Regular Pre-Retirement

Pre-Retirement Guide
for Regular Members

This document has been prepared for members of the Public Employees' Retirement System of Nevada to provide general information.

It is based on retirement law effective from the 71st session of the Nevada Legislature, 2001. This is not a legal document, nor is it intended to serve as a basis for legal interpretation. Official legal reference may be found in the Nevada Revised Statutes.

Introduction

How To Begin Processing Your Retirement

Counseling

Retirement Eligibility

Effective Date Of Retirement

Important Factors Determining
Your Benefit Amount

Service Credit
The Retirement System keeps an ongoing record of your service based on information supplied by your public employer. Service is credited for years, months, and days actually worked based on employment records and contributions.

School district employees, except 12-month employees and professional staff of the university system are credited with service for a full year if they work full-time for the full school or academic year. Employment for part of a school or academic year is credited on a ratio of one and one third days for each day worked. A full year of service cannot be credited until the full 12-month period has expired.

There are generally two ways to increase service credit -- through purchase of service and repayment of refunded contributions.

Purchase of Service: If you have five years of credit in PERS, you may purchase up to five years of additional service at any time prior to retirement. The purchase price is calculated using the percentage factor based on your age and your current average compensation. Purchase of service may also be accomplished using certain types of retirement savings accounts such as 401 (a), 401 (k) qualified pension trusts, 403 (b) and 457 retirement savings plans and IRAs. Purchases must be completed within 30 days of retirement.

Repayment of Refund: If you have received a refund of employee contributions and later return to work and reestablish active membership for at least six months, you may repay the refunded contributions and restore your service credit. Repayment, including interest at the actuarially determined rate, may be made in a lump sum or by monthly installments. Service will not be restored until repayment is made in full. Repayment of refunded contributions must be completed prior to your date of retirement.

To learn more about purchase of service or repayment of a refund, contact the PERS Membership Division.

Average Compensation
Your average compensation is based on the 36 highest consecutive months of compensation as reported by your employer. If you have been under the Employer Pay Contribution Plan (EPC), your reported compensation will be increased by the appropriate factors to insure that it is no less than had you continued under the employee/employer contribution plan.

Please note that in calculating an estimate, the 36-month period used to determine your average compensation will usually be the period ending with the last payroll reports received from your public employer and will not project your current salary through your anticipated retirement date.

Retirement Options
The Unmodified Retirement Allowance (Option 1) is the maximum allowance you can receive. Upon your death, however, the unmodified plan provides no monthly allowance for a beneficiary.

Since many people wish to give a monthly allowance to their beneficiary after their death, there are six additional options. Each offers a benefit somewhat lower than the Unmodified Allowance, but does afford a monthly benefit for your beneficiary after your death.

You may name anyone you wish as your beneficiary. However, your spouse must consent to the plan selection and beneficiary designation. This is necessary because Nevada is a community property state, and the courts have determined that a retirement benefit is a substantial community asset.

There are many factors to consider in selecting an option. Some are:

• The amount and source of income from other retirement programs
• Employment which is or may be available to your beneficiary
• The amount and types of debts your beneficiary may be responsible for discharging after your death
• The type and amount of insurance, such as mortgage insurance and/or life insurance available to your beneficiary

The other retirement options are:

Option 2: An actuarially reduced allowance for the lifetime of the retired employee. After the retired employee's death, the same allowance continues for the lifetime of the beneficiary.

Option 3: An actuarially reduced allowance for the lifetime of the retired employee. After the retired employee's death, 50 percent of the allowance continues for the lifetime of the beneficiary.

Option 4: An actuarially reduced allowance for the lifetime of the retired employee. After the retired employee's death, and beginning when the beneficiary reaches age 60, the same allowance continues for the lifetime of the beneficiary.

Option 5: An actuarially reduced allowance for the lifetime of the retired employee. After the retired employee's death, and beginning when the beneficiary reaches age 60, 50 percent of the allowance continues for the lifetime of the beneficiary.

Option 6: An actuarially reduced allowance for the lifetime of the retired employee. After the retired employee's death, a specific sum per month, as selected by the retired employee, will continue for the lifetime of the beneficiary. This amount may not exceed the monthly allowance paid to the retired employee.

Option 7: An actuarially reduced allowance for the lifetime of the retired employee. After the retired employee's death, and beginning when the beneficiary reaches age 60, a specific sum per month, as selected by the retired employee, will continue for the lifetime of the beneficiary. This amount may not exceed the monthly allowance paid to the retired employee.

