Ball State University Text Box: Employee Benefits Handbook

Exempt Staff Personnel

Important NoticeHealth CareSalary ContinuanceLife & AD&DRetirement BenefitsOther BenefitsAppendices  
   
 
Public Employees' Retirement Fund (PERF)

PERF is administered by the State of Indiana. The PERF benefit consists of two parts: an annuity and a pension.

The annuity is financed by your contributions. The University "picks-up" i.e. pays, your contribution in the amount of three percent of your gross pay commencing with the first day of employment or July 1, 1989, whichever is later. These contributions are credited to your annuity savings account. In addition, at retirement, the "pick-up" amount is included in the salaries used to determine final average salary for purposes of calculating your pension. The amount of your benefit is based on the balance in your account at the time benefits commence.

The pension, the larger part of your benefit, is financed by the University. The University contributes an amount required to provide the pension determined by PERF. The amount of the benefit is based on your "highest 20 calendar quarters" average salary, your age, your years of service and retirement options selected.

If you are at least 65 years of age and have at least ten or more years of creditable service, you are entitled to a full retirement benefit. Early retirement with a reduced benefit is offered if you are at least 50 years of age and have at least 15 or more years of creditable service.

Membership

Membership is compulsory for all Staff Personnel in Groups 1, 2, 3 and 5 as defined in Appendix I. You must complete a Membership Record and designate your beneficiaries. This Membership Record is used to establish your account; it becomes part of your permanent record at the Public Employees' Retirement Fund office which is located in Indianapolis.

Your Contributions

Effective July 1, 1989, the University "picks-up" your contribution in the amount of three percent of your gross pay. For this purpose, gross pay means: (1) your salary paid before taxes and other deductions, plus (2) the amount that would have been paid, except for your salary reduction agreement, if any, established under Section 125 or Section 403(b), or other sections of the Internal Revenue Code. This amount is sent to PERF and is deposited in your individual annuity savings account, with interest credited each year. You will receive an annual statement from PERF of the total amount in your annuity savings account.

Creditable Service

Service credit is an important factor in determining the amount of retirement benefit and the age at which you can receive a benefit. You earn one year of service credit for each year of full-time employment in a PERF-covered position. Under certain circumstances, service credit will be given for military service and for leaves of absence.

 

>>Contact the Public Employees' Retirement Fund Office for additional information.

The Two Parts of Your Retirement Benefit

At retirement, assuming you have ten or more years of creditable service and are at least age 65, or have 15 or more years of creditable service and are at least age 50, you can receive a check each month from PERF. This will be made up of an annuity based on the amount available in your individual annuity savings account and a pension furnished by the State of Indiana. However, all creditable service is subject to verification and further, is contingent upon compliance with the law governing such service.

Annuity Benefit

 

The annuity (the smaller of the two parts) is based upon the amount of money in your annuity savings account, including interest. There is no monthly annuity benefit when you elect distribution of your total annuity savings account.

 

After the first year, and annually thereafter, during the month of June, you will be given the choice as to how your annuity savings account (contributions and accumulated interest) is to be invested for the next year. An "Investment Election Ballot" is sent to you each Spring along with information regarding the investment options available. You have the option of leaving your annuity savings account in the Guaranteed Fund, or transferring your money to an alternative investment program which consists of the Money Market Fund and the Bond Fund. If you wish to remain in the Guaranteed Fund, you will not need to complete a form; however, if you wish to transfer to an alternative investment, you must return a completed form.

 

The Guaranteed Fund guarantees both the value of your annuity account and interest. If you elect the Money Market Fund or the Bond Fund, the value of your annuity account could rise or fall with the market, but it is not guaranteed by the State as is the Guaranteed Fund. Once you have transferred from the Guaranteed Fund to an alternative fund, you may not transfer back into the Guaranteed Fund but may transfer between the alternative funds.

