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This section explains how a pension is calculated. It also details the normal and early retirement benefits available to you, and pension and ASA payment options. Working after retirement and being a retired member are covered in the After Retirement section.
Indiana Code 5-10.2-4-8(c) states that if you are a PERF member receiving retirement benefits and you are re-employed in a PERF- and/or TRF-covered position within 30 days of ending service, your retirement benefits must stop. You will have to repay all the benefits you have received.
If, before you retire, you have an agreement with a covered employer, formal or informal, your retirement application will be void.
Vesting is the status that determines eligibility for a retirement benefit.
In general, you are vested with 10 or more years of PERF- and/or TRF-covered service. You must be vested to collect a pension.
You will begin receiving a lifetime monthly pension benefit after you officially retire from PERF-covered service. The amount of your monthly pension check is calculated with a formula set by state law. PERF uses three factors:
The Benefits Calculator here is available to give you an idea of how this works. You may also obtain a benefit estimate using this formula if you are within two years of qualifying for early or normal retirement.
“Final Average Salary” refers to your highest five years of pay 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.
You need to review your service and confirm its accuracy before applying for retirement.
If you retire with service in both PERF and TRF, you must choose which retirement fund will pay your pension benefits when you apply for retirement.
If you think an error was made in calculating your creditable service, you may request an administrative review of your benefit. By law, you have up to six years after your first monthly pension payment to appeal a decision made during re-examination of your benefits.
If the INPRS staff has answered your questions about your account but you disagree with the action or determination, and no alternative resolution is available, you may request administrative review.  You must have standing as a party to request administrative review. Click here for administrative review steps.
You may think your last day of work or the last day you were on the payroll as your retirement date. PERF uses an “effective date” for retirement benefits. The effective date of your retirement benefits is the first day of the month after 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 you if you earn more years of service even though you may have retired sooner. There are three ways you qualify for full (unreduced) pension benefits under PERF if you are:
If you are a PERF or TRF member who:
You are entitled to retire from PERF or TRF and begin receiving retirement benefits if you are otherwise eligible for retirement and have reached normal retirement age.
For example, Steve is 62 years of age and has 15 years of PERF service as a state of Indiana employee. Steve is elected as a judge eligible for service in the Judges' Retirement System (JRS). Steve terminates his previous state of Indiana PERF covered employment and immediately begins serving as a judge participating in the JRS. Since Steve is age and service eligible for a PERF benefit, has reached normal retirement age, and has terminated his PERF covered position, he's eligible to begin receiving PERF retirement benefits even though he didn't separate from state employment.
If you are 70, you can start receiving your retirement benefit while still working in your PERF-covered position if you have at least 20 years of creditable service. Please note that this election cannot be changed. If you choose to start receiving your retirement benefit while still working, you will not earn any more service credit toward retirement. You can still put money into your ASA. If you choose this option, you cannot withdraw the additional ASA contributions made after retirement until you end service.
PERF also has early retirement options. If you do not qualify for full retirement benefits, your pension benefit is reduced based on your age when you take early retirement. You will qualify for early retirement with a permanently reduced pension if you:
If you choose to take early retirement, your pension benefits remain at a reduced level even after you reach age 60.
The following chart shows how the pension part of the benefit is reduced according to your age at early retirement:
|Retirement Age||% of Pension|
Once you qualify for pension benefits, don’t wait to submit your retirement application. By law, PERF can only pay up to six months of retroactive pension benefits from the date PERF receives the application.
The pension choices you make at retirement affect the amount of your monthly payment. Those decisions also determine if any survivors or beneficiaries will receive a monthly payment after your death. Your monthly retirement benefit amount 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 receive 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 receive 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 receive the difference.
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 pass away before receiving payments for five years, your beneficiary receives 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 receive 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 pass away 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 receive 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 receive 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 less than age 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.
|Important Notice (Applies to former Options 10, 20, 30, 40, 50, and 61)|
|If you annuitized your ASA and pass away, you may have money left in your ASA. This happens if the total amount of your pension and ASA received up to the date of your death is less than the balance of the ASA at the time of retirement. In this case, either the beneficiary or your estate will be paid the remaining ASA balance. If you took a total distribution of your ASA, this guarantee doesn’t apply. If you took a partial distribution of your ASA, this guarantee only applies to the remaining ASA balance.|
Your ASA is the second piece of your two-part retirement benefit. You may combine your ASA, with your pension as a lifetime monthly payment.
With 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 after your retirement. Then, it’s a monthly payment 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 made.
You may choose to receive your ASA funds when you retire from PERF, or delay distribution to a later date up until age 70 1/2.
Effective July 1, 2011, as a vested member who qualifies for early retirement, you may withdraw your ASA, without losing your pension benefit. This can happen, as long as you have ended service for more than 30 days.
