PUBLIC EMPLOYEES RETIREMENT ASSOCIATION PERA

Introduction to pera

Trivia Who is a PERA member? School Nurse Volunteer Firefighter City Administrator Ambulance Driver All of the above

Defined Contribution Defined Benefit Performance-Based 401(k) 403(b) IRA 457(b) (Deferred Compensation) Formula-Based PERA Social Security

PERA’s Defined Benefit Plans Coordinated Cities Counties Public schools Correctional County facilities Police & Fire Local departments Sheriff offices

SVFRP and Defined Contribution Volunteer firefighters 142 departments and 2,848 firefighters One defined benefit plan Defined Contribution Ambulance personnel Physicians Elected officials 7,882 members These are the fiscal year 2017 totals for the SVF. Did not include 2018 numbers since those numbers are not in the CAFR.

Source: PERA’s Comprehensive Annual Financial Report, 2017 DB Membership Active Vested/ Inactive Recipients Over 476,000 in DB Membership (not including SVF) Not vested Active: 168,000+ Inactive: 198,000+ Total DB membership does not include SVF department with a DB plan Recipients: 109,000+ Source: PERA’s Comprehensive Annual Financial Report, 2017

Pre-Tax Contribution Rates How PERA’s DB Plans are Funded Pre-Tax Contribution Rates *Employee Coordinated Correctional Police & Fire 6.5% 5.83% 10.8% *Employer 7.5% 8.75% 16.2% Contributions reduce taxable income. * Contribution rates are subject to legislative change.

Source: PERA’s Comprehensive Annual Financial Report, 2017 State Board of Investment – Diversified for the Long Term PERA’s NET Assets: $28.7 Billion Cash 2% International Stocks 19% Bonds 20% Alternative Assets Domestic Stocks 39% Source: PERA’s Comprehensive Annual Financial Report, 2017

SBI Performance 8% annual rate of return expected FY 2017 Investment Returns Domestic Stocks 19.4% International Stocks 20.2% Bonds 0.90% Alternative Investments 19.7% *Total Combined Funds 15.1% 8% annual rate of return expected *Over last 20 years PERA’s investments have returned 7.2% *Source: PERA’s Comprehensive Annual Financial Report, 2017

Funding Levels and Increases as of June 30, 2017 Coordinated Correctional Police & Fire 77.8% 94.5% 85.2% Annual benefit increases of 1% until fund is 90% funded for two consecutive years, then 2.5% benefit increases Source: PERA’s Comprehensive Annual Financial Report, 2017

Source: PERA’s Comprehensive Annual Financial Report, 2017 Revenues (FY1998-FY2017) 64.3% 19.9% 15.8% Source: PERA’s Comprehensive Annual Financial Report, 2017

Source: PERA’s Comprehensive Annual Financial Report, 2017 Expenses 3% 96% 1% Source: PERA’s Comprehensive Annual Financial Report, 2017

Annual Benefit Payments Giving Back to Minnesota Annual Benefit Payments Total benefit recipients Annual benefits paid to Minnesota residents 109,940 $1.765 Billion Retirees of state and local government put three times as much money back into the state economy as is collected by the public pension plans from taxpayers through employer contributions.

Value of Your Pension Plan Member contributions Employer contributions Investment growth Recouped in first 2-3 years Recouped in next 5-7 years Rest of your life

Life Expectancy Present Age Life Expectancy Current PERA Tables 50 Men Women 50 82.2 84.5 55 82.9 84.9 60 83.5 85.5 65 84.2 86.2 70 85.3 87.2 75 86.6 88.6

Public Service Start Date Years to Vest Coordinated Vesting 05/16/89 – 06/30/10 3 07/01/10 - 5

Public Service Start Date Correctional Vesting Public Service Start Date Years to Vest 1999 – 6/30/2010 3 Graded Vesting 7/1/2010 - 5 yr 6 yr 7 yr 8 yr 9 yr 10 yr 50% 60% 70% 80% 90% 100%

Police & Fire Vesting Public Service Start Date Years to Vest 1987 - 1988 5 1989 - 2010 3

Police & Fire Graded Vesting 10-Year Vesting 7/1/10 – 6/30/14 5 yr 6 yr 7 yr 8 yr 9 yr 10 yr 50% 60% 70% 80% 90% 100% 20-Year Vesting 7/1/14 - Later 10 yr 11 yr 12 yr 13 yr 14 yr 15 yr 16 yr 17 yr 18 yr 19 yr 20 yr 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%

Pera pension formula and terminology

Three factors: Age at retirement Years of service High-five salary

Single-life Benefit Survivor Option Highest benefit amount Lifetime payment to member only Survivor Option Member takes reduced lifetime benefit to provide lifetime payment to one survivor upon member’s death

Survivor Option Option at time of benefit application One person – irrevocable Monthly payments to survivor if member dies first

Beneficiary(ies) People, entities, and/ or trusts Primary and secondary Change at any time Paid if member and survivor die before member contributions paid out

Benefit Estimate

25% 50% 75% 100% Member – age 63 Single-life benefit $1,079 Survivor options for a 61-year old survivor 25% Member $1,047 Survivor $262 50% $1,014 $507 75% $993 $745 100% $960

Survivor age restrictions Survivor Options 25% No Restrictions 50% 75% No more than 19 years* younger than member if not a spouse 100% No more than 10 years* younger than member if not a spouse *Per IRS modified age difference calculation

Important to Note: Bounce Back If survivor pre-deceases the member, the member benefit will bounce back to the single life amount. No second survivor Important to Note:

If survivor is not a spouse Changing Option If survivor is a spouse Court order needed revoking option – signed by spouse If survivor is not a spouse PERA document must be signed by the survivor revoking their right to the option

Important to Note: Revocation of survivor If option is revoked, member will convert to the single life benefit for the rest of their life Member does not get to choose another survivor

Deferred pensions

Age at Termination Benefit Collection Benefit Amount 47 55 $279 62 $443 66 $600 *70 ½ * You may not defer past age 70½ per IRS regulations

refunds/rollovers

Refund - Member Contributions Only + 4% Interest Federal Income Tax Lump Sum 20% withheld *Member Rollover 20% withheld PERA Rollover Non-taxable event You will receive a 1099-R tax form the following January * Member has 60 days to rollover full refund (including the 20% federal tax already withheld) to not have tax liability for the year.

