Retirement Services Division

Number of Remaining Annual Payments | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|

10 | 9 | 8 | 7 | 6 | 5 | 4 | 3 | 2 | 1 | |

Percent Reduction in Value | 16.50% | 15.20% | 13.70% | 12.30% | 10.70% | 9.10% | 7.40% | 5.70% | 3.90% | 2.00% |

**Example: **

Assume that an employee's total service purchase cost without consideration of any encumbered funds is $205,000. The employee has $100,000 in encumbered funds in the TIAA Traditional Fixed Account and $150,000 in ARP, 403(b), and 457 accounts. The employee has elected to use their encumbered funds for the payment of their service purchase, after they have exhausted their non-encumbered funds. The employee has initiated the transfer of their encumbered funds from TIAA to the Prudential ARP Transition Fund.

Encumbered funds are paid in 10 installments over a period of approximately 9 years. For purposes of this example we will assume that each annual installment is $10,000 and the first installment has been deposited to the employee's Prudential ARP Transition Fund with 9 more annual installment payments to be made reducing their total encumbered funds with TIAA to $90,000 and increasing their Prudential ARP Transition Fund account total to $160,000.

Using the discount chart above reduces the value of the employee's encumbered funds for the purpose of this service purchase by 9.10% or $4,095.00 and consequently increases the overall cost of the service purchase by $4,095.00.

The amount required for the employee's first payment towards their purchase service cost will be $160,000.00 and each of the 5 subsequent installment payments, for a total of $49,095.00, must be transferred to SERS from Prudential to complete the purchase. The employee will retain the remaining balance of $50,905 ($100,000 - $49,095) in their Prudential ARP account following the transfer of the remaining payments from the TIAA Transition Fixed Account to SERS and may direct Prudential to reallocate these funds as desired.

Additional Cost/Discount: | $45,000 X .910 (9.10%) = | $ 4,095 |

Adjusted Service Purchase Cost: | $205,000 + $4.095 = | $209,095 |

First Payment: | $209,095 - $160,000 =
Balance = $49,095 |
$160,000 |

Plus Five Subsequent Payments: | = $49,095 | $ 10,000 |

$ 10,000 | ||

$ 10,000 | ||

$ 10,000 | ||

$ 9,095 |
||

Total Amount Paid: | $209,095 |

**Example 2:**

Assume that an employee's total service purchase cost without consideration of any encumbered funds is $200,000. The employee has $100,000 in encumbered funds in the TIAA Traditional Fixed Account and $100,000 in other ARP accounts. The employee has elected to use their encumbered funds for the payment of their service purchase cost and has initiated the transfer of their encumbered funds from TIAA to the Prudential ARP Transition Fund.

Encumbered funds are paid in 10 equal installments over a period of 10 years. For purposes of this example we will assume that each annual installment is $10,000 and the first installment has been deposited to the employee's Prudential ARP Transition Fund with 9 more annual installment payments to be made reducing their total encumbered funds with TIAA to $90,000 and increasing their Prudential ARP account total to $110,000.

Using the discount chart above reduces the value of the employee's encumbered funds for the purpose of this service purchase by 15.20% or $13,680 and consequently increases the overall cost of the service purchase by $13,680.

The amount required for the employee's first payment towards their purchase service cost will be $123,680 and each of the 9 subsequent installment payments, for a total of $90,000, must be transferred to SERS from Prudential to complete the purchase. This means that the employee must either use $13,680 from their State 457 or 403b account to meet the required first payment or purchase a reduced amount of service credit. To calculate the reduced amount of service to which they are entitled, the employee should enter the total of their other ARP accounts, $110,000, plus the reduced value of their encumbered funds, $76,320 ($90,000 - $13,680) to the service credit estimator.

Additional Cost/Discount: | $90,000 X .1520 (15.20%) = | $ 13,680 |

Adjusted Service Purchase Cost: | $200,000 + $13,680 = | $213,680 |

First Payment: | $213,680 - $90,000 = | $123,680 |

Plus Nine Subsequent Payments: | $ 10,000 | |

$ 10,000 | ||

$ 10,000 | ||

$ 10,000 | ||

$ 10,000 | ||

$ 10,000 | ||

$ 10,000 | ||

$ 10,000 | ||

$ 10,000 |
||

Total Amount Paid: | $213,680 |

**Example 3: **

Assume that an employee's total service purchase cost without consideration of any encumbered funds is $200,000. The employee initiated a transfer of their encumbered funds from TIAA to Prudential 3 years ago and has $70,000 remaining in the TIAA Traditional Fixed Account and $175,000 in other ARP accounts. The employee has elected to use their encumbered funds for the payment of their service purchase cost.

Encumbered funds are paid in 10 equal installments over a period of 10 years. For purposes of this example we will assume that the employee has 7 more annual installments in the amount of $10,000 to be made.

Using the discount chart above reduces the value of the employee's encumbered funds for the purpose of this service purchase by 12.30% or $8,610 and consequently increases the overall cost of the service purchase by $8,610.

The amount required for the employee's first payment towards their purchase service cost will be $138,610 and each of the 7 subsequent installment payments, for a total of $70,000, must be transferred to SERS from Prudential to complete the purchase. The employee will retain the remaining balance of $36,390 ($175,000 - 138,610) in their Prudential ARP account.

Additional Cost/Discount: | $70,000 X .1230 (12.30%) = | $ 8,610 |

Adjusted Service Purchase Cost: | $200,000 + $8,610 = | $208,610 |

First Payment: | $208,610 - $70,000 = | $138,610 |

Plus Seven Subsequent Payments: | $ 10,000 | |

$ 10,000 | ||

$ 10,000 | ||

$ 10,000 | ||

$ 10,000 | ||

$ 10,000 | ||

$ 10,000 | ||

Total Amount Paid: | $208,610 |

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