Beyond the Basics: Special Issues

Beyond the Basics: Special Issues

2007, Texas Municipal Retirement System.

2007 Annual Training Seminar

In this presentation, we will cover:

Beneficiary Designations

Death Benefits

Divorce

Service Credits and Purchases

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

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

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

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

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)

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

What About Spousal Consent?

Spouse must consent by affidavit if: Not named as beneficiary, OR No lifetime benefit elected

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

Why Wait?

Member’s account grows two ways: deposits and interest

Compounding interest increases value

City match applied when monthly benefits become payable

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Previous beneficiary designations are no longer valid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

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

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:

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.

Designating Minors

TMRS benefits cannot be paid to minors without a legal representative.

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.

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.)

What About Divorces?Deposits and interest earned during marriage are community property.

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)

What happens to member’s account during divorce?

Account is “flagged”

No payments can be made during divorce

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”

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!

Service Buyback Restricted Prior Service

Credit Proportionate

Retirement Updated Service Credit

Types of Service Credit

Prior Service Credit …

Service performed before city joined TMRS.

Monetary credit applied only if employee retires.

Probationary Prior Service Credit

Optional provision — employees hired on “probationary” basis prior to September 1, 1989, to receive credit.

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.

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

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.

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”

Restricted Prior Service Credit... Optional provision that grants a “time” credit

for previous, full-time, paid, public work anywhere in U.S.

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

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.

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.

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.

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.)

Questions & Answers

HOW TO CONTACT TMRS:Toll-free: 800-924-8677Web: www.TMRS.comE-mail: phonecenter@tmrs.com