 

Pension Benefit

 

The pension is paid from State funds. It is calculated by using a formula set by law. This pension amount is determined by your:

  • age of retirement;

  • creditable service;

  • average annual compensation consisting of the "highest 20 calendar quarters" average salary, employer-paid employee contributions made in the quarters used in the calculation, and any additional payments made at termination, up to $2,000 (i.e. pay for unused sick leave or vacation days); and

  • retirement option selected.

The total annual PERF retirement benefit is the sum of your annuity and your pension.

 

Estimating Your Benefits

 

If you are within one year of retirement by virtue of age and service, you can request a written estimate of your retirement benefits from PERF. In order to receive an estimate:

  • obtain an Estimate Request Form from the Payroll and Employee Benefits Office;

  • complete this form; and

  • send it to PERF.

From the information furnished on this form, a PERF retirement counselor will prepare a written estimate of your benefits and mail it to you.

 

If you want to estimate your retirement benefits, you may request a copy of the booklet "Estimating Your Retirement Benefits" from the Payroll and Employee Benefits Office

 

Vested Status

 

Vested status means that you have ten or more years of creditable service under PERF. If you have attained vested status, you will be entitled to benefits when you meet the age and service requirements for either normal or early retirement.

 

If you terminate employment before becoming eligible for benefits (having at least ten but less than 15 years of service credit), you will maintain vested rights only if your annuity funds are not withdrawn. In this situation, your annuity savings account will earn yearly interest until you receive either a retirement benefit or a refund of those contributions and accumulated interest.

 

When Retirement Benefits Begin

 

If you retire at age 65 with at least ten years of creditable service, you qualify for normal retirement with full benefits.

 

If you retire prior to age 65 and you have at least 15 years of creditable service, you may, at your option, receive reduced benefits as early as age 50. The following table shows how the pension benefit is reduced according to your age:

 

In addition, the annuity benefit will also be paid over a greater period; therefore, the monthly annuity benefit will be reduced accordingly.

 

If you have at least ten but less than fifteen years of creditable service, you may retire early; however, your retirement benefits will begin the first day of the month following your 65th birthday.

 

65 100% 59 89.0% 53 59.0%
64 98.8% 58 84.0% 52 54.0%
63 97.6% 57 79.0% 51 49.0%
62 96.4% 56 74.0% 50 44.0%
61 95.2% 55 69.0%
60 94.0% 54 64.0%

 

Retirement Options Available

 

Your choice of a retirement option is an important decision in planning your retirement. There are two types of options: (1) one life options which pay you a lifetime income; and (2) survivor options which pay you a lifetime income and, if your survivor (spouse or other named co-survivor) lives longer than you, the survivor continues to receive an income for life. The amount continuing to the survivor depends on the specific option you select.

 

Every benefit is actuarially equivalent to every other benefit. This means that it is a benefit of equal value as determined actuarially by taking into account your life expectancy and, where applicable, your co-survivor's. An explanation of each option follows:

  • Normal Retirement (Option 10) -- You will receive a monthly benefit for life. If you die before receiving benefits for five years, your beneficiary will have the choice of receiving either your monthly benefit for the remainder of those five years or the present value of those remaining payments in a lump sum.

  • No Guarantee (Option 20) -- You will receive a monthly benefit for life, but there are no monthly payments to anyone after your death.

  • Joint with Full Survivor Benefits (Option 30) -- You will be paid a monthly benefit for life. After your death, that same monthly benefit will be paid to your beneficiary for life.

  • Joint with Two-Thirds Survivor Benefit (Option 40) -- You will be paid a monthly benefit for life. After your death, a monthly benefit in the amount of two-thirds of your benefit will be paid to your beneficiary for life.

  • Joint with One-Half Survivor Benefits (Option 50) -- You will be paid a monthly benefit for life. After your death, a monthly benefit in the amount of one-half of your benefit will be paid to your beneficiary for life.

