I" to this memorandum.

   During the incentives of 1989 and 1991-1992, the Division met its objective of processing all bona fide applications so that Program participants received pension checks in their first month of retirement. While this remains the Division's objective for 1997, there is a possibility that payment of benefits may be delayed until the member's second month of retirement, depending on the level of interest in the Program. Please advise SERS members of this contingency as part of the retirement application process.

   Please do not direct employees with inquiries concerning the Program to the Division's Counseling Services Unit; instead, share with employees the information contained in this memorandum and attempt to assist them in preparing for attendance at a counseling workshop. For general questions which agencies are unable to answer, the Counseling Services Unit may be contacted between 8:30 a.m. and 4:30 p.m. at (860) 702-3490, 702-3491, 702-3495.

Very truly yours,

STATE EMPLOYEES RETIREMENT COMMISSION
NANCY WYMAN, SECRETARY EX OFFICIO

BY:

Steven Weinberger, Director
Retirement and Benefit Services Division

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