KPERS Papers Newsletter
Active Member Issue – September 2007, Volume 2
Inside This Issue
KPERS Benefits Changing for Future Members
State’s Deferred Compensation Oversight Moving to KPERS Ten Reasons You Should Be Planning for Retirement
You Have Someone at Your Employer to Help You
New State Laws to Cut Taxes
Retirement Planning Goes Beyond the Financial Picture
Will the Right Person Get Your Life Insurance?
Earlier Vesting for Current KPERS Members The Kansas Legislature recently made changes to the overall KPERS plan design for future
members. If you are currently an active KPERS member, your benefits will not change. However,
you may receive certain benefit enhancements from the new plan design.
Effective July 1, 2009:
• The vesting requirement is reduced to five years.
• The “year of service,” or year of waiting, for all non-school employees will be eliminated.
Five-Year Vesting
KPERS members are currently “vested” with ten years of service. When you are vested, it means
you have earned enough service credit to guarantee a retirement benefit. Under the new law,
KPERS members will vest in half the time, with only five years of service.
• If you are an active member with at least five years of service credit on July 1, 2009, you will become vested.
• If you are an active member with less than five years of service credit on July 1, 2009, you will become vested when you have five years of service credit.
First-Day Membership
Currently, State and local employees (also called non-school employees) must work for one year
before becoming KPERS members. This is called the “year of service.” All employees in their
year of service will automatically become KPERS members on July 1, 2009, but will keep the
same benefit structure they have now.
Except for these improvements, nothing changes about your benefits. The “85 point rule,” early retirement options and all other eligibility requirements will stay the same for you.
KPERS Benefits Changing for Future Members
In April 2007, the Kansas Legislature passed and the Governor signed into law a new plan design
providing modified benefits for KPERS members first employed on or after July 1, 2009.
New Plan Design Features
• First-day membership in KPERS
• Five-year vesting
• Normal retirement at age 65 with five years
of service, or at age 60 with 30 years of service
• Early retirement at age 55 with 10 years
of service
• Automatic annual 2 percent cost-of-living
adjustments beginning at age 65
• Employee contribution rate of 6 percent
Plan design changes do not apply to KP&F members or the Retirement System for Judges.
Changes Won’t Affect Your Retirement Except for the benefit improvements detailed on page 1, these changes for future employees in no
way affect your retirement benefits. Benefits for members currently employed by KPERS-
participating employers are safe and guaranteed by the State of Kansas. The “85 point rule,”
early retirement options and all other eligibility requirements will stay the same for you.
Anyone working now will receive the benefits they have been promised.
See www.kpers.org/legislation.htm for more information about the new plan design.
State’s Deferred Compensation Oversight
Moving to KPERS
Many Retirement System members also save through the Kansas Deferred Compensation Plan.
Based on new legislation, the plan’s oversight is moving to KPERS, beginning January 2008.
The State’s Department of Administration oversees the plan now and it is available to all State
employees. In addition, many local public employers, like cities and counties, provide the
deferred compensation plan for their own employees.
How This Affects Participants
January’s transition will not directly affect plan participants or their accounts. ING will continue
to provide day-to-day customer service and handle investment transactions. They will be able to
answer whatever questions you have about your accounts.
This teaming up by KPERS and ING will offer employees a more coordinated approach to
retirement education and planning information. We also hope it will create a more meaningful
understanding of the deferred compensation plan as a retirement benefit and how it fits with the
Retirement System.
Transition Timeline
Oct 2007 ING unveils investment
lineup and plan features Nov – Dec 2007 Transition planning and
member communication Jan 1, 2008 Plan transfers to KPERS
Assets $691 • State $459 million
million • Local $232 million Total Participants 26,300 • State 15,300
• Local 11,000 Active Participants 16,400 • State 8,700
• Local 7,700 Employers 240 • State of Kansas
• Local 239 *as of 6/30/07
Ten Reasons You Should Be Planning for Retirement
You’ll Need More Than Just Your Pension 1. While an important part of your retirement income, your Retirement System benefits will be
just one part. Your pension was designed to supplement Social Security and your personal
savings. As you work and earn service credit, it is equally important to save on your own.