  • Integration With Social Security (Option 61) -- You may choose this option if you are eligible for early retirement and have not yet attained age 62. You will be paid a higher monthly benefit prior to age 62. The benefit will be reduced or possibly terminated at age 62 depending upon the specific facts.

If you die before receiving benefits for five years, your beneficiary will be entitled to receive the remaining monthly benefits subject to the reduction when you would have reached age 62.

It is your responsibility to make application for Social Security benefits. Notification to the Social Security Office should be made approximately three months in advance of the time you expect benefits to commence.

  • Cash Refund Annuity (Option 71) -- You will receive a monthly benefit for life. This benefit will be based on your age, salary and service and the amount of money in your annuity savings account. This option is not available if you elect to receive a total payment of your annuity savings account at retirement; however, if you select Option 1 or Option 3 under “Annuity Account Options Available,” Option 71 would be available. At your death, payments will be made as follows:

Pension Benefit—If you die before receiving benefits for five years, your beneficiary will receive either a monthly benefit for the remainder of those five years or the present value of those remaining payments in a lump sum.

Annuity Benefit—Upon your death, your beneficiary will receive a lump sum payment of the amount remaining in your annuity savings account. Please note, your annuity savings account balance is reduced with each monthly benefit paid. Thus, if you die after the account has been reduced to zero, there will not be an annuity savings account distribution to your beneficiary.

Annuity Account Options Available

In addition to designating a retirement option, you must also select an annuity option. You may elect to receive the annuity savings account balance as follows:

Choice 1: To have the total amount of your annuity savings account paid as a monthly benefit. If you elect Choice 1, any non-taxable basis you have will be recovered on a pro-rata basis over a predetermined number of payments based on your age at the time benefits start. The balance of each benefit payment will be fully taxable.

Choice 2A: To have the total amount in your annuity savings account (less the mandatory withholding for federal income tax) paid directly to you. If you elect Choice 2A, PERF is required to withhold 20 percent of the taxable portion. You will have to pay state and federal income tax on this taxable portion.

Choice 2B: To have all of the taxable portion of your annuity savings account paid in the form of a direct rollover to an individual retirement account (IRA) or a qualified retirement plan which has provisions allowing it to accept the rollover on your behalf. If you elect Choice 2B, the taxable portion of your payment will not be taxed in your current year and no income tax will be withheld. You will be taxed later when you receive a distribution from the IRA or qualified retirement plan. The non-taxable portion will be paid directly to you.

Choice 2C: To have a part of the taxable portion of your annuity savings account paid in the form of a direct rollover to an IRA or a qualified Retirement Plan which has provisions allowing it to accept the rollover on your behalf; this choice is available only if you want a partial rollover amount of at least $500. If you elect Choice 2C, the non-taxable portion will be paid directly to you. Also, the part of the taxable portion of the distribution which is not directly rolled over (less the mandatory withholding for federal income tax) will be paid directly to you. For any part of the eligible rollover distribution that is not directly rolled over, PERF is required by law to withhold 20 percent for federal income taxes. You will have to pay federal and state income taxes on this taxable portion. You will not be taxed in the current year and no income tax will be withheld on the direct rollover amount. You will be taxed later when you receive a distribution from the IRA or qualified retirement plan.

Choice 3: To receive a distribution of an amount equal to your federal tax basis (after-tax contributions) in your annuity savings account balance as it existed on December 31, 1986, and to receive the balance of the account as a monthly benefit. If you elect Choice 3, the income tax consequences will be determined as follows:

  1. In accordance with a letter ruling received from the IRS, the basis that existed on December 31, 1986, will be recovered tax free.

  2. The basis after December 31, 1986, will be recovered on a pro-rata basis over a pre-determined number of payments based on your age at the time benefits begin.

