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Important Information for Employees of
Oklahoma State UniversityJune 2004
President Announces Passage of Retirement Legislation
OTRS Benefit Formulas Improved
Long-Term Care Enrollment Deadline of June 11
OTRS Will Recalculate Monthly Retiree Payments
Future Option for Members to Opt Out of OTRS
Retirement Plan Options for New Hires
Voluntary Retirement Contributions for Biweekly Paid Employees
At the June 18, 2004 OSU/A&M Board of Regents meeting, President David J. Schmidly will request an increase in university contributions to 11.5% of pay for employees in the OSU Retirement Plan to be effective July 1, 2004. This change will affect all employees currently in the 11% Plan.
Employees in the OSU Retirement Plan and OTRS prior to July 1, 1993, will
continue to receive an adjustment acknowledging their participation in the plan
that existed prior to July 1, 1993. These employees will receive at least 11.5%
of pay in retirement contributions with the formula adjusted to reflect the
pre-93 contribution. The new OSU contribution rate will be $1,500 to OTRS plus
10% of pay over $7,800 of salary, plus 11.5% of pay over $48,000 of salary each
fiscal year. The threshold amount of $48,000 has been lowered from the current
$72,000 to reflect the increase in contributions.
This improvement, plus those resulting from the passage of HB 2226 (pending
signature by the Governor), will create a premier retirement system for OSU
employees. With an optional OTRS program, new hires on or after July 1, 2004,
will be able to select the retirement program best suited to their needs, thus
enhancing recruitment of faculty and researchers. Other changes, such as the
increase to 11.5% for OSU contributions and the change in the OTRS retirement
benefit formula, will enhance retirement for current employees.
President Announces Passage of Retirement Legislation
On May 27, President David J. Schmidly announced the passage of HB 2226 by the State Legislature. The legislation has been forwarded to the Governor for signature. The legislation is to become effective July 1, 2004, if signed by the Governor. Representative Terry Ingmire and Senator Mike Morgan led the effort within the legislature.
The successful passage of this bill is the most positive retirement legislation
affecting OSU in many years. President Schmidly deemed this project as one of
his top priorities for this year. Members of the Flexible Compensation Benefits
Committee, Faculty Council, Emeriti Association, and Human Resources worked
together to draft and promote passage of the legislation. They worked with OU,
OTRS, and legislative staff. All of OSU expressed support during this effort.
Key features of the legislation include:
* Improvement in the benefit formula for OSU and OU members who joined OTRS
prior to 7-1-1995
* Recalculation of retiree benefits affected by a new formula with possible
increase in retirement beginning January 1, 2005
* Option for OSU/OU employees now in OTRS to withdraw from OTRS in the future
after IRS approval
* Option for OSU employees hired July 1, 2004, or thereafter, to join OTRS or
the OSU Alternate Retirement Plan
OTRS Benefit Formulas Improved
OSU/OU employees joining OTRS prior to July 1, 1995, are expected to have increased monthly retirement benefits based on the new formulas established in HB 2226. The new benefit formulas increase benefits to be more comparable to the benefits received by other higher education institutions and common school members for the same contributions.
Basically the new formulas eliminate the year by year calculation for 1995
through 2007 when the salary caps are gradually lifted. Years in which a member
contributes less than the applicable low or high base cap will be considered
with all years after 2007 when the caps are removed. Years in which a member
contributes at the applicable salary cap will be considered together. In both
cases, the high three year average that applies to members who joined prior to
July 1, 1992, or the high consecutive five year average that applies to members
who joined after July 1, 1992, will apply for this period.
Additional information, including sample calculations provided by Oklahoma
Teachers’ Retirement System and the full text of HB 2226, are available on the
OSU Human Resources website at http://www.okstate.edu/OSU_per/retadd.htm. In
addition, you may wish to obtain a new Retirement Estimate from OTRS,
1-877-738-6365, or from the OTRS website at
www.trs.state.ok.us.
Long-Term Care Enrollment Deadline of June 11
Employees have guaranteed acceptance if enrolling in the new OSU-John Hancock Long-Term Care plan by June 11. You may not be accepted if you wait past the deadline. There will likely be no annual “open enrollment” period for Long-Term Care. Employees not currently working due to Long-Term Disability status are not eligible.
OTRS Will Recalculate Monthly Retiree Payments
HB 2226 provides for recalculation of OTRS retirement benefits of OSU/OU retirees who retired after July 1, 1995. If the recalculation based on the new benefits formula in HB 2226 results in an increase, the retiree will receive the new monthly retirement income beginning January 1, 2005. Regardless of calculation results, OTRS will not reduce income of a retiree. Due to provisions in HB 2226, no retroactive benefits will be paid.