Since Options 6 and 7 are based on an amount which you specify, we do not normally provide an estimate for these options. If you wish to provide for a set amount to go to your beneficiary, contact the PERS Benefits Division and indicate the amount. We will be happy to provide an estimate for these two options.

The reduction in Retirement Options 2 through 7 from the Unmodified Allowance is based on the age and life expectancy of the retired employee and beneficiary. On the following page is an example of benefits which would be available under the optional plans.

You must select a retirement plan by signing in the appropriate space on the form in the presence of a notary public. Your spouse must also sign the form, acknowledging the selection of the retirement plan and beneficiary designation. In addition, your spouses signature must be notarized.

Should your beneficiary under one of the Options 2 through 7 predecease you, your allowance will be changed to the Unmodified Option at the beginning of the next month upon receipt of a certified copy of your beneficiarys death certificate.

If for any other reason you wish to change to the Unmodified Option, you may do so with the concurrence of your spouse; however, the change is not retroactive. It is effective the day the form indicating the change is received in our office or the date indicated on the form, whichever is later. You cannot change from the Unmodified Option to any other plan after you have retired. Since it is an irreversible decision to select the Unmodified Option, give it careful consideration.

Within a week after you have submitted your retirement application, PERS will send you an acknowledgment of the date the application was received, the effective date of your retirement and the option you have selected. We will also advise you of any documentation we may need.

If you have difficulty meeting this requirement prior to retirement, please contact us. We will be happy to work with you to satisfy this requirement.

Deductions
You may elect to have deductions made from your retirement allowance for continuation of the group health insurance previously carried with your public employer, retired employee association membership dues, and federal income taxes.

As an alternative to your employers insurance program, within 30 days after your retirement date, you will have the option to enroll in the insurance program for state employees. Please refer to the form provided in your retirement packet to obtain information about this program.

PERS is now required to withhold federal income tax from your retirement allowance unless you instruct us in writing not to withhold monies for this purpose. If you elect to have federal income tax withheld, the System can calculate the tax based on marital status and the number of specified exemptions, or you can have a flat monthly amount deducted. We do not have the expertise on staff to advise you on tax matters. We suggest you seek the advice of a tax consultant if you have questions.

Payment of Retirement Benefits

Time Schedule for Completion of Retirement Processing: It normally takes four to six weeks for final payroll information to be submitted by your public employer and then processed and posted to the System's computer, so the initial calculation of your allowance and payment will be a preliminary amount.

After the final payroll information has been posted, a final calculation will be made. Any adjustment will be reflected in your next benefit.

Within approximately six months of your effective date of retirement, a complete audit of your file, including all calculations, will be conducted by a staff member who has had no prior involvement with your account. We adhere to this procedure to avoid any possibility of compounding errors or overlooking any other factor relevant to your retirement. If there are any errors or additional salary postings, a recalculation of any adjustment to your benefit will be made. You will be fully informed if such an adjustment is necessary.

Although we take every safeguard against its occurrence, occasionally an overpayment of benefit is made. PERS is bound by law to recover overpayments. If this does happen, you will be contacted and provided a full explanation of the situation and of the rights and alternatives available to you.

Method of Payment
PERS offers direct deposit of your monthly benefit to your financial institution. Through this service, your allowance will be available to you four working days before the end of each month. Forms to initiate this type of payment are available upon request.

We can also mail your benefit check to your home four working days before the end of each month. We automatically mail your check to your home address unless you authorize us to set up a direct deposit.

Change of Address
It is important that we know where you are whether your benefit is mailed to your home or electronically deposited to your bank account. From time to time, we mail items of importance and must be able to reach you. If you are writing to change your mailing address for correspondence only, be sure to tell us to continue your direct deposit to the bank. You should also notify your former public employer of any change of address if you are enrolled in their group insurance program. To help us serve you better, please include your Social Security number on all correspondence to PERS.

Re-Employment After Retirement

1. If you enter into employment with a public employer in Nevada within the first 90 calendar days after your effective date of retirement, you will be required to forfeit your retirement allowance for the duration of that employment. There are provisions for a one-time, 30-day waiver during the first 90 days on an emergency basis. If you contemplate employment within the first 90 days after your retirement, both you and your public employer must notify PERS in advance that it is an emergency situation and that you are the only qualified person available for the job. The PERS Executive Officer must approve the request in advance of your returning to work.

