The Missouri State Employees’ Retirement System (MOSERS) is sending letters to 17,000 former Missouri state employees eligible for a future pension, informing them they can cash in early if they choose.
Rather than wait until eligibility, future retirees can opt to collect their benefits in a lump-sum payment. If they’d rather wait it out, they can do that as well. The option is not available to current state employees or current retirees.
The MOSERS Board was authorized to offer the Buyout Program under Senate Bill 62, which took effect in August. SB 62 aims to save the $8 billion system money over the long term by allowing MOSERS to pay out a percentage of a pension’s value over time and avoid administrative fees regarding the tracking of all 17,500 beneficiaries. According to the St. Louis Post-Dispatch, the program could save MOSERS, which is 69% funded, an annual $7 million.
“The lump-sum buyout amount will be 60% of the present value of the member’s future normal retirement annuity,” MOSERS said in a statement. “The present value is the amount required, as of October 1, 2017, to fund their future benefit payments.”
In the letters, MOSERS suggests former state workers consult with financial experts or tax advisors before they make their decision. The letters also note that the system is required to withhold 20% of the taxable potion of a cash distribution for federal income tax. In addition, those younger than 59 ½ may be subject to an additional 10% early distribution federal tax penalty.
The deadline for those who wish to participate in the lump-sum buyout is November 30. The deadline to rescind their application is also November 30.
Payments will begin in December.
Tags: Buyout Program, Missouri State Employees’ Retirement System, Pension, Senate Bill 62