PERF Hybrid Plan Member Handbook: Retiring From PERF

Retirement Benefit Details

Calculating Your Retirement Benefits

Vested Status

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 retirement benefit.

Retirement Benefit Calculation

NOTE: Contact INPRS if you are an elected official.

You will begin receiving a lifetime monthly retirement benefit after you officially retire from PERF-covered service. The amount of your monthly retirement benefit check is calculated with a formula set by state law. PERF uses three factors:

  • final average salary,
  • creditable service, and a
  • multiplier of 1.1 percent (.011)

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

“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.

Creditable Service

You need to review your service and confirm its accuracy before applying for retirement. You can even contact INPRS for a service credit review.

If you retire with service in both PERF and TRF, you must choose which retirement fund will pay your retirement 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 retirement benefit payment to appeal a decision made during re-examination of your benefits.

APPEALING STAFF DETERMINATIONS

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 an administrative review (IC 4-21.5).  You must have standing as a party (be affected by a matter that requires legal resolution) to request an administrative review. Click here for administrative review steps.

Survivor Benefit Details

If you qualify for benefits, but pass away while out of service and before applying for them, your surviving spouse is entitled to survivor benefits. Survivor benefits are reduced by any disability benefits paid to you.

If you do not have a qualified surviving spouse or surviving dependents, then no survivor benefit will be paid.

A DC that is not claimed by a beneficiary within three years of your death must be credited in the manner provided by the INPRS Board of Trustees. 

If you do not have a qualified surviving spouse, your survivor benefit is divided between all surviving dependents younger than 18 (or older if the dependent[s] is permanently disabled).

This benefit is separate and distinct from any benefit created by your DC.

If you fail to notify PERF of beneficiary changes, it may mean payment will be made to someone who is no longer your choice to receive your DC balance. You can log in to your online account to make changes.

Disability Benefit Details

At least once a year until you reach age 65, PERF must confirm that you still qualify for Social Security disability benefits. Your disability benefits are suspended if you don’t confirm you still qualify. If you no longer qualify for Social Security disability benefits, you no longer qualify for PERF disability benefits. Any PERF benefits paid after you no longer qualify must be repaid by law.

Disability retirement calculations for the monthly retirement benefit, DC and RSA are the same as regular retirements. The differences between the two are:

  • the Social Security Integration option isn’t available,
  • generally, only the creditable service worked up to the date of the disability applies,
  • there is no early retirement reduction, and
  • the monthly disability benefit payment minimum of $180 per month is actuarially adjusted based on the payment option selected. (This amount does not include DC or RSA payments.)

NOTE: Contact INPRS if you are an elected official.

Your disability benefits transfer to a regular retirement benefit when you become age and service qualified. When your benefits transfer to a regular retirement, the annual disability confirmation will no longer be required.

DISABILITY ALTERNATIVES 

You may request a lump sum withdrawal of your DC while you wait for a disability determination from the Social Security Administration. You will not lose your service credit as long as you have ended service with your PERF or TRF-covered employer. This provides income for you while you are unemployed and awaiting a decision.

This also allows you to file for disability retirement when you qualify, even if you didn’t have your disability determination request filed with INPRS when you withdrew your DC. It also means you must show that your determination request was in place when you withdrew your DC. It is no longer necessary for you to have it on file with INPRS when requesting a withdrawal of your DC.

See 35 IAC 1.2-5-4 for more information on disability alternatives.

Applying for Retirement Benefits

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 retirement benefit check will come one to two months after your retirement date.

RETIREMENT DATE

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, which 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.

Retirement with Full (Unreduced) Retirement Benefits

The calculation of the retirement 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) retirement benefits under PERF if you are:  

  • 65 and have 10 or more years of creditable service under PERF and/or TRF,
  • 60 and have 15 or more years of creditable service under PERF and/or TRF,
  • 55, but under 60, and your age at retirement plus your total creditable years of service under PERF and/or TRF equals 85 or more (Rule of 85).

Retirement without Employer Separation

If you are a PERF or TRF member who is:

  1. no longer working in PERF or TRF-covered service with an employer;
  2. actively working with the same employer; and
  3. working in a non-PERF or non-TRF covered position;

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 60 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.

Separation from Service

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 to be rehired with a covered employer, formal or informal, your retirement application will be void.

Age 70 Benefits (“Millie Morgan”)

If you are 70 at least 20 years of creditable service, you can start receiving your retirement benefit while still working in your PERF-covered position. 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 DC. If you choose this option, you cannot withdraw the additional DC contributions made after retirement until you end service.

Funds from any of the following may be combined with your PERF funds after you end service:

  • A qualified plan described in IRS Section 401(a), 403(a), an annuity contract or account described in Section 403(b).
  • A qualified plan maintained by a state, political subdivision of a state, or an agency of a state under IRS Section 457(b).
  • An Individual Retirement Account (IRA) described in IRS Section 408(a) or 408(b).