2. For employment after the first 90 days, there are different restrictions, depending on the conditions of that employment:

• You will be required to forfeit your retirement allowance from the first day that you are employed by a public employer in Nevada in a position eligible for membership, that is, half time or more. This forfeiture continues for the duration of that employment. We require notification in writing from both you and the public employer within ten days of your first day of employment.
• You will not be required to forfeit your retirement allowance until you have earned $19,597 in a fiscal year from employment with a public employer in Nevada in a position that is not eligible for membership. This earning limitation applies to independent contracts as well as other positions not eligible for membership in PERS, such as positions of less than half time and substitute teaching. We require notification in writing from both you and your public employer within 30 days of your first day in this type of employment.

3. If you accept employment after retirement in a position which is eligible for membership, your benefit will be forfeited. You may choose to reenroll as a contributing member of PERS. If you do this and work less than five years, you will earn a separate retirement allowance for this period of employment. When you retire, you must complete a form to resume your retirement. Your benefit earned as a result of the new employment will be added to your previous benefit. If your employment continues for five years or more, you may select a different option and beneficiary for the new benefit only.
4. If you re-enroll and your employment continues for five years or more, you may select a different option and beneficiary for the new benefit only or your benefit could be recalculated as if you had not previously retired. This is, your additional credit for your current service would be added to your previous credit for service. This option is available only during one period of employment after the original retirement. If you elect to do this, your benefit will be calculated as if you had not previously retired but had a break in service.
5. If you are chosen by election or appointment to fill an elective public office, you may continue to receive your retirement allowance unless you are serving in the same office in which you earned service credit as a member.
6. Effective July 1, 2001, some retired employees who are reemployed by a Nevada public employer in a position for which there is a critical labor shortage are exempt from any reemployment restrictions. This applies only to positions that have been approved by the governing authority of the public employer as critical labor shortage positions.

We cannot emphasize too strongly that employment after retirement with a public employer in Nevada can have serious effects on your retirement allowance. You would be well advised to contact the PERS Benefits Division prior to entering any employment or an independent contract with a public employer after retirement to discuss the conditions of that employment or contract to avoid any future problems.

Some Pitfalls And How To Avoid Them

Your retirement allowance is paid first from the contributions which you personally made. After your personal contributions are exhausted, your allowance will be paid from PERS funds (employer contributions and interest earned from investments over the years).

The federal Tax Reform Act of 1986 eliminated the Three-Year Basis Recovery Rule and made retirement allowances taxable from the first day of receipt. An exclusion is still allowed for personal contributions, but only a portion is excludable each year until you have outlived your "actuarial life expectancy" according to Internal Revenue Service tables. The percent excludable from federal income tax is determined by taking a ratio of your personal contributions to your anticipated lifetime earnings from the plan. The percent excludable from federal income tax is applied to your base benefit only. Post-retirement increases (explained below) are 100% taxable.

You will receive a 1099-R form from the System by January 31, of each year indicating how much of your retirement allowance is taxable, in compliance with federal regulations. Plan ahead for the IRS and avoid getting caught owing a large amount. We will be happy to make income tax deductions for you as described in the section on "Deductions."

Other Things To Consider

We endeavor to provide you with the foundation to make your transition as smooth as possible from the standpoint of your PERS benefit. Beyond this, there are many personal factors to consider, which only you can handle. The key is advance planning. To assist you, we are providing two checklists at the end of this booklet.

What To Expect After Retirement

Post-Retirement Increases
As a general rule, once you have been retired for three full years you are entitled to a post-retirement increase of 2% in each of the fourth, fifth and sixth years; 3% in the seventh, eighth and ninth years; 3.5% in the tenth, eleventh and twelfth years; 4% in the thirteenth and fourteenth years; and 5% each year thereafter. Post-retirement increases are due in the month following the month in which you retired. For example, if your retirement effective date is January 1, your post-retirement increase would be effective February 1, and paid with your February benefit at the end of February.

Occasionally, post-retirement increases are lower than the percentages listed above. This is because they are capped by the Consumer Price Index (All Items) average for the three preceding years. This limitation does not apply, however, if the purchasing power of your benefit has not kept pace with inflation during the period since your retirement.

For further information, contact your agency's retirement liaison officer or the PERS offce.