Beyond the Basics: Special Issues
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Transcript of Beyond the Basics: Special Issues
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Beyond the Basics: Special Issues
2007, Texas Municipal Retirement System.
2007 Annual Training Seminar
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In this presentation, we will cover:
Beneficiary Designations
Death Benefits
Divorce
Service Credits and Purchases
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Why Designate a Beneficiary?
Prior to vesting and upon member’s death, benefits are paid to the designated beneficiary.
If no valid designation is on file… Benefits are paid to
member’s estate
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Common times to designate a beneficiary…
When first enrolled Upon becoming vested When applying for retirement
Up to three beneficiaries may be designated
Member may change their designation at any time prior to retirement
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If Member Dies Before Vesting…
Designated beneficiary will receive a lump sum refund of member’s account balance
Beneficiary is not eligible for retirement benefits
City match is forfeited
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What happens when member is vested?
Vested = 5 years of service (some cities require 10 years)
At death, beneficiary is entitled to a monthly benefit based on member’s and city’s money
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Vested Options Beneficiary may receive:
Monthly payments for life (only if 1 person is
designated)Monthly payments for 15 years
A lump-sum refund
(city matching forfeited)
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Are There Vested Forms to Complete?
Yes! If a vested member dies without a vested designation, benefits will be paid as follows: To the spouse; or To the children if there is no
spouse; or To the last designated
beneficiary if there is no spouse and no children; or
To the estate
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What About Spousal Consent?
Spouse must consent by affidavit if: Not named as beneficiary, OR No lifetime benefit elected
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When will beneficiary receive benefits?
A non-spouse beneficiary will receive benefits immediately.
A spouse beneficiary may choose to receive their benefit immediately or when the member would have reached age 60. Available only if spouse elects
monthly payments Spouse must make this
election within 180 days from date of death
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Why Wait?
Member’s account grows two ways: deposits and interest
Compounding interest increases value
City match applied when monthly benefits become payable
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At Retirement…
Previous beneficiary designations are no longer valid
Member must redesignate beneficiary for retirement purposes
Upon death, beneficiary receives monthly payments based on the option the member selected at retirement
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What Is a Supplemental Death Benefit (SDB)?
Program of group term life insurance Active employees:
payment equal to yearly salary
Retired employees: payment equal to $7,500
Must be authorized by city
Different beneficiary may be designated to receive SDB payment
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Who is Covered by SDB?
City elects to participate; AND member is required to make a TMRS contribution
Coverage ends:
The month after employee terminates employment
UNLESS…
Member is covered from the day:
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SDB – Extended Coverage Members who fail to earn
compensation because they are incapable of gainful employment are automatically eligible for up to 6 months from month of last deposit.
If member requires coverage past the 6-month period, an application is required.
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Designating Minors
TMRS benefits cannot be paid to minors without a legal representative.
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Designating an Estate
Will must go to probate
Payments distributed to executor or administrator
An Estate may be designated if the member wants TMRS to pay in accordance with his or her will.
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Designating a Trust
Trust must satisfy all IRS requirements
If trust not acceptable, benefits will be paid in accordance with the TMRS Act (alternate beneficiary, estate, etc.)
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What About Divorces?Deposits and interest earned during marriage are community property.
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Member going through divorce…What’s first?
Call a lawyer — TMRS cannot give legal advice
Call TMRS! “Divorce packet” includes
information that will assist member and attorney (mailed to member — also on TMRS Website)
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What happens to member’s account during divorce?
Account is “flagged”
No payments can be made during divorce
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Do TMRS Benefits Have to Be Divided?
NO!
If member retains entire benefit, divorce needs to state so
TMRS does not need a copy of divorce unless account was “flagged”
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How Is Benefit Divided?
TMRS benefits are protected by law!
Only Qualified Domestic Relations Order (QDRO) can divide benefits.
Only TMRS can decide if an Order is qualified!
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Service Buyback Restricted Prior Service
Credit Proportionate
Retirement Updated Service Credit
Types of Service Credit
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Prior Service Credit …
Service performed before city joined TMRS.
Monetary credit applied only if employee retires.
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Probationary Prior Service Credit
Optional provision — employees hired on “probationary” basis prior to September 1, 1989, to receive credit.
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Military Service Prior to Employment
Employee must have 5 years of service and have been a contributing member on 12-31-2003; otherwise credit only
Optional provision that allows employees to purchase/receive credit for a maximum of 60 months active military service.
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What Is USERRA?USERRA = Uniformed Services Employment and Re-employment Rights Act (federal law)
Must have left employment to serve in the military
Must return to work for the same city within 90 days of discharge
Must be released or discharged under honorable conditions
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What does member get?
Member can “pay” into TMRS amount that would have been contributed had they never left.
Member has up to 5 years to pay total due.
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Special Purchases: Buy-Back
Optional provision allows employees who have forfeited TMRS time to “buy back” their time.
Must be an employee of the city at the time the city adopts “buy-back”
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Restricted Prior Service Credit... Optional provision that grants a “time” credit
for previous, full-time, paid, public work anywhere in U.S.
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Proportionate Retirement Texas public retirement
systems allow combination of time between systems for vesting and retirement
Funds stay in separate
systems — only time is combined
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Proportionate Buyback for Current Employees
Current TMRS members who have refunded service credit from another Texas statewide public retirement system may be allowed to restore that service credit with that retirement system. Employees should contact
the retirement system in which they previously participated for eligibility requirements.
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Updated Service Credit (USC)
Optional provision designed to increase the value of retirement benefits comparable to an amount that more closely reflects the member’s pre-retirement income.
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HELPS Provision TMRS begins participating in the program in
January 2008. HELPS allows retired public safety officers to pay
for their health insurance coverage from their monthly retirement annuity.
TMRS makes direct payment to health insurance provider from retiree’s annuity.
Up to $3,000 of the payment may be deducted on the retired officer’s tax return per year.
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Retirees who were public safety officers – law enforcement, firefighter, or EMS – may be eligible for this program.
Retiree’s employing city must verify status as a retired public safety employee.
Call TMRS at 800-924-8677 if you need more information or to request the HELPS forms.
HELPS Provision (cont.)
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Questions & Answers
HOW TO CONTACT TMRS:Toll-free: 800-924-8677Web: www.TMRS.comE-mail: [email protected]