Note: This message is displayed if (1) your browser is not standards-compliant or (2) you have you disabled CSS. Read our Policies for more information.
This section of the handbook explains the issues a member applying for retirement will confront, including how a pension is calculated, the normal and early retirement benefits available to members, and the selection of the pension and Annuity Savings Account (ASA) payment options. Working after retirement and other issues related to being a retired member are covered in the After Retirement section.
Indiana Code 5-10.2-4-8(c) provides that if a PERF member who is receiving retirement benefits is re-employed in a PERF- and/or TRF-covered position within thirty (30) days of the date on which the member left employment, the member’s retirement benefits are stopped. Full repayment of benefits received is due from the member.
In addition, a PERF member’s application for retirement benefits is void if the member has an agreement, formal or informal, prior to his or her retirement, with a covered employer to become re-employed in a covered position.
Vested status is the ten (10) or more years of PERF- and/or TRF-covered service needed to receive a benefit from PERF. You must be vested to collect a pension.
Generally, you cannot receive a pension benefit with out at least (10) years of creditable service.
You will begin collecting a lifetime monthly pension benefit after you officially retire from PERF-covered service. The size of the pension portion of your monthly check is calculated using a formula set by law. PERF cannot alter this formula, which uses three factors:
The Benefits Calculator here is available to get an idea of how the formula works. You may also obtain a benefit estimate using this calculation once you are within two years of eligibility for early or normal retirement.
Payment of an estimated retirement benefit must be at least 85 percent of the actual benefit.
“Final Average Salary” refers to your highest five years of compensation in a PERF- or TRF-covered position. PERF will combine 20 quarters in groups of four consecutive quarters (as mandated by law) over your entire PERF- and/or TRF-covered career. The resulting average in all cases will be the highest possible benefit.
Payments for unused vacation days or severance, for example, up to $2,000 are included in this Final Average Salary calculation.
All creditable service is subject to final certification at retirement. Members need to review their service time prior to applying for retirement.
Members who retire with service in both PERF and TRF are required to elect which retirement fund to receive their pension benefits from when they apply for retirement.
If, after retirement, you believe an error was made in calculating your creditable service, you may request an administrative review of your benefit. You may only appeal the determination under the Indiana Administrative Orders and Procedures Act if the administrative review is requested within six years after the payment commencement date.
If the Indiana Public Retirement System (INPRS) staff has answered your questions regarding your account but you disagree with the action or determination, and no alternative resolution is available, you may request administrative review under the Administrative Orders and Procedures Act (IC 4-21.5). You must have standing as a party or a right to intervention to request administrative review. Click here for administrative review steps.
Your last day in pay status is generally the date most people think of as the day they “retire.” PERF uses an “effective date” for retirement benefits. The effective date of your retirement benefits can be no earlier than the first day of the month following your last day in pay status.
|EXAMPLE: Your last day in pay status is Aug. 2. Your effective date of retirement is Sept. 1.|
The calculation of the pension benefit rewards members who earn more years of service even though they have the opportunity to retire at an earlier age. There are three ways you become eligible to receive full (unreduced) pension benefits under PERF:
PERF also provides early retirement options (assuming you do not yet qualify for full retirement benefits). Your pension benefit will be reduced based on your age if you take early retirement. You will qualify for early retirement with a permanently reduced pension if:
Keep in mind that if you choose to take early retirement, your pension benefits will remain at a reduced level even after you reach 60 years of age.
If you are entitled to early retirement with reduced benefits, the following chart shows how the pension part of the benefit is reduced according to your age:
|Retirement Age||% of Pension|
By law, if you are eligible to receive pension benefits and wait to submit a retirement application, PERF can only pay up to six (6) months of retroactive pension benefits from the date PERF receives the application.
The pension elections you make at retirement will affect the amount of your monthly payment and determine whether or not any survivors or beneficiaries will receive a monthly payment after you pass away. How much you receive each month in retirement benefits will depend on your wages, service, pension option and ASA election.
Five-Year Certain and Life (formerly PERF Option 10/TRF A-1): You will get a monthly benefit for the rest of your life. If you pass away before receiving five years of payments, your beneficiary will get that monthly benefit for the remainder of those five years. The beneficiary can also choose a lump sum equal to the present value of those remaining payments. Payments to the beneficiary stop at the end of that five year period.
Example: Retired member X has been receiving a monthly benefit for 24 months. During the 24th month, member X dies. Member X’s beneficiary is entitled to receive the monthly benefit for the remaining 36 months or the present-day value of the remaining payments.
Straight Life (formerly PERF Option 20/TRF A-2): You will get a monthly benefit for life, but there are no monthly payments to anyone after your death. However, if you combine your ASA with your pension check, there could be remaining ASA money. PERF will add up the monthly pension and ASA payments paid before your death. If the total of monthly payments is less than your ASA balance when you retired, your beneficiary will get the difference.