Social Security’s Future is Uncertain 2. For most members, Social Security is a vital part of retirement income, but the program is
facing significant long-term funding challenges. There are no plans to reduce benefits for current
retirees or those nearing retirement. However, today’s younger workers could face reduced benefits unless changes are made in the near future. In addition, the full retirement age has
increased to 67 for those born in 1960 or later.
You Might Live Longer Than You Think
3. People are living longer and healthier lives. The average life expectancy at birth has risen 30
years in the last century. If you retire at age 55 in good health, you might reasonably expect to
spend 25 to 30 years in retirement. While KPERS and Social Security pay benefits for as long as
you are living, your retirement savings also has to last.
We’re Saving Less
4. Most of us are not saving enough for retirement. According to the U.S. Department of
Commerce’s Bureau of Economic Analysis, the national savings rate is at its lowest level since
the 1930s, declining from 10 percent in 1970 to negative 1 percent in 2006.
You Probably Haven’t Calculated Your 5. Retirement Needs
According to the Employee Benefit Research Institute’s 2007 Retirement Confidence Survey (RCS),
only about four in ten workers have calculated how much they need to save for retirement. For an
easy way to estimate your retirement income needs, try the American Savings Education Council’s
“Ballpark Estimate” worksheet at www.choosetosave.org.
Working After Retirement 6. Many retirees find that part-time work or a new career can be a fulfilling and rewarding way
to supplement their income. But counting on your ability to work after retirement may not be the
safest bet. The 2007 RCS reports that even though 60 to 70 percent of workers say they will work
after retirement, only about half of those actually do.
If you return to work for the same Retirement System employer, you may be limited to how
much you can earn without affecting your retirement benefit.
Handling Health Care Costs 7. Health care costs have risen two to three times faster than inflation over the last few decades,
with no sign of slowing down. Without proper planning, you may find health care eating up much
of your hard-earned savings. Soaring health care costs may hit extra hard if you retire early, since
Medicare coverage doesn’t begin until age 65.
Long-Term Care Is Often Overlooked 8. No one can predict whether they’ll need long-term care, and those who need it can rarely cover the costs without depleting their savings. Private health insurance and Medicare won’t pay
for long-term care. Considering long-term care insurance before you need it can provide financial
protection for you and your loved ones.
Lifestyle in Retirement
9. It’s no surprise that retirees are more active than ever. Although retirees generally expect to
eliminate or reduce many expenses, like mortgages, cost of raising children and the daily
commute, many find that other expenses like travel and entertainment may go up. When planning
for retirement, be honest with yourself about how you will spend your budget.
Keep Time on Your Side
. 10Time and compound interest are your most valuable allies when it comes to saving for retirement. Compound interest is at work when your original investment earns interest, and then
you continue to earn interest on the interest. The effects can be dramatic as your returns increase
exponentially over time. Compound interest is particularly valuable if you can only afford to save
modest amounts. It’s better to get started sooner, even with a small amount of money, than not at all.
You Have Someone at Your Employer to Help You
When it comes to retirement, you have a valuable resource wherever you work. Every employer
that offers KPERS benefits has appointed a designated agent. In fact, your designated agent
works for the same employer you do. This person is your local contact for KPERS information. If
you’ve ever wondered who this person is or what they can do for you, look no further.
How to Find Your Designated Agent
Your designated agent is listed on the personalized KPERS annual statement you received this
spring. If you don’t know who your designated agent is, check with your personnel office.
What Your Designated Agent Can Do For You
The following are some common requests designated agents receive from members.
I have questions about my benefits.
KPERS provides annual training as well as regular memos so that your designated agent has all
the information they need to help you get the most from your benefits.
I would like an estimate of my retirement benefits.
If you’re nearing retirement, it’s a good idea to have KPERS calculate a retirement estimate for
you. Your designated agent can help you complete a Retirement Benefit Estimate Request form,
using your most current pay information. KPERS will return an estimate to you through your
designated agent.
I’m ready to apply for retirement benefits.
Your designated agent has all the forms you will need. He or she also will provide information
that KPERS needs to process your application.
I need a printed KPERS publication or form.
Designated agents regularly keep a supply of our most current publications on hand. If not, they
can order one for you directly from us. Most KPERS forms are available at www.kpers.org. If
you don’t know which form you need, your designated agent can assist you.
