A little-known retirement benefit has re-asserted its importance in light of the weak economy and the voluntary early retirement incentive (VERI) recently offered to WSU employees.
The retirement supplement is available to eligible employees in the Washington State University Retirement Plan (WSURP), commonly referred to as the TIAA-CREF plan.
The goal of the supplement is to ensure that participants achieve at least a basic level of income upon retirement. For eligible retirees, that level would be 20-50 percent of the average of their highest two-year consecutive salary.
To be eligible for the supplement, employees must be active WSURP participants for at least 10 years and they must be age 62 or older. If retirement is approved due to a health condition, the age requirement is waived.
The specific percentage within the 20-50 percent target range is determined by years of service in a higher education retirement plan. Benefits increase for plan participation beyond the 10-year minimum – up to 25 years, when supplementation is capped.
The benefit is reduced for retirement age between 62 and 65. It is also less for those who did not increase their retirement investment to 10 percent of their salary at age 50.
Previous participation in the PERS retirement plans also will mean subtractions – either of PERS years or retirement money – when the supplement calculations are made.
Consider an employee who retires at age 65 with 25 years of service with an average highest two-year consecutive salary of $5,000 per month. If it were determined that she is eligible under retirement supplement calculations to receive 50 percent of that amount ($2,500), and TIAA-CREF calculates her assumed retirement benefit will be $2,000, then her monthly supplement from WSU will be $500.
Another employee’s average highest two-year consecutive salary also might be $5,000 per month. But retirement supplement calculations show, due to age and years of service, he is eligible for 20 percent of that ($1,000). If TIAA-CREF calculations determine that he will receive $1,100 in retirement benefits, he will not receive the supplement.
In all cases, the supplement will be paid for the life of the retiree and/or his/her survivor.
Unique benefit
“It’s a huge benefit,” said Ann Monroe, WSU senior human resource consultant, at a recent information session attended by about 27 employees on the Pullman campus. “TIAA-CREF representatives have said we’re the only state providing a plan like this.
“The state Legislature put it into effect in the early 1970s – another tough economic time,” said Monroe. “Most employees have achieved their minimum retirement target in recent years and therefore have not received supplementation. But with the current economy, we may see more eligible for supplementation.”
In fact, she said, of the retirees whose numbers she has run in the past 18 months, 60 percent have received a supplement.
Early retirement incentive
Besides the economy, another factor bringing retirement supplementation to the forefront is the early retirement incentive that WSU has offered to eligible employees as part of its budget-reduction efforts.
“If you’re considering the VERI, supplementation might be another piece of information you can use to help you make your decision,” Monroe said. However, she said, to receive the required information from TIAA-CREF to complete the calculation may take several months, and not all employees may receive the information within the VERI timelines.
Recent supplementations commonly have ranged from $150-$600 per month.
“But it’s really very unpredictable,” Monroe said, “both the amount and whether an employee will qualify once we run the numbers.”
More information
Monroe said about 180 WSU employees are at least age 62 with 10+ years in the WSURP plan – and thus might qualify for retirement supplementation. About 200 retirees are receiving a supplement.
Retirement supplementation should not be confused with the voluntary investment plan (VIP), formerly known as the supplemental retirement account (SRA). The VIP is a separate plan that an employee may choose to invest in – in addition to the primary retirement plan.
More information – including registration for a March 11 information session offered by HRS – can be found ONLINE @ www.hrs.wsu.edu by clicking on “Retirement Supplementation.”