  3. The remainder of your annuity savings account and your pension benefits will be fully taxable in the year received.

If at the time of your or your beneficiary’s death, benefits totaling the balance in your annuity savings account on the date of your retirement have not been paid, then either your or your beneficiary’s estate will be paid the remaining annuity savings account balance. Please note that if you took a total distribution of your annuity savings account, this does not apply. Also, if you took a partial distribution of your annuity savings account, this only applies to the remaining annuity savings account balance

 

Benefits to Survivors

If your death occurs after retirement, the options you select on the Application for Retirement Benefits will determine how your account is settled.

If your death occurs before retirement, the benefit available to your eligible survivors is described in the following paragraphs.

Survivor Benefit

The survivor benefit was created by the Indiana Legislature for the benefit of survivors of long-term PERF members. This benefit is separate and distinct from any benefit created by your annuity savings account.

If you die before retirement and have 15 or more years of creditable service, your surviving spouse of two or more years at the time of your death will receive a monthly survivor benefit for life. There is no benefit for a spouse of less than two years.

If there is no eligible surviving spouse and there is a surviving dependent, the dependent is eligible to receive a monthly survivor benefit until the attainment of age 18 or death, whichever is earlier. However, if a dependent is permanently and totally disabled (using disability guidelines established by the Social Security Administration) at the date of attaining age 18, the monthly benefit is payable until the date the dependent is no longer disabled (using disability guidelines established by the Social Security Administration) or does, whichever is earlier. In case of multiple surviving dependents, the benefit is shared equally.

Note regarding inactive members: In order for a survivor benefit to be provided to the eligible surviving spouse or the surviving dependents, an inactive member who did not make application for the pension benefit must, at the time of death, have had 15 or more years of creditable service and have been at least age 50.

No survivor benefit is available for a beneficiary other than your spouse or dependent beneficiary.

Claims for survivor benefits on the account of a deceased member must be made within three years of date of death.

Annuity Benefit

Whether or not there is a survivor benefit due, upon your death the annuity savings account will be distributed to the beneficiary or beneficiaries designated by you on your Membership Record or most recent Change of Beneficiary form. In this case, the designated beneficiary or beneficiaries can receive the annuity savings account and the survivor benefit if they also happen to be the surviving spouse or dependent.

 

Beneficiaries

You have the right to change your beneficiaries at any time prior to your filing for retirement or disability benefits.

At retirement, if you select one of the Joint with Survivor Benefit Options (30, 40, or 50), you may name only one beneficiary. If you select retirement option 10, 61, or 71 you may name:

  • More than one beneficiary, or

  • Your estate instead of an individual as your beneficiary,

If you name multiple beneficiaries, any benefits due these beneficiaries, upon your death will be distributed in pro-rata amounts to the named beneficiaries. If you elect to receive benefits under Option 30, 40, or 50, you cannot change your beneficiary after PERF receives your retirement application. Under other options, your beneficiary may be changed if approved by the PERF Board.

It is important to keep your beneficiary designation up to date.

>>Contact the Payroll and Employee Benefits Office for change of beneficiaries and additional information.

 

Disability Benefits

If you become disabled while receiving pay in a PERF-covered position, you are eligible for disability benefits if you:

  • Have five or more years of creditable service under PERF, and

  • Qualify for Social Security disability benefits.

If you qualify for PERF disability benefits, you will be entitled to receive a monthly payment as long as you continue to be eligible for Social Security disability benefits.

When you complete the PERF Disability Application, you must select one of the retirement options. At the same time, you must select an annuity savings account option.

If you select Option 10 or 20, your disability benefit cannot be less than $100 per month unless you elect to receive a lump sum payment of your annuity account. If you elect to receive a lump sum payment of your annuity savings account, your monthly benefit will be reduced by the amount representing your annuity.

PERF disability benefits will cease if you have disability benefits terminated by Social Security.

 

If You Leave the University

 

You cannot withdraw contributions to your annuity savings account and interest in your annuity savings account as long as you are employed in any position covered by this Fund or by any other of the Indiana State Retirement Funds. You can withdraw these amounts only if you are no longer employed in a covered position and are not eligible for monthly benefits.

 

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