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      University of Maryland
      Pre-Retirement Seminar
Morning Session          Afternoon Session

   Pension Benefits        Social Security
   Retirement              Financial Planning
    Procedures              Legal Issues
   State Health
    Insurance Benefits
   Medicare
Pension System Overview
       Eligibility Requirements
       Benefit Calculations
       Option Selection
       Necessary Forms
       Unused Sick Leave
       Cost-of-Living Adjustment
       Annual Leave
    Eligibility Requirements
    Service Retirement – Pension System
 Age 62 with at least 5 years of eligible
  service or
 30 years of eligible service regardless of

                    When                              Time

                                 Plan           How
Eligibility Requirements
Early Retirement – State Pension System

 Age 55 with at least 15 years of eligible
 Lose ½ percent per month or 6 percent a
  year for every year under age 62
 Eligibility Requirements –Old
 Retirement System
Service Retirement         Early Retirement

    Age 60 or                 25 years of service
    30 years of service       Lose ½ percent per
                                month or 6 percent
                                per year for every
                                year under 30 years
                                of service
 Calculation of Pension Benefits
Average Final Salary       Service Credit

    Retirement System:        Membership Credit
     Three highest years       Military Credit
    Pension System:           Purchased Credit
     Three highest              (Normal cost:
     consecutive years          anytime. Full cost: 12
                                months prior to your
                                retirement date)
Pension System Formula for
Basic Allowance
       1.2 percent x AFS x Years of
       Service prior to 6/30/98


       1.4 percent x AFS x Years of
       Service after 6/30/98

       Divided by 12
Retirement System Formula
for Basic Allowance

   AFS x Years of Service

   Divided by 12
Monthly Payout Options
   Basic Allowance (Maximum)
     – Largest monthly allowance
     – No protection for beneficiary(ies)
     – Benefits cease at death
   Single Life Annuities
     – Options 1 and 4
     – Provides lifetime monthly benefit to retiree and may provide lump sum
       payout to beneficiary(ies) at retiree’s death
   Dual Life Annuities
     – Options 2,3,5, and 6
     – Provides continuing monthly benefit to surviving beneficiary
     – Provides access to health insurance for surviving beneficiary at subsidized rate
Single Life Annuities – Option 1

   Guarantees full return of Present Value of
    retiree’s Basic Allowance. Present Value is the
    combination of employee and employer
    contributions plus interest
   Present Value is reduced each month by amount
    of monthly benefit. Typically takes about 9 years
    to pay out funds
   Remainder of present Value, if any upon death of
    retiree is paid in lump sum to designated
Single Life Annuities – Option 4
 Guarantees full return of employee’s
  contributions only plus interest (Present
  Value). Amount is usually paid out within
  two to three years
 Present Value is reduced each month by
  the amount of the retiree’s pension payout
 Remainder, if any, is paid in a lump sum to
  designated beneficiary(ies) upon death of
Dual Life Annuities – Options 2 and 3

   Option 2                     Option 3
    – 100 % survivorship          – 50 % survivorship –
      benefit – beneficiary         beneficiary receives
      receives same                 ½ of retiree’s
      monthly payout as
      retiree                       monthly payout
    – Guarantees                  – Guarantees
      continuing health             continuing health
      insurance coverage            insurance coverage
      for surviving spouse          for surviving spouse
      at subsidized rate            at subsidized rate
Dual Life Annuities – “Pop Up
Provisions” - Options 5 and 6
Pop-Up Provision guarantees surviving spouse a specific percentage
of retiree’s pension if retiree dies first. If beneficiary dies first, then
retiree’s pension amount “pops-up” to Basic Allowance.

   Option 5                                 Option 6
     – 100 % survivorship –                    – 50 % survivorship –
       beneficiary receives                      beneficiary receives
                                                 ½ of retiree’s
       same amount as
                                                 monthly benefit
                                               – Surviving spouse
     – Surviving spouse                          guaranteed access to
       guaranteed access to                      health insurance at
       health insurance at                       subsidized rate
       subsidized rate
Special Option 7
               A member may propose a
               personalized benefit to meet his
               or her specific needs

 Must be actuarially sound

      Must be approved by Board of Trustees

           Continuation of health insurance is not available for
           surviving beneficiary

                 Must request Option 7 in writing prior to
Comparison of Payout Options






      Max   Option 1   Option 2   Option 3   Option 4   Option 5   Option 6
Some Things to Consider in
Making Your Selection
   Does your spouse have their own pension?
   Does your spouse have access to health insurance
    in the event of your death?
   What are your income needs upon retirement?
   What expenses will you have at retirement?
   Women live longer than men. They will have a
    need to retirement benefits to last longer. For
    them Options 5 or 6 may be the best choice
Necessary Forms
   Application for Service Retirement (Form 13-23)
   Electronic Fund Transfer Sign-Up (Form 85)
   Reemployment After Retirement (Form 127)
   Federal and State Tax Withholding Request (Form
   Health Benefits Enrollment Form for Retirees
   Designation of Beneficiary Form for Options 1 and 4
    (Form 4)
   Proof of Birth for Beneficiary for Options 2, 3, 5, and
Things to Do – Twelve Months
Prior to Retirement
   Request an estimate of
    benefits (Form 9).
    Check all options to
    obtain information on
    all the payout choices
   Apply to purchase
    service for any eligible,
    prior employment
    (Form 26)
   Make sure that you
    have applied for any
    eligible military credit
    (Form 43)
Things to Do – Two Months
Prior to Retirement
                 Contact Benefits
                  Office and complete
                  retirement forms
                 Forms should be sent
                  to the State
                  Retirement Agency
                  one month prior to
                  your retirement date
Unused Sick Leave
   Must retire directly from active employment
   For every 22 days of sick leave State adds 1 month to
    your service credit (if 11 or more days are leftover, an
    additional month is credited
   Sick leave cannot be used to qualify for retirement
   Amount of days verified by employer at time of
   Maximum of 15 sick leave days per year of service
    may be credited
Annual Leave
                  Annual leave is paid
                   out in a lump sum
                  Maximum for exempt
                   and non-exempt
                   employees is 50 days
                  Maximum for faculty is
                   45 days
                  However, if someone
                   retires during the
                   calendar year, annual
                   leave payout can
                   exceed maximum
Earnings Limit
 Applies only if you work for a State
  Agency that participates in State
  Retirement System.
 Limit is the difference between Average
  Final Salary and Basic Allowance.
 Example: $35,000 (AFS) - $17,000 (Basic
  Allowance) = $18,000 Earnings Limit
Time Line and State
   Retirement always first of the month
   Last paycheck from UMCP
   Payout of annual leave from UMCP
   Retirement check received between 25 –28 of month.
    First check usually sent to home.
   Will receive COBRA letter from State Benefit Office
    stating benefits cancelled– IGNORE THIS!
   Will receive letter from State Benefit Office
    confirming coverage and premium costs. Letter will
    request check to cover first month premium and will
    ask if you want future premiums to be taken from
    retirement check.
Cost-of-Living Adjustment
 Awarded July 1 of each year
 Must be retired at least twelve months on
  July 1 to receive COLA
 Percentage based on Consumer Price Index
  as published by U.S. Department of Labor
  and Bureau of Statistics
COLA Calculations
   Pension System         Retirement System
                            – Plan A (7% Contribution)
    – Up to 3 percent         – unlimited compounding
      compounded            – Plan B (5% Contribution)
                              – Up to 5% compounding
                            – Plan C (Bifurcated)
                                   Prior to Plan selection –
                                    unlimited or up to 5%
                                   After Plan selection up to
                                    3% compounded if