Combined service annuity (CSA)

Two or more MN public pension plans: PERA Coordinated Duluth Teachers Retirement Fund Association (DTRFA) PERA Police & Fire PERA Correctional Teachers Retirement Association (TRA) Minnesota State Retirement System (MSRS) St. Paul Teachers Retirement Fund Association (SPTRFA) Minneapolis Employees Retirement Fund (MERF)

Combined Service Both plans will calculate benefit as a combined service annuity (CSA) and as separate stand-alone benefits. The method yielding the highest overall benefits will be used for payments.

Both benefits calculated using Combined Service Example Plan Years of Service High-Five Salary PERA 20 $5,500 MSRS 3 $1,200 Benefits PERA 20 year benefit Both benefits calculated using PERA High-Five Salary MSRS 3 year benefit

Repaying a refund

Purchasing Previously Forfeited Time Repayment Must Be Within Six Months of Termination Must be active in public service for minimum of 6 months Must pay back contributions plus interest

Purchasing Previously Forfeited Time Pay with after-tax dollars or transfer from another tax-qualified retirement plan: 457(b) 401(k) Deferred compensation 403(b) IRA Individual Retirement Account

Repayment Example Time to Recover Benefit Without Repayment Benefit With Repayment $1,000 $1,500 5 years forfeited $45,000 to purchase Time to Recover Repayment / difference in benefits / 12 months $45,000 / $500 = 90 / 12 = 7.5 years At 7.5 years the $45,000 payment has been recovered and the member is ahead $500 / month for life.

Transmittal for Purchase

DISABILITY BENEFITS

Disability Qualifications Unable to work for at least one year Must supply medical evidence of disability Active public employee when disabled (Must apply w/in 18 months of leaving) May not be collecting a retirement benefit Under full retirement age

Same formula as for retirement (No reduction due to age) Coordinated Plan Total and Permanent Disability Must be vested Deemed unable to perform any substantial or gainful activity Same formula as for retirement (No reduction due to age)

Correctional Plan Regular Duty Unable to work in this occupation 10 year minimum 25 year minimum benefit 1.9% each additional year Unable to work in this occupation

15-year benefit (regardless of service) Police & Fire Plan Regular Total Permanent 15-year benefit (regardless of service) 15-year minimum 3% each additional year Unable to work in this occupation

Police & Fire Plan * Duty * Vested with one day on the job Regular Total Permanent 20-year minimum 3% each additional year Auto Survivor Unable to work in this occupation

Survivor benefits

Survivor Benefits Spouse Dependent Children Beneficiaries Survivor benefits may be payable should a member die before receiving a benefit. Depending on plan and marital status, benefits may be payable to the following: Spouse Dependent Children Beneficiaries

miscellaneous

Important to Note: PERA benefits are taxable Tax-deferred contributions since January 1, 1983 Important to Note:

Weigh options carefully Survivor option is lifetime benefit Pension Maximization Survivor Option or Life Insurance Weigh options carefully Survivor option is lifetime benefit Bounce-back if survivor pre-deceases member

30 Day separation State Statute 353.01, subd. 11a

Separation From Public Service A right to a retirement benefit requires: A complete and continuous separation from all public employment for 30 days No written or verbal agreement prior to termination to provide services to a public employer

Separation From Public Service Independent contractors and employees of an independent contractor may not work for their same employer for 30 days Public employment includes school districts, cities, counties, townships, and state employment in Minnesota

Paperwork and checklist

Birth & Name Change Documentation Member & Survivor ID Birth & Name Change Documentation

Retirement Application First of two PERA documents

Second of two PERA documents Verification of Termination Form Second of two PERA documents

Working after retirement with a pera employer

Earnings Limit Timeline Under full SSA retirement age Earn up to annual amount with no offset January 1 the year of full SSA retirement age $45,360 annual limit Full SSA retirement age* No limit *See Working After Retirement brochure $17,040 annual limit Reduction $1 for every $2 over limit or suspension of benefit. Offsets are recovered.

Earnings limits only apply if you return to PERA-covered employment Earnings Limit Timeline Earnings limits only apply if you return to PERA-covered employment For every $2 exceeding limits, $1 of pension goes into escrow account accessible two Januarys later or one year after termination

MY PERA and other ONLINE resources

MY PERA Active Members Retirees View retirement estimates Use retirement calculator to create estimates See contribution history Retirees Access 1099R Change: tax withholding direct deposit address

Log On

Register As a New User

MY PERA Retirement Calculator

Retirement Tool Kit

Educational programs ask your employer to arrange a workplace presentation

Group Conferences one to three years before retirement PERA Overview all stages of employment Preretirement Workshop within five years of retirement

A Word From Our Attorneys This presentation is intended to provide general information; the rights and obligations of PERA members are governed by state and federal laws, rules and regulations. The Minnesota Legislature or the federal government may change the statutes, rules and regulations governing PERA at any time. If there is a discrepancy between the law governing PERA and the information contained in this presentation, the statutes and regulations shall govern.