Minimum Amount Provision
The minimum amount provision makes sure you or your beneficiary will get a total pension benefit that is at least the balance of what you have in your ASA when you retire. If you die before then, your beneficiary will receive the rest of the money due. Your beneficiary can get this money as a lump sum or in monthly payments.
Example: You have $100,000 in your ASA when you retire. After 2 years, you have received $10,000 in monthly payments. Sadly, you die. Your beneficiary will then get the remaining $90,000.
Modified Cash Refund Plus Five-Year Certain and Life (formerly PERF Option 71/TRF A-3): To select this option, you must combine at least part of your ASA with your lifetime monthly pension benefit. This option pays you a monthly benefit for the rest of your life. If you die before getting payments for five years, your beneficiary gets the pension part of your monthly benefit for the rest of those five years. The beneficiary could also choose a lump sum equal to the present value of the remaining payments. He or she would also get any remaining balance on your ASA.
Modified Cash Refund Plus Five-Year Certain and Life (formerly PERF Option 71/TRF A-3) is not available to members who choose to take a total payment of their ASA at retirement. However, if you choose a partial withdrawal of the ASA (a distribution of the 1986 Tax Basis), Modified Cash Refund Plus Five-year Certain and Life is available. Please note that your ASA balance is smaller with each monthly ASA benefit paid. Therefore, if you die after the account balance is zero, there will be no ASA payment to your beneficiary.
100 Percent Survivor Benefit (formerly PERF Option 30/TRF B-1): You will get a monthly benefit for life. After you pass away, the same monthly benefit will be paid to your joint survivor beneficiary for his/her lifetime. Contact PERF if your joint survivor beneficiary is not a spouse; there are restrictions (age, child, etc.)
66-2/3 Percent Survivor Benefit (formerly PERF Option 40/TRF B-2): You get a monthly benefit for life. After you pass away, 66 2/3 percent of your benefit will be paid to your joint survivor beneficiary for his/her lifetime.
50 Percent Survivor Benefit (formerly PERF Option 50/TRF B-3): You receive a monthly benefit for life. After you pass away, one-half of your benefit will be paid to your joint survivor beneficiary for his/her lifetime.
Social Security Integration (formerly Option 61): If you retire between ages 50 and 62 you may combine the PERF monthly pension benefit with your estimated Social Security benefits. INPRS pays a larger monthly benefit before age 62. The payment may be greatly reduced or terminated at age 62. Your estimated monthly Social Security payment determines if your INPRS payment will be reduced or terminated. INPRS does not work in conjunction with Social Security. This selection will not impact the benefit received from Social Security.
Your ASA is the second piece of your two-part retirement benefit. You may annuitize your ASA. That is, you may take this money in combination with your pension as a lifetime monthly payment.
If you choose this option, your first pension and annuitization payments will be sent separately. Your first monthly payment may be lower because it will not include your monthly annuity amount. The ASA is held in a fixed interest account until the month following your retirement date. It is then paid monthly based on the higher balance.
You will not receive a retroactive payment of your monthly annuity, as your ASA earned interest for an additional month. Your monthly payment is actuarially calculated based on your age and balance at the time your payment is disbursed.
Or you may choose to receive a distribution of the ASA funds when you retire from PERF, or defer distribution to a later date up until age seventy and a half (70 1/2).
Effective July 1, 2011, a vested member who is eligible for early retirement may withdraw the member's ASA, without forfeiting his or her pension benefit, so long as the member separates from service for more than 30 days.
Members who elect to withdraw their ASAs at retirement will remain invested according to their pre-retirement investment allocations until their ASA is paid out at the time PERF processes their retirement.
Members who elect to annuitize their ASAs at retirement will have the balance of their ASA put into a fixed value account set at the same rate as the Guaranteed Fund. This happens not more than 30 days prior to processing the member’s retirement application or the member's retirement date.
Members who elect to defer their ASA at retirement will continue to have the balance of their ASA invested according to their pre-retirement investment allocation. Members continue to control their investment allocations until they complete the post-retirement ASA election form. Members control their investment allocations until the date of disbursement.
Members have the option to establish a Rollover Savings Account (RSA) at retirement. For example, if you have a 457(b) account through your PERF-covered employer, you can roll it over to PERF at retirement. You can annuitize it along with your Annuity Savings Account (ASA). This must be done after separation of service and with the retirement application process, but not more than 30 days following the cessation of covered service.
The importance of reporting any change of beneficiary cannot be overemphasized. Failure to make changes could result in payment being made to a named beneficiary who is no longer your choice to receive your ASA balance.
The decision of how to receive the distribution of your ASA can have significant tax implications, and we urge you to consult with a tax advisor. PERF can explain your options but cannot offer tax advice. The information below is included to aid you and your advisors with federal tax provisions as they apply to PERF benefits.
Any contributions to your ASA made with after-tax dollars are considered “tax basis” because you have already paid taxes on those dollars. Mandatory contributions paid by your employer were not taxed at the time they were paid. Therefore, they do not create “tax basis”. Upon retirement, any after-tax contribution (your tax basis) is reported by PERF as non-taxable on the IRS Form 1099-R issued to retired members and the IRS. However, it is important to note that your tax basis is recoverable under very specific IRS rules. The following briefly outlines the basis recovery rules applicable to your situation.