Early Retirement with a Reduced Retirement Benefit

PERF also has early retirement options. If you do not qualify for full retirement benefits, your retirement benefit is reduced based on your age when you take early retirement. You will qualify for early retirement with a permanently reduced retirement benefit if you:

  • have 15 or more years of creditable service under PERF, and
  • are between the ages of 50 and 59.

If you choose to take early retirement, your retirement benefits remain at a reduced level even after you reach age 60.

The following chart shows how the lifetime monthly retirement benefit part of the benefit is reduced according to your age at early retirement:

Retirement Age

% of Retirement Benefit

59

89%

58

84%

57

79%

56

74%

55

69%

54

64%

53

59%

52

54%

51

49%

50

44%

Once you qualify for retirement benefits, don’t wait to submit your retirement application. By law, PERF can only pay up to six months of retroactive retirement benefits from the date PERF receives the application.

Retirement Benefit Payment Options

The retirement benefit 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, retirement benefit option and DC 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 DC with your retirement benefit check, there could be remaining DC money. PERF will add up the monthly retirement benefit and DC payments paid before your death. If the total of monthly payments is less than your DC balance when you retired, your beneficiary will receive the difference.

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, as there are restrictions (age, child, etc.)

66-2/3 Percent Survivor Benefit (formerly PERF Option 40/TRF B-2): You will 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 will 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 retirement 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.

Direct Deposit

Direct deposit is the required method to provide your benefit payments. Direct deposit eliminates the chance that your check will be late, lost, or stolen. If you change banks, contact PERF about starting again at a new bank and filling out a new PERF direct deposit form.

If you change account numbers with the same bank, or if you change banks, contact PERF. Do NOT close your old account until you know funds are being deposited into your new account. It may take up to 60 days for the change to take effect.

Designating a Beneficiary on the Retirement Application

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, or Social Security Integration. 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).

Defined Contribution (DC) Account Payment Methods

Your DC is the second piece of your two-part retirement benefit. You may purchase an annuity benefit through MetLife using your DC.

You may choose to receive your DC funds when you retire from PERF, or delay distribution to a later date up until age 70 1/2. More information is available here.

Effective July 1, 2011, as a vested member who qualifies for early retirement, you may withdraw your DC, without losing your retirement benefit. This can happen as long as you have ended service for more than 30 days and you are not yet eligible to begin your retirement benefit.

Your DC will be paid out the same day if your application is submitted prior to 4 p.m. If your application is received after 4 p.m., your DC will be paid the next business day.

If you choose to defer your DC 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 DC election form. You control your investment choices until the date of disbursement.

Beginning Jan. 1, 2018, INPRS will no longer be among your choices of annuity providers at retirement. However, we have partnered with MetLife to offer annuities at competitive rates. With the transition to MetLife not only will you still have the ability to purchase a lifetime income annuity with all your INPRS defined contribution (DC) account assets, but also just a portion of those assets.

Who is impacted?

If your retirement date is Jan. 1, 2018 or later, INPRS will no longer be among your choices of annuity providers. Please visit the MetLife Retirement Income Center to get an annuity estimate. You are not required to annuitize with MetLife. You may annuitize with any annuity provider of your choice. If you do not wish to annuitize your retirement funds, you are not impacted.

For more information go to the Annuity Information page, here.

WITHDRAWAL OF DC WITHOUT EMPLOYER SEPARATION

If you are a member of PERF or TRF who is not age and service eligible for a retirement benefit, who is:

  1. no longer working in PERF or TRF-covered service with an employer;
  2. actively working with the same employer; and
  3. working in a non-PERF or non-TRF covered position;

you may suspend and withdraw the amounts in your DC 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 DC 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.

Rollover Savings Account (RSA) Payment Method

As an active member, 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 DC. 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 DC/RSA balance.

Taxation on the DC Account (applicable to all active accounts on Jan. 1, 2018 and thereafter)

Your choice about how to distribute your Defined Contribution (DC) account 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 will help you and your advisors with federal tax rules as they apply to PERF benefits.

Contributions to your DC made with after-tax dollars are referred to as “cost basis.” Mandatory contributions paid by your employer were not taxed when they were paid so they don’t create “cost basis.” At retirement, any after-tax contribution (your cost 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 cost basis is recovered under very specific IRS rules. You can choose to receive a total withdrawal of your DC when you begin receiving your monthly retirement benefit. This will include your total cost basis that is included in your DC.

The IRS issued a private letter ruling to PERF stating that the DC and monthly retirement benefits payable to you are not separate accounts. This means that when you retire, part of the basis of your DC contributions must be assigned to your retirement benefit, as described above. Federal tax law will allow you to immediately recover any cost basis that you had in your DC on Dec. 31, 1986. The post-1986 basis may be partially recovered with the remainder given to your monthly retirement benefits.

Any DC 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.

