You may have heard about an upcoming change to the factors table used to calculate SURS retirement benefits under the Money Purchase formula. The following message provides more information to determine if you are impacted by this change, including important considerations if you are thinking about retirement.
Does This Impact Me?
Members retiring on or after July 2, 2012, with the highest retirement calculation under the Money Purchase formula will be impacted by these changes. The change in Money Purchase factors will NOT affect:
- Current annuitants (SURS members who are already retired).
- Members in the Self-Managed Plan.
- Members whose retirement annuity is highest under the General Formula calculation.
- Members who first became SURS-eligible on or after July 1, 2005, as these members are not eligible for the Money Purchase calculation that uses the factors.
Additionally, SURS members who are more than five years away from retirement will likely be subject to future experience studies that could result in different factors.
How is the Retirement Annuity Calculated?
SURS calculates a retirement benefit using all formulas for which the member is eligible, and the member's annuity is based on the formula that provides the highest benefit. The General Formula calculation (which is not changing) is based on a member's age, years of service, and Final Rate of Earnings.
What is the Money Purchase Calculation?
The Money Purchase calculation utilizes an actuarial factor based on the member's age, normal retirement contributions, and accrued interest at retirement to determine the benefit amount. The Money Purchase factors are intended to set the monthly benefit amount at a level that will allow a member to recover all contributions and interest over a projected life expectancy.
What Will Change?
The Money Purchase factors used to determine monthly annuity benefits will change for retirements on and after July 2, 2012. For employees who retire on or after July 2, 2012, this change in factors will result in an approximately 7% to 8% reduction in monthly retirement benefits under the Money Purchase calculation. SURS estimates that working employees can recover this monthly reduction by delaying retirement for approximately 10 to 11 months, due to the additional contributions and interest that would be added.
Why is This Changing?
SURS is required to conduct an experience study at least every five years, which looks at economics, demographics, and life expectancies. The Money Purchase factors are being revised to reflect the changes in demographics and life expectancies according to the results of the most recent study.
What if I'm Considering Retirement Soon?
Faculty and staff who are considering retirement should make that decision thoughtfully, as it could be detrimental to retire too early. If you are planning to retire in the next 1-2 years, or deciding whether to retire this year or next year, then you will want to carefully consider the impact of the factors change. The following resources are available to help answer your questions:
- SURS Fact Sheet - the Money Purchase Factor Change Fact Sheet available on the SURS website is an excellent resource, which includes an expanded FAQ and a "Should I Retire?" decision tree.
- Benefit Estimator - the actual reduction in a monthly annuity calculated using the Money Purchase is unique to each individual member. For this reason, SURS encourages members to use the Benefit Estimator by logging on to the Member Website. Gain a clearer picture on how the factor changes may impact you by performing estimates for retirement dates before and after the July 2, 2012 date and then comparing your results.
- Contact SURS - if you have additional questions after reviewing the Fact Sheet and Benefit Estimator, contact SURS at 217-378-8800 or 800-275-7877. It may also be helpful to review additional plan information on the SURS website.
- SURS Counseling Appointments - Employees who are within 4 years of retirement eligibility may attend a confidential SURS counseling appointment once every 12 months.
