RETIREMENT SERVICES DIVISION MEMORANDUM 2018-05

April 10, 2018

TO ALL HEADS OF STATE AGENCIES

I. Introduction

The purpose of this memorandum is to provide updated information to all state agencies concerning the on-going implementation of the SERS Tier IV retirement plan as provided for under the 2017 agreement between the State and the State Employees Bargaining Agent Coalition (SEBAC).

As discussed in prior communications, complications in the ratification of the SEBAC 2017 agreement resulted in a delay in the ability of the Retirement Services Division and CORE-CT to make the changes necessary to implement the new Tier IV retirement plan. Just as in Memorandum 2018-01 wherein we provided information advising agencies on the use of the new CORE-CT payroll codes that were developed to implement the retroactive payment of the mandatory retirement contributions for Tier I, Tier II and Tier III respectively, the present memorandum provides similar information regarding the process and timeline for Tier IV.

II. General Information

SEBAC 2017 provided for the implementation of the new SERS Tier IV retirement plan for new employees first hired on or after July 31, 2017. The SERS Tier IV plan is comprised of both a traditional Defined Benefit component and a new Defined Contribution component.

The Tier IV Defined Benefit component provides a pre-defined monthly retirement income for life, with the amount being affected by years of service, retirement age, and the member's final average earnings for members that satisfy the Tier IV minimum age and service eligibility requirements.

The Tier IV Defined Contribution component establishes an account consisting of an accumulation of employee and employer contributions, as well as investment gains or losses. Each Tier IV member will have an account with Prudential Retirement the current third party administrator of the State of Connecticut 457 Plan, the 403(b) Plan and the Alternate Retirement Program (ARP). Information about this new plan is expected to be included on the State of Connecticut Defined Contribution website, www.CTDCP.com  effective April 16, 2018.

The retirement plan contribution rates required for the respective Tier IV Defined Benefit and Defined Contributions components are as follows:

Many employees when first hired on or after July 31, 2017 were placed in the wrong SERS retirement plan which as a result has led to underpayment of retirement contributions. Agencies have corrected the Tier placement in most cases. However, for those members whose plan membership was corrected, outstanding mandatory catch up contributions still remain due. In that connection, mandatory catch up contributions will commence with the check dated April 13, 2018. Please note that the catch up contributions will continue for the remaining six check dates in Fiscal Year 2018.

III. Tier IV Defined Benefit ("DB") Catch-Up Contributions Codes

In January 2018, CORE-CT developed and released payroll codes for the mandatory retirement contributions for the Tier IV Defined Benefit for both the employee and employer share. CORE-CT has now updated those codes to reflect the catch up contributions that are due from the employee only. The contribution deduction codes that correspond with the Tier IV member's retirement plan are as follows:

While agencies are able to add the applicable retirement plan contribution codes for Tier IV employees, the Catch-up code may only be added by Active and Pension Payroll and is available for viewing purposes only in the General Deduction Screen for agency personnel and payroll users.

IV. Tier IV Defined Contribution ("DC") Catch-Up Contributions

As stated above, the SEBAC 2017 agreement states that Tier IV employees are required to make a mandatory 1% contribution to a Defined Contribution Plan that is matched by a 1% employer contribution. Effective with the check dated April 13, 2018 Tier IV employees will commence with those contributions.

Because of the time that has been needed to set up the new plan, employees first hired on or after July 31, 2017 into the SERS Tier IV plans (Non-Hazardous Duty, Hazardous Duty, and Hybrid) were unable to contribute to the Defined Contribution Plan. The employee missed out on the matching employer share also. For this reason the State of Connecticut and SEBAC agreed that the employees will make temporary supplemental Tier IV Plan Defined Contributions ("DC Catch-Up Contributions") for the remainder of Fiscal Year 2018. The employee DC Catch-Up Contributions will be matched by equal employer DC Catch-Up Contributions - all with the goal of ensuring that employees will have received the same contributions that would have been available, had the Tier IV Plan been ready to receive contributions when they were first hired.

The amount of each installment of the DC Catch-Up Contributions is determined by the number of pay periods between the member'
s date of hire and the date on which the member began paying Tier IV DC contributions. The DC Catch-Up Contributions will also begin on April 13, 2018 and cease with the June 22, 2018 paycheck. The following chart provides the various DC Catch-Up Contributions rates as determined by the number of pay periods between the employees'
date of hire and enrollment in Tier IV.

For the purposes of this memorandum, the date of hire refers to the member's date of hire between July 31, 2017 and March 31, 2018, which corresponds with Tier IV membership.

Tier Members can choose how the funds in their Defined Contribution account will be invested. A description of the Plan's investment options can be found at www.CTDCP.com  under "Your Plan" section. The plan will have the same investment options as the ARP, 457 and 403(b) plans. The Plan will also have GoalMaker, which is a model portfolio program designed to diversify investments based upon a participants tolerance for risk (Conservative, Moderate or Aggressive) and estimated years until retirement. Information about GoalMaker can be found at www.CTDCP.com  under "Your Tools". All new Members in the plan will have their account funds initially invested using the GoalMaker Moderate Portfolio that is most closely aligned with his/her date of retirement. Once the plan is live and the website access has been set up, (target date April 16, 2018) participants will be able to create online account access and can modify their investment choices at any time. Those seeking assistance in the selection of their investments can contact one of Prudential's retirement counselors. The administrative fee for participating in the plan is 0.046% per year, which will be debited from each participant'
s account balance.

CORE-CT payroll codes have been updated to incorporate the new Defined Contribution Plan contributions as well as the temporary supplemental contributions. The contribution deduction codes that correspond with the Tier IV member'
s defined contribution plan are as follows:

CORE-CT has instructed that the remainder of the deduction code values for the catch up contributions is dependent upon the employee'
s date of hire and a job aid is being developed with a more detailed explanation so as to assist agencies.

V. CONCLUSION

It is our expectation that this information will be distributed to all of your applicable business units that participate in the hiring of new employees. Please be advised that as the Retirement Services Division implements the necessary processes to administer SEBAC 2017 we will continue to provide agencies with information as it becomes available.

Any questions regarding the information provided herein may be directed to Colin Newman, Assistant Director at (860) 702-3482 or by email Colin.Newman@ct.gov. 

Very truly yours,
STATE EMPLOYEES RETIREMENT COMMISSION
KEVIN LEMBO, SECRETARY EX OFFICIO
BY:
John Herrington, Director
Retirement Services Division

JH/cn

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