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PUBLIC ACT 89-207, TEACHERS' RETIREMENT SYSTEM
EMPLOYER "PICK-UP" OF RETIREMENT CONTRIBUTIONS

Public Act 89-207, codified as Section 10-183kk of the Connecticut General Statutes (CGS), affects the treatment of mandatory retirement contributions deducted from earnings of members of the Teachers' Retirement System. This Act went into effect on July 1, 1991 for contributions payable on salary earned on or after July 1, 1991. Mandatory contributions made from members' salaries after the effective date will be treated as a salary reduction arrangement, i.e., the mandatory contributions would be excluded from a member's current gross income for income tax purposes.

A detailed explanation of the provisions of this Act was issued on January 18, 1991 by the Assistant Administrator, Teachers' Retirement Board. Please refer to directives from the Teachers' Retirement Board for answers to your questions concerning this Act and for information on the impact on tax sheltered annuities, taxability of withdrawals, etc.

PAYROLL PROCEDURES

  1. Mandatory Contributions on Wages Earned on or after July 1, 1991

    All mandatory contributions made, as described in subdivision (7) of Section 10-183b of CGS, must be treated as a salary reduction arrangement. No exception or individual election otherwise is possible.

    On June 24, 1991, a new D/OE code (`3A' - TRS EMPLR CONT) was established and a mass change was made centrally establishing a D/OE code '3A' for employees with a Retirement Code 'F' and D/OE Code '34'. Contributions coded to '3A' shall be deducted from "pre-tax" wages, i.e., the employee's income tax liability will be based on their full salary minus the employee's mandatory retirement contribution. All mandatory retirement contributions must be coded to D/OE Code '3A' and the retirement contribution entered as a fixed amount.

    Agency payroll staff are to enter the deductions for mandatory contributions as follows:

    1. Forms: CO-1001 (Deductions/Earning Maintenance Form)

      D/OE

      MC

      P

      TYPE
      DOE
      AMOUNT
      SORT
      CODE
      3A 1 A A 0010000 = 00152bb
      $100.00
    2. On-Line: Screen 170-190; same as above.
    3. Remote Job Entry: RK Transactions; same as above.
  2. Mandatory Contributions on Wages Earned before July 1, 1991, Voluntary Contributions and Purchases of Retirement Credit

    After June 24, 1991, agency personnel must activate and enter the deductions for mandatory contributions on wages earned before July 1, 1991, voluntary contributions and contributions made to purchase retirement credit to D/OE Code '34' (TRS PURCH/VOL) as follows. Contributions coded to '34' will be a "post-tax" deduction. Taxes will be paid on the employee's full salary.

    1. Forms: CO-1001

      D/OE

      MC

      P

      TYPE
      DOE
      AMOUNT
      SORT
      CODE
      34 1 A A 0010000 = 00152bb
      $100.00
    2. On-Line: Screen 170-190; same as above.
    3. Remote Job Entry: RK Transactions; same as above.

ASSISTANCE

Please direct requests for assistance as follows:

Public Act Interpretation: Teachers' Retirement Board

Assistant Administrator, 566-5786; or
Administrator, 566-3242; or
Chief Accountant, 566-2875

Payroll Procedures: Office of the State Comptroller

Form and On-Line: Central Payroll Division, 566-5428

Remote Job Entry: Computer Services Division, 566-3214

VESTED RIGHTS IN THE STATE EMPLOYEES RETIREMENT SYSTEM (SECTION 5-166 AND SECTION 5-192i OF THE CONNECTICUT GENERAL STATUTES)

  1. Except as provided in Section 5-163a, a Tier I member of the State Employees' Retirement System who leaves state service before the employee is eligible for retirement but after completing at least ten years of state service, of which at least five years shall have immediately preceded the date of the employee leaving state service, shall continue to be a member and shall be eligible for retirement income as provided in Section 5-162, but on a reduced actuarial basis as determined by the retirement commission, upon reaching the minimum retirement age (55 with at least ten years of actual state service; 60 with at least ten years of credited state service).