Your Annuity Savings Account (ASA) will be valued the day after receipt of your application. If your application is received after 4 p.m., your ASA will be valued the next business day. It will be transferred to a Fixed Value Fund in order to minimize loss while your request is processed. However, you may transfer your monies between investment options at any time before we receive your application. You may transfer monies via phone or online.
If you choose to defer your ASA, at retirement it will continue to have the balance invested according to your pre-retirement investment choices. You may continue to control your investment choices until you complete the post-retirement ASA election form. You control your investment choices until the date of disbursement.
If you are a member of PERF or TRF who is not age and service eligible for a retirement benefit, who:
you may suspend and withdraw the amounts in your ASA if you are at least 62 years of age at the time you apply for the withdrawal.
For example, Josh has worked in a PERF-covered position for four years. He is promoted to a non-PERF covered position with the same employer. When Josh is 62 years of age, he may withdraw his ASA so long as he's not working in a PERF or TRF covered position and isn't age and service eligible to receive a PERF or TRF retirement benefit.
You can set up 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 combine it along with your ASA. This should be done no more than 30 days after you have ended service along with your retirement application process.
Reporting any change of beneficiary IS VERY IMPORTANT. Failure to make changes may mean that a payment is made to a named beneficiary who is no longer your choice to receive your ASA/RSA balance.
Your choice about how to distribute your ASA can have important 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 here to help you and your advisors with federal tax rules as they apply to PERF benefits.
Contributions to your ASA made with after-tax dollars are “tax basis” because you already paid taxes on them. Mandatory contributions paid by your employer were not taxed when they were paid so they don’t create “tax basis.” At retirement, any after-tax contribution (your tax basis) is reported by PERF as non-taxable on the IRS Form 1099-R. The 1099-R is issued to retired members and the IRS. It is important to note that your tax basis is recovered under very specific IRS rules. You can choose to receive a total withdrawal of your ASA when you start getting your monthly pension benefit. Federal tax law will not allow you to immediately recover your entire basis when you receive your ASA. Part of the basis must be assigned to the monthly pension benefits. The basis given to the monthly pension payment is divided up and recovered over a set number of monthly payments, according to IRS rules. Part 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 issued a private letter ruling to PERF. It states that the ASA and monthly pension benefits payable to you are not separate accounts. This ruling means that when you retire, part of the basis of your ASA contributions must be assigned to your pension benefit, as described above. Federal tax law will allow you to immediately recover any tax basis that you had in your ASA on Dec. 31, 1986. The post-1986 basis may be partially recovered with the remainder given to your monthly retirement benefits.
|Any ASA contributions under $1,000 received after the date when your retirement benefit is processed will be paid directly to you in a lump sum.
If the amount is greater than $1,000, it can be paid directly to you as a lump sum, or you can choose to have INPRS do a direct rollover. You will be paid directly any amount of trailing contributions if no choice 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.
Withdraw Non-Taxable Portion/Monthly ASA: With this ASA option you withdraw the non-taxable portion of your ASA as it existed on Dec. 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 Dec. 31, 1986 and a portion of any post-1986 post-tax contributions.
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 Dec. 31, 1986.
Full Withdrawal: When you withdraw your entire ASA, you may have your ASA paid directly to you. INPRS is required to withhold 20 percent for federal taxes.
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 after 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.
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 Dec. 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 after you turn age 701/2.
INPRS is required to withhold income taxes on distributions. INPRS will withhold 20 percent for federal taxes on monthly payments unless you choose not to have taxes withheld. Make sure to complete the tax withholding forms when you apply for benefits.
You can only name one joint survivor beneficiary if you select any of the joint with survivor benefit options (100% Survivor Benefit, 66 2/3% Survivor Benefit or 50% Survivor Benefit formerly 30, 40, or 50). You can name a person(s), trust, your estate, or other legal entity as beneficiary if you choose retirement options Five-Year Certain and Life, Social Security Integration or Modified Cash Refund Plus Five-Year Certain and Life (formerly 10, 61, or 71). If you name more than one beneficiary under those options, any benefits due at your death will be directed as listed on your application.
You will receive a monthly benefit for life under each retirement payment option. Several of the options provide further payments to your beneficiary or beneficiaries.
Changing beneficiaries after retirement has different procedures and rules (see After Retirement).
For most of us, applying for a retirement benefit is a once-in-a-lifetime event. Generally, if you file your application 90 days before retiring AND your employer sends us your final day worked and wage information, your first pension check will come one to two months after your retirement date. If you combined your funds, you can expect your monthly annuity payment to begin two to three months after your retirement date.
Click here to watch our how-to video on completing your retirement application.