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Pension Reform: Changes You Need to Know
In June 2009, at the depth of the financial crisis, the Ohio Retirement Study Council (ORSC) asked all five Ohio retirement systems to examine their financial condition. State law required that Ohio’s pension systems had enough money to pay off all pension promises within 30 years. While SERS was within the 30-year requirement, changes needed to be made to stay within that time frame in coming years.
To accomplish this, the SERS Board, with input from member and retiree stakeholder groups, developed and approved a pension reform plan that protected the benefits of current retirees, and focused on increased age and service requirements to address the longer life expectancy of members.
In February 2012, at the request of Senate leadership, SERS’ Board added a grandfather provision for longtime members and added a buy-up option that gives members outside of the grandfather period an opportunity to keep current age and service requirements.
In May 2012, S.B. 341 was introduced. All of SERS’ Board-approved pension reform changes were included along with Board-approved modifications that had been awaiting legislative action, some for several years. In most cases, these modifications modernize existing SERS statutes, and add language that clarifies interactions between SERS, Ohio Public Employees Retirement System (OPERS), and State Teachers Retirement System of Ohio (STRS).
On Sept. 12, 2012, SERS’ pension reform bill, S.B. 341, passed the House and Senate of the Ohio legislature. It was signed into law by the governor on Sept. 26, 2012.
The majority of the pension reform changes and modifications in S.B. 341 take effect on Jan. 7, 2013; however, the implementation dates of the changes vary.
The pension reform changes to age and service credit requirements are effective Jan. 7, 2013, but will be implemented on Aug. 1, 2017.
To protect the benefits of longtime members, SERS included a grandfather provision that allows members who reach 25 years of service on or before Aug. 1, 2017, to retire under the current age and service credit eligibility requirements.[Read More...]
Please keep in mind that your pension will vary considerably depending on your age when you retire. It makes good sense to consider the difference in the retirement income available to you based on an early retirement date versus one a few years away.
SERS is unable to provide an estimate of your benefits under the new provisions until after Jan. 7, 2013. If you would like to receive an estimate for a retirement effective Aug. 1, 2017 or later, please submit a pension reform estimate request now and SERS will send an estimate to you once they are available.[Hide]
Members who will have fewer than 25 years of service credit as of Aug. 1, 2017, can retire under current retirement eligibility requirements if they pay the actuarial difference between the benefit they would have received under the new requirements and the benefit they may receive under the current requirements.[Read More...]
Members interested in the buy-up option may call SERS for an estimate.
If the estimate you receive is something you might like to pursue, then please submit a written request to SERS to schedule a final Buy-up calculation by SERS’ actuary. Once this final calculation is complete, full payment of the amount is due in one lump-sum within 90 days. If payment is not received within 90 days, a new calculation must be performed using updated age, service credit, and salary information. Members who want to buy-up must complete their one-time payment within 90 days of the final calculation or by Aug. 1, 2017, whichever is earlier.
To take advantage of this buy-up option, members must request a cost for the buy-up by June 30, 2017 and complete their payment in one lump sum on or before Aug. 1, 2017.
Once SERS receives payment from a member that wishes to buy-up, the purchase is final and the option cannot be changed at a later date.[Hide]
Current and future disability recipients who return to contributing service for two years after their disability ends will be limited to two years of free disability-period service credit. However, they will be allowed to purchase service credit for the remaining period of disability.[Read More...]
Future disability applicants and recipients also may be affected by the following modifications:
Beginning Feb. 1, 2013, future survivor benefits for children will be paid up to age 19 with no requirement that the child be attending school. This does not apply to children currently receiving a survivor benefit.[Read More...]
An employee must be age 57 to participate in an early retirement incentive.[Read More...]
The Board has authority to determine the amount of Medicare Part B reimbursement with the current $45.50 monthly reimbursement rate as the base.[Read More...]
Health care eligibility restrictions were removed from state law. This allows the SERS Board to make adjustments to keep the SERS health care fund in solid financial condition.
SERS Board has the authority adjust future age and service changes based on the results of the required five-year actuarial experience study. This amendment will be delayed for 180 days after Jan. 7, 2013 in order to give the ORSC time to review all five retirement systems’ board-authority provisions and make recommendations.[Hide]
Four employer penalties for failure to submit required paperwork and contributions by established deadlines were included in the modifications. These penalties go into effect Jan. 7, 2012.[Read More...]
The penalties are:
An employee is required to pay both the employee and employer contributions plus interest to purchase Leave of Absence service credit. Service credit may be purchased for multiple leaves of absence. The total years purchased cannot exceed five years, and the maximum amount of service that may be purchased for a period of leave is two years.[Read More...]
Employer or employee contributions – employee contributions remain at 10%; employer contributions remain at 14%
Cost-of-Living Adjustment (COLA) – the COLA remains at 3%
Final Average Salary (FAS) – the FAS remains the average of the three highest years of salary[Hide]