    A Tier I member who leaves state service before they are eligible for retirement and before completing the service requirements of Section 5-166(a) shall thereupon lose their status as a member.

    A Tier I member who is eligible for retirement when they leave state service may not elect to withdraw their retirement contributions in lieu of receiving retirement income payments at such time as they are payable, but if they are eligible to participate in or is a participating member of the Connecticut Teachers' Retirement System (TRS), they may elect to have their contributions and earned interest in SERS transferred to TRS for credit pursuant to the requirements of the TRS.

    A Tier II member of SERS who terminates state service before they are eligible for retirement, but after completing at least ten years of vesting service, shall be eligible for a vested retirement income calculated as described in Section 5-192i upon reaching the normal age of retirement or, alternatively, upon reaching age 55 with a retirement income that would have been payable at the normal age of retirement, reduced by one quarter of one percent (effective 7/1/91) for each month the benefit commencement date precedes the member's normal age of retirement. (Normal retirement is age 65 with ten years of vesting service for a member who retires on or before 6/1/92; for a member who retires 7/1/92 forward, the minimum age to receive normal retirement benefits is either 60 with 25 years vesting service or 62 with ten years of vesting service).

    1. In Tier 1, leaves of absence without pay will not be considered a break in service. Thus, time worked after LAW to date of termination accumulates with time worked prior to LAW, but any period(s) of LAW purchased in accordance with Section 5-174, 5-174a, 5-180(c), 5-248a or a collective bargaining agreement, Pension agreement or the provisions of the 1988-92 Pension Arbitration Award, does not count toward the minimum ten years for Tier I members whose vested rights benefits commence before attaining age 60.
    2. In Tier II, leaves of absence without pay for personal medical or family leave without pay granted pursuant to Section 5-248a or terms of a collective bargaining agreement count toward both vesting and credited service; educational leaves of absence without pay only count toward vesting service (to a maximum of 4 years); qualifying military leave without pay counts toward vesting service and is limited to three years plus war service for credited service. The information contained herein assumes that the required contributions and interest for the LAW have been made by Hazardous Duty Tier II members.
    3. Education LAW
      1. In Tier I (Section 5-174) educational LAW is creditable for both nonhazardous duty members and hazardous duty members subject to the following two restrictions:
        1. educational LAW cannot be used to fulfill the ten year minimum service requirement to retire under age sixty and receive regular benefits; and
        2. educational LAW cannot be used to fulfill the twenty year minimum hazardous duty service requirement to receive benefits under CGS Section 5-173 or 5-188.
      2. In Tier II (Section 5-192i(e)) up to four years of educational LAW count toward vesting service to retire at age 55 or older. However, educational LAW is consistently excluded from credited service. Therefore, it cannot be used to fulfill the twenty year minimum credited service requirement for hazardous duty members nor will educational LAW have any impact on the amount of a Tier II member's benefit.
    4. Military LAW
      1. In Tier I (Section 5-180(c)) military service is creditable for both nonhazardous duty members and hazardous duty member subject to restrictions:
        1. military leave cannot be used to fulfill the ten year minimum service requirement to retire under age sixty and receive regular benefits; and
        2. military leave can be used to complete the twenty year minimum hazardous duty service requirement only if hazardous duty state employment immediately precedes and immediately succeeds the LAW.
      2. In Tier II, all military leave is vesting service and war service plus three years in recognized as credited service. The only restriction in applying LAW as retirement credit in Tier II occurs with respect to hazardous duty members. In order to use this type of LAW as part of the twenty year minimum hazardous duty requirement, hazardous duty state employment must immediately precede and immediately succeed the LAW.
    5. In Tier II, a period of severance of less than 12 months counts for vesting but not for credited service unless the Tier II member quit or was fired while on a leave of absence, in which case, the return to service must occur within one year after the first day of the absence to avoid a break in service.
    6. A Tier II member does not receive vesting credit for a break in service (termination and return to service after an absence of at least one year).

      Neither vesting nor credited service is given for prior state service if a permanent break in service occurs. That is if there's a break in service, the employee is not vested and the period of severance from service date to reemployment date equals or exceeds the Tier II vesting service prior to that severance or five years, whichever is greater.