You can elect to receive a total distribution of your ASA at the same time you begin receiving your monthly pension benefit. However, if you elect to do so, federal tax law does not allow you to immediately recover your entire basis when you receive your ASA. Instead, part of the basis has to be allocated to the monthly pension benefits. The basis allocated to the monthly pension payment is divided up and recovered over a mandatory number of monthly payments, as determined by applicable IRS regulations. Therefore, a portion of each monthly benefit paid to you is non-taxable, for as long as basis remains.
This division of the basis is required because the IRS has issued a private letter ruling to PERF concluding that the ASA and monthly pension benefits payable to you do not constitute separate accounts. The consequence of this ruling is that, upon retirement, basis from contributions to the ASA must be partially allocated to your pension benefit, as we have described above. One exception to this basis allocation rule is also relevant: a special provision of federal tax law permits you to immediately recover any tax basis that you may have had in your ASA on Dec. 31, 1986. The post-1986 basis, however, may be partially recovered with the remainder allocated to your monthly retirement benefits.
|Any ASA contributions totaling $1,000 or less received after the final date on which a member’s retirement benefit is processed will be paid directly to the member in a lump sum of which the member may elect to roll over after receipt.
If the amount is greater than $1,000, it can be paid directly to you as a lump sum, or you can elect to have INPRS do a direct rollover. You will be paid directly any amount of trailing contributions if no election is made.
Monthly ASA: You may choose to combine the total amount of your ASA with your monthly pension benefit check. You will not receive any other money from the ASA outside of this monthly payment. If you combine your ASA payment with your pension benefit, your account balance and any money posted after your benefits are processed will be moved into a fixed value account. This happens about 30 days before processing your retirement application. The money will earn the same rate as the Guaranteed Fund until you receive payments.
Withdraw Non-Taxable Portion/Monthly ASA: With this ASA option you withdraw the non-taxable portion of your ASA as it existed on December 31, 1986. The remainder of your ASA will be paid as a monthly benefit. Your monthly pension will be combined for a higher monthly benefit payment.
Direct Rollover: You may choose to have the entire taxable portion of your ASA rolled over to a Qualified Retirement Plan. The after-tax (tax basis) will be paid directly to you. The amount will equal the after-tax (tax basis) balance of ASA as it existed on December 31, 1986.
Partial Rollover/Partial Withdrawal: You may receive a portion of the taxable portion of your ASA as a direct rollover to a Qualified Retirement Plan. The portion that is not rolled over will be paid directly to you. The amount will equal the after-tax (tax basis) balance of ASA as it existed on December 31, 1986.
Full Withdrawal: When you withdraw your entire ASA, you may have your ASA paid directly to you.
Full Deferment: You may leave your ASA invested with PERF. When you decide to do this, you delay distribution of your ASA balance. IRS regulations require distributions by April 1 of the calendar year that you turn age 70 1/2. Your funds remain invested according to your directions until you choose to receive them. At a later date, you may choose one of the other options listed.
Do you have money in your ASA from before Dec. 31, 1986? If yes, you must choose the Partial Deferment/Withdraw Non-Taxable option to defer.
Partial Deferment/Withdraw Non-Taxable: You may choose to receive an amount equal to your after-tax (tax basis) of your ASA as it existed on December 31, 1986. You may delay distribution of the remainder of your ASA until a later date. IRS regulations require distributions by April 1 of the calendar year that you turn age 70 1/2.
With this option, we would pay you the money in our account from before Dec. 31, 1986. Again, you have already paid the tax on that money.
PERF is required by law to withhold 20 percent for federal income taxes for any part of the eligible rollover distribution that is not directly rolled over. You will have to pay federal and state income taxes on this taxable portion.
You may name only one joint survivor beneficiary if you select any of the joint with survivor benefit options (30, 40, or 50). You may name a person(s), trust, your estate, or other legal entity as beneficiary if you select retirement options 10, 61, or 71. If you name more than one beneficiary under those options, any benefits due upon your death will be directed as designated on your application.
You will receive a monthly benefit for life under each retirement payment option. Several of the options provide for further payments to your beneficiary or beneficiaries.
Changing beneficiaries after retirement has different procedures and restrictions (see After Retirement).
When you are ready to apply for retirement benefits, please select "Member Login" to register for your PERF Online account if you do not already have one. Submitting your application online is quick and easy.
For most people, applying for a retirement benefit is a once-in-a-lifetime event. The PERF guide here will help you make the transition from your last paycheck to your first PERF check as easy as possible.
Generally, if you submit your application 90 days before your retirement date AND your employer submits to INPRS your final day worked and wage information, you can expect your first pension check one to two months following your retirement date. If you annuitized your funds, you can expect your monthly annuity payment to begin two to three months after your retirement date.