I need to know the cost to purchase service credit.
Your designated agent can tell you whether your past service is eligible and help you with the paperwork to get a purchase cost from KPERS. He or she can also tell you about the various payment options that are available.
I’m leaving employment. What options do I have?
If you’re ending employment, talk to your designated agent about life insurance conversion and portability options. He or she can also provide information to help you decide whether to withdraw your contributions.
New State Laws to Cut Taxes
KPERS Lump-Sum Benefits Stay Tax-Exempt
A new Kansas law will ensure that KPERS partial lump-sum option (PLSO) payments, including earnings, keep their state tax-exempt status, even when rolled over to a qualified retirement plan. In general, KPERS benefits are exempt from Kansas income taxes. However, the Kansas Department of Revenue previously ruled that payments to KPERS members had to meet two requirements to be exempt from state taxes.
• The payment had to be received directly from KPERS.
• The payment had to be included in the member’s federal adjusted gross income in the year that it was received.
This ruling meant that KPERS payments that were rolled over could lose their characterization as KPERS benefits and be subject to state taxes upon withdrawal from the rollover plan. The new law changes this ruling and ensures that PLSO payments that are rolled over keep their state tax-exempt status.
Social Security Exemption
When you retire, you may be able to exempt Social Security benefits from your state income taxes. Beginning this year, eligible retirees will be able to subtract Social Security benefits that are included in federal adjusted gross income when filing their Kansas income tax return. Federal adjusted gross income will determine eligibility for the subtraction.
If you have questions about state income tax, please contact the Kansas Department of Revenue’s Taxpayer Assistance Center at (785) 368-8222 or tac@kdor.state.ks.us.
Common Questions About Contributions
Can I borrow money from my KPERS account?
No. State law does not allow us to administer a loan program for our members.
Can I withdraw part of my contributions while I am still working?
No. KPERS is a qualified 401(a) defined benefit pension plan under the Internal Revenue
Code. This type of plan is not permitted to allow “in-service distributions.”
When can I withdraw my contributions?
You can apply to withdraw your Retirement System contributions 31 days after your last day
on payroll if, in the meantime, you have not begun employment with another KPERS
employer. When you withdraw, you give up all Retirement System rights, benefits and
service credit.
Relocating for Retirement
Although the majority of KPERS retirees stay rooted in Kansas, there are some who venture to
other states, neighboring countries and even overseas. If relocating is part of your retirement plan,
consider these tips.
Reasons for Relocating
• Lower cost of living
• Proximity to family
• Warmer climate
• Change of scenery
Try Before You Buy
Consider evaluating potential locations based on the five “A’s.”
Access. Make sure basic necessities like health care, transportation, etc. are convenient. Amenities. Check availability of enjoyable activities like hobbies, cultural attractions, etc. Ambience. Do you enjoy the overall surroundings? Affordability. Cost of living, housing and state tax structure can be important budgeting factors.
Atmosphere. Even in paradise, there are four seasons. Be sure you can tolerate the climate any
time of year.
Did You Know?
• About 88 percent of KPERS benefit recipients reside
in Kansas.
• KPERS benefit recipients inhabit all 50 states.
• KPERS benefit recipients reside in 15 countries outside the U.S.
Retirement Planning Goes Beyond the Financial Picture
Most traditional retirement planning is financial, but finances alone do not automatically make for a happy retirement. Even though planning and saving for retirement is of vital importance, retirement planning is about more than just saving and spending money. You also need a plan for how you’re going to spend your time.
Adjusting to a New Lifestyle
Think about how your time is spent now. You probably balance your time between different aspects of your life, like your career, time with family and recreation. Sometimes it may seem like there aren’t enough hours in the day.
For some retirees, the first part of retirement can feel like a long vacation. Free from job responsibilities, they finally have time to rest, travel, enjoy favorite pastimes and experience new ones. For some, this “vacation” phase may last for years. But for others, it quickly passes and they find that their new lifestyle isn’t as satisfying as they thought it would be.
Facing Retirement’s Psychological Challenges
Adjusting to life without work can be difficult for some. Work often fulfills many basic human needs, such as:
• Sense of belonging
• Power and influence
• Feeling of achievement
• Goals to accomplish
• Social interaction
• Sense of self-worth
Many of your life goals now are likely connected to your career. These long-range goals could include earning a living, supporting a family, buying a home, educating your children and saving for retirement.
