PTAA helps teachers make very important decisions for their retirement.
Caring for your family is your number one priority. If you are within five years of retiring, now is the time to make informed decisions that could affect you and your family’s future after you retire.
Making such decisions can be difficult without the proper information. There are decisions that need to be made now and entail many things:
- Understanding pension options A, B and C
- Is all of my creditable service accounted for?
- Did you know you could pay for creditable service with pre-tax dollars?
- Do I need long term care insurance?
- What about health insurance and Medicare?
- How will the Windfall Elimination Provision (WEP) affect my Social Security?
- How does the Government Pension Offset (GPO) affect my spouse?
For more complete information about the various types of creditable service, visit the website at mass.gov/mtrs. Forms to purchase service can be downloaded from the website or obtained by calling the MTRS at 617-679-6877 in Boston or 413-784-1711 in Springfield.
Buying Back Creditable Service
- Use pre-tax versus after-tax dollars from your 403 B/457/IRA
- Buying back from other states
- Buying back overseas (You must have 10 years teaching in Massachusetts to buy back from other states and overseas)
Forms of Creditable Service
- Regular service
- Out-of-state public school teaching service, up to 10 years
- Substitute, temporary, part time teaching or tutoring
- Maternity prior to January 1975
- Any unpaid leave of absence - one month
- Non-public school service - prior to 1973, up to 10 years
- Military service, up to four years
- Peace Corps service, up to three years
- Work done in any state, county, municipality, as long as not while you are teaching
- Part of a year counts
Options A, B, and C in Summary
Full benefits (not to exceed 80%). No benefits to a survivor. Of all three options, Option A provides you with the highest possible monthly allowance; it does not, however, provide for any continuing survivor benefits. Upon your death, all Option A retirement payments will stop, and any retirement benefits you earned during the month of your death will be paid to your estate.
1% less than Option A. Lump-sum payment to a survivor. No restrictions on the named beneficiary. The beneficiary receives the balance of the annuity savings account which reduces each year and phases out after the sixteenth year.
Option B provides you with a monthly allowance that is approximately 1% less than an Option A allowance. This option’s payments are slightly less because Option B does provide for a possible one-time, lump-sum survivor benefit. The Option B survivor benefit is a lump-sum payment of the balance, if any, remaining in your annuity savings account at the time of your death. During your retirement, the balance in your annuity savings account decreases by an amount equal to the annuity portion of your retirement allowance. In most cases, the annuity account will be depleted after 11-12 years. For all intents and purposes, this recordkeeping is "invisible" and the reductions do not affect monthly retirement payments.
Upon your death:
- all Option B retirement payments will stop,
- any retirement benefits you earned during the month of your death will be paid to your estate, and,
- the balance remaining in your annuity savings account, if any, will be paid in a lump sum to your Option B beneficiary or estate.
If your annuity savings account is depleted while you are receiving an allowance, you will continue to receive the full Option B retirement allowance for life; upon your death, your estate will receive only the amount of the retirement allowance that you were entitled to in the month of your death. Under Option B, you may designate more than one person as your beneficiary and that person or persons need not be related to you.
5%-25% less than Option A. Monthly benefit at a reduced level continues for the surviving beneficiary who must be a spouse, parent, child, sibling or former spouse who has not remarried. The pop-up provision, effective after January 12, 1988, restores Option A pension if the beneficiary pre-deceases the retired teacher.
Option C provides you with the smallest monthly allowance (approximately 5-25% less than an Option A allowance). It also provides your surviving beneficiary with monthly payments for the rest of his or her life. The calculation of the Option C allowance is based on the life expectancies of both you and your beneficiary at the time of your retirement.
Upon your death:
- all Option C payments will stop, and
- your beneficiary will receive a monthly survivor benefit that is equal to two-thirds of the amount of your Option C allowance on the date of your death. Your beneficiary must be your spouse, parent, sibling, child or former spouse who has not remarried.
Option C “Pop-Up”
If you retire under Option C and your beneficiary predeceases you, you cannot name a different “Option C beneficiary.” Under the terms of the so-called "pop up" provision, the monthly benefit will "pop up" to a higher amount that is proportional to the amount you would have received under Option A at the time of your retirement. This new, higher amount is then paid to you as of the date of the death of your beneficiary and until your death. In the event that your Option C beneficiary predeceases you, you will need to notify the MTRS. You will be required to complete an Option C Reversion Claim Form, and then recalculate your retirement allowance.
Final Average Salary (FAS)
Regular salary + longevity + any money you get for a contractual stipend position = your salary. Sick leave buy back and “deals” cannot be included.
Your FAS is made up of the average of your three highest consecutive years’ salaries.
Under Retirement Plus, retirement benefits for eligible and participating members are now increased by 2% for each full year of creditable service in excess of 24 years, up to the statutory maximum of 80%. The contribution rate for Retirement Plus participants was set at a flat 11%.
In February 2001, then current members of the MTRS were mailed an Election Form and given until June 30, 2001 to affirmatively elect to participate in Retirement Plus. New members as of July 1, 2001 are automatically subject to Retirement Plus. Members who transfer into the MTRS from