OSU is committed to a
strong OTRS and has agreed to pay the unfunded liability for OSU employees and
retirees who are OTRS members. Detailed actuarial studies were performed by OTRS
and private actuaries. A provision of HB 2226 designates that OU/OSU will pay a
surcharge of 2.5% of compensation for new hires that do not join OTRS, but would
have prior to passage of HB 2226.
The surcharge will be recalculated on an annual basis and adjustments made as
necessary to uphold OSU’s commitment.
Future Option for Members to Opt Out of OTRS
HB 2226 allows current employees participating in OTRS an opportunity for a one-time irrevocable lifetime election to opt out of OTRS. However, it must be noted that while the legislation specifies such an option, IRS approval must be obtained prior to implementation. The exact provisions of such an election will also be determined by the IRS approval process. OSU has been advised that it may take a year before the IRS ruling is received. Once the approval is received, affected employees will have a year in which to make a one-time irrevocable decision of whether to stay in OTRS or not. OSU will provide individual information to assist employees in the decision-making process.
Exact details of the opting out election cannot be determined until IRS approval
is secured. However, it is the intent of HB 2226 that current OTRS members who
opt out could roll the member contributions plus interest to the Alternate Plan.
If the member is vested, the member could leave contributions with OTRS and
receive retirement credit when separating employment with OSU. If a member opts
out of OTRS, no future credit will accrue. Again, the exact details will become
known as the IRS approval process continues.
Those employees who have been mandated into OTRS, but are not yet enrolled in
the OSU Retirement Plan, will continue under the existing provisions of the OSU
Retirement Plan. They will be enrolled in the OSU Retirement Plan as eligibility
criteria is met. Unless determined otherwise by the IRS ruling, these employees
will be eligible to continue to receive the 11.5% contribution if they elect to
remain in OTRS, with any OSU contributions in excess of the 7.0% OTRS member
contribution being contributed to their individual TIAA-CREF account.
Employees who elect to continue active participation in OTRS will continue to
receive the 11.5% OSU contribution. If OSU currently pays OTRS from the 11.5%,
this will continue, with the rest of OSU contributions deposited to the
employee’s individual TIAA-CREF account.
Retirement Plan Options for New Hires
Eligible OSU employees hired to begin work on or after July 1, 2004, will have 90 days to make a one-time lifetime irrevocable election to join OTRS or join the OSU Alternate Retirement Plan. If no election is made, the new employee will be default enrolled in OTRS. Contributions to OTRS or the Alternate Plan will be made retroactively to date of hire.
If an employee is enrolled in OTRS, OSU will pay the OTRS member contribution of
7.00% of compensation and the OTRS employer fee of 7.05% of compensation. The
employer fee is not credited to the account of OTRS participants.
If the employee elects to join the Alternate Retirement Plan, OSU will
contribute 11.5% of pay to TIAA-CREF. Unlike the current OSU Retirement Plan,
the Alternate Plan will have a two year vesting requirement. This means if an
employee leaves before the end of two years, all retirement contributions made
by OSU will return to OSU.
The one year employment and age 26 eligibility requirement will not be repeated
in the Alternate Plan. New employees who elect participation in OTRS will not
have to pay their own OTRS contributions for the first year of employment or
until age 26. Employees must be regular continuous employees (an appointment of
at least six months) with an FTE of at least .75. Employees with federal
benefits, visiting faculty, interns, post docs, and residents and certain other
classification will remain ineligible for participation in OSU retirement
contributions.
Make sure you have the information you need about your health insurance before you retire. The State Insurance Board offers several seminars around the state. Visit their website for locations, dates and times -- www.healthchoiceok.com/PreRetirement_meeting.htm.
Voluntary Retirement Contributions for Bi-weekly Paid Employees
OSU will change its payroll system in July to allow greater opportunities for employees on the bi-weekly payroll to voluntarily save for retirement. Effective July 2004, employees voluntarily contributing into a 403(b) tax deferred annuity and/or a 457(b) deferred compensation program will have their monthly contribution split between the first and second bi-weekly payroll of each month rather than to have the full amount taken once a month. No action on your part is needed for this change to occur.
If you would like to increase or decrease your contributions for July based upon
this opportunity to have deductions from two checks each month, please complete
a new Salary Reduction Form before June 14 to meet the payroll cutoff for the
July 2 check. Forms can be found on the web at
www.okstate.edu/osu_per/benefits/benforms.html.
OSU Human Resources developed this information for the convenience of OSU employees. It is a brief interpretation of more detailed and complex materials. If further clarification is needed, the actual law, policy and contract should be consulted as the authoritative source. OSU continually monitors benefits, policy and procedures and reserves the right to change, modify, amend, or terminate benefit programs at any time.