  2. Upon reaching the minimum retirement age, an ex-employee's "vested right becomes a right to retire".
    1. A Tier I member who leaves state service before they are eligible for retirement may elect to withdraw all of their retirement contributions and earned interest, but then will lose their vested rights privilege.

      A hazardous duty member of Tier II who leaves state service before they are eligible for retirement may withdraw all of their retirement contributions and earned interest without losing their vested rights privilege.

    2. A member who leaves state service before they are eligible for retirement also loses their right to fringe benefits such as active employee group life insurance and health insurance services. However, they have the right to convert to the full amount of basic group life insurance in effect immediately preceding termination to an individual policy with the insuring agency within a stipulated period of time. The employee may also elect to continue the group health insurance coverage for themselves and covered dependent(s) via COBRA for a limited period of time (currently no more than 18 months) by paying the full group rate plus an administrative fee.

      If the former employee elects to receive retirement benefits any of the health insurance available to SERS retirees can be put into effect as early as the first of the month following that member's appearance on the retirement payroll, assuming the appropriate paperwork has been completed in a timely manner.

  3. A member who has left state service must apply for the retirement income to get it. It is not automatic.
    1. The employee does not have to take the monthly retirement income at the earliest date they are eligible for it. The advantage to waiting is, that in most cases, the monthly retirement income will be larger as they grow older, although no income will be paid the intervening period of time and COLA's do not go into effect until the 1st of January or the 1st of July, whichever first follows completion of at least nine full months of retirement.
    2. A form CO-624, Application for Retirement, and other required forms should be prepared when the employee leaves state service. This application will not preclude their change of mind as to when to start to receive a retirement allowance, nor the right to elect a refund in lieu of other benefits.
  4. In the event of death of the former Tier I employee, the Retirement Division, when notified of the death, will refund the retirement contributions and earned interest to the beneficiary designated by the former employee on their most current CO-931, filed with the Retirement Division. If the beneficiary pre-deceased the former employee, the refund will be made payable to the estate of the former employee. However, if the former employee had at least 25 years of service credit in Tier I or 25 years vesting service in Tier II and they were married for at least 12 months immediately preceding their death, the surviving spouse may be entitled to a pre-retirement death benefit, in which case, no refund would be issued at that time.
  5. For retirement options, please contact the Retirement Division at 566-2126.

RETIREMENT PLAN EXTRA

In certain instances, a Tier I employee is entitled to purchase credit toward retirement for certain types of service either by making a lump- sum payment in the form of a check made payable to the "State Treasurer for the Retirement Fund" or by making installment payments on the payroll by means of a "retirement extra" deduction. However, all purchases less than $200.00 must be paid in a lump sum.

When an employee submits a "Retirement Credit Purchase Request - Tier I", form CO-896, REV. 9/90, the purchase unit of the Retirement Division, Office of the State Comptroller will compute the cost of purchasing this service for retirement credit and by invoice will notify the employee of the cost, the date by which payment must be made or payroll deductions started and the amount of the deductions. If the employee wants to complete the purchase, it is then the employee's responsibility to notify the payroll clerk in their agency and provide the employee with the invoice and either make payment in full or authorize payroll deductions in accordance with the instructions on the invoice, prior to the effective date shown on the invoice. If there is a delay in this notification, in some cases either a re-computation may be necessary or a forfeiture may occur. The invoice sent to the employee will give a breakdown for the payroll deductions inclusive of, but not limited to, the number of payments to be made, the amount of the payments, how much should be coded as principal on a DOE46 on the payroll system, as well as how much should be coded as interest on a DOE45.

Once payroll deductions commence, payroll clerks do not have the authority to discontinue payroll deductions for a retirement credit purchase prior to completion without prior permission from the Retirement Division, unless they obtain the balance due from the employee and remit this payment, accompanied by an explanatory memo, to the Retirement Division.

NOTE: The Retirement Division purchasing unit should be contacted whenever more information is needed.

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