Consider the activities and interests that will be stimulating and satisfying to you during retirement. What personal goals will you find rewarding once your career is over? Keys to a Satisfying Retirement Lifestyle
Staying mentally, physically and socially active is key to an enjoyable retirement. Retirement is a stage of your life that could last many years. Planning is essential for adjusting to your new lifestyle and continuing to fulfill the basic human needs that are now at least partially satisfied by your work. Think about activities and personal goals that will contribute to a satisfying retirement lifestyle. Do you want to:
• Travel the world or stay at home?
• Volunteer time for community activities?
• Start a new business or even a new career?
• Rediscover a favorite hobby or take up a new one?
Everyone’s vision of retirement is unique. If you’re married, share your dreams and goals with your spouse so that both of you can explore and work out differences. What if one wants to travel and the other wants to stay home?
Financial planning for retirement is certainly important, but it’s also important to look beyond the financial picture. After all, the ultimate goal for financial security is to be able to enjoy a healthy, happy, and meaningful lifestyle.
Will the Right Person Get Your Life Insurance?
As a KPERS member, you are automatically covered by basic group life insurance equal to 150 percent of your salary. By checking your beneficiary information from time to time, you can be sure the right person will receive your life insurance benefits should anything happen to you. It is especially important to review your beneficiary list whenever you have a significant life event. As your life situation changes, so could your choice of beneficiary.
• Marriage • Birth or adoption
• Divorce • Death in the family
You have the option to name separate beneficiaries for your retirement benefits and your group life insurance.
What Your Beneficiary Receives
• Retirement benefit = your account balance
• Life insurance = basic life insurance and
any optional life insurance
You can change beneficiaries anytime by completing a Designation of Beneficiary form (KPERS-7/99). Each time KPERS receives a new form from you, it cancels all those you have previously submitted. Be sure to fill it out completely each time. You will receive a confirmation letter to verify your beneficiary change.
A Special Benefit for Your Spouse
Sometimes, naming your spouse as the sole primary beneficiary could be best for your family. KPERS has a benefit called the “Surviving Spouse Benefit Option,” created especially for your spouse.
If you die before retirement, your spouse may be able to choose a lifetime monthly benefit instead of just receiving your account balance. For your spouse to have this option, you must name him or her as your sole primary beneficiary and have at least ten years of service. If you are eligible to retire when you pass away, your spouse begins receiving the monthly benefit right away. If you weren’t eligible to retire, but had ten years of service, monthly benefits start when you would have reached age 55.
This is not an automatic benefit. Your spouse will have the option to choose either your account balance or the monthly benefit, whichever is best at the time.
You can name contingent beneficiaries or separate beneficiaries for your life insurance without affecting this option.
Safeguarding Your Personal Information
At the Retirement System we value your trust, both with your retirement finances and your
personal information. Please be assured that KPERS records are kept private and confidential. We take this responsibility seriously in the way we conduct business and dispose of documents.
Staff members do not disclose information, even to a spouse, without authorization from a member. We realize this policy may frustrate you at times, but we feel it is necessary to protect you.
Social Security numbers are a hot commodity these days. We are making every effort to remove
them from letters and other communications wherever we can. If a Social Security number really
is necessary, we use only the last four digits. Whenever you send us a letter or e-mail, be sure to include only the last four digits yourself. Using just the last four will not significantly increase your identity theft risk.
It would be an extremely rare, unusual case that Retirement System staff would call you for
personal information like your Social Security number. Be absolutely certain it’s us before
providing anything. We suggest you hang up and call back through our InfoLine call center just
to be sure.
Members Rate Redesigned Annual Statements
Earlier this year, you should have received a member annual statement from the Retirement
System through your employer. Annual statements show account and beneficiary information.
Vested members also have retirement benefit estimates.
Because of our new information system, we were able to make significant design changes and
customize content. To find out what members thought about the new statement, we invited 3,600
members to participate in an online survey.
Result Highlights
Agreed statement is valuable 87% tool and resource
Agreed content was clear 81% and easy to understand
Agreed statement was helpful 86% and relevant Agreed their statement 83% was accurate Agreed distribution 89% was confidential