DC Options

MetLife Annuity – You may elect to use the total amount of your Defined Contribution (DC) account to purchase a MetLife Annuity. Your options are:

  • Straight Life Annuity with Cash Refund
  • 100% Survivor Annuity with Cash Refund
  • 66 2/3% Survivor Annuity with Cash Refund
  • 50% Survivor Annuity with Cash Refund

Visit the MetLife Retirement Income Center to get an annuity estimate.

Withdraw Pre-1987 Portion of Defined Contribution Account/MetLife Annuity

You may elect to receive a distribution of an amount equal to your tax basis (after-tax contribution) in your Defined Contribution (DC) account balance as it existed on Dec. 31, 1986. The remainder of your DC will be used to purchase a MetLife Annuity. Your options are:

  • Straight Life Annuity with Cash Refund
  • 100% Survivor Annuity with Cash Refund
  • 66 2/3% Survivor Annuity with Cash Refund
  • 50% Survivor Annuity with Cash Refund

Visit the MetLife Retirement Income Center to get an annuity estimate.

Direct Rollover – You may elect to have the entire taxable portion of your Defined Contribution (DC) account paid in the form of a direct rollover to an IRA or Qualified Retirement Plan. You may elect to receive a distribution of an amount equal to your tax basis (after-tax contribution) in your DC balance as it existed on Dec. 31, 1986 paid directly to you or in the form of a direct rollover. You must complete your IRA or Qualified Retirement Plan information.

Split Defined Contribution (DC) Account Balance – You may elect to split your Defined Contribution (DC) account between the options listed below.

  • MetLife Annuity
  • Direct Rollover
  • Lump Sum
  • Defer

You may elect to receive a distribution paid directly to you of an amount equal to your tax basis (after-tax contribution) in your DC balance as it existed on Dec. 31, 1986. You must complete your IRA or Qualified Retirement Plan information if you choose to roll over a portion of your DC.

You may elect to use this percentage of your DC to purchase a MetLife Annuity:

  • Straight Life Annuity with Cash Refund
  • 100% Survivor Annuity with Cash Refund
  • 66 2/3% Survivor Annuity with Cash Refund
  • 50% Survivor Annuity with Cash Refund

Visit the MetLife Retirement Income Center to get an annuity estimate.

For 100%, 66 2/3% or 50% annuity survivor Benefit – designate only one survivor.

Full Withdrawal – You may elect to have the total amount of your Defined Contribution (DC) account (less mandatory federal income tax withholding) paid directly to you.

Full Deferment – You may elect to defer distribution of your Defined Contribution (DC) account until a later date. Your account will continue to be invested with INPRS according to your directions. Distribution must begin April 1 of the calendar year after the year in which you turn age 70 ½. If you do not want your assets in this account paid to your estate at your death, you must designate a beneficiary.

Partial Deferment/Withdraw Pre-1987 Portion of Defined Contribution Account/MetLife Annuity

You may elect to receive a distribution of an amount equal to your tax basis (after-tax contribution) in your Defined Contribution (DC) account balance as it existed on Dec. 31, 1986 and defer distribution of the remainder of my DC until a later date. Your account will continue to be invested with INPRS according to your directions. Distribution must begin April 1 of the calendar year after the year in which you turn age 70 ½. If you do not want your assets in this account paid to your estate at your death, you must designate a beneficiary. 

RSA Options

MetLife Annuity – You may elect to use your Rollover Savings Account (RSA) to purchase a MetLife Annuity. Your options are:

  • Straight Life Annuity with Cash Refund
  • 100% Survivor Annuity with Cash Refund
  • 66 2/3% Survivor Annuity with Cash Refund
  • 50% Survivor Annuity with Cash Refund

Visit the MetLife Retirement Income Center to get an annuity estimate.

Direct Rollover – You may elect to have your RSA paid in the form of a direct rollover to an IRA or Qualified Retirement Plan. You must complete your IRA or Qualified Retirement Plan information.

Split RSA – You may elect to split your RSA between these options:

  • MetLife Annuity
  • Direct Rollover
  • Lump Sum
  • Defer

You must indicate the IRA or Qualified Retirement Plan information if you choose to roll over a portion of your RSA.

You may elect one of the percentages of your RSA to purchase a MetLife Annuity:

  • Straight Life Annuity with Cash Refund
  • 100% Survivor Annuity with Cash Refund
  • 66 2/3% Survivor Annuity with Cash Refund
  • 50% Survivor Annuity with Cash Refund

Visit the MetLife Retirement Income Center to get an annuity estimate.

For 100%, 66 2/3% or 50% annuity survivor benefit, you must designate only one survivor.

Full Withdrawal – You may elect to have the total amount of your RSA (less mandatory federal income tax withholding) paid directly to you.

RSA Deferment – You may elect to defer distribution of your RSA until a later date. Your account will continue to be invested with INPRS under the same guidelines applicable to a RSA. You may change the allocation strategy of the RSA quarterly. Distribution must begin April 1 of the calendar year after the year in which you turn age 70 ½. If you do not want your assets in this account paid to your estate at your death, you must designate a beneficiary.

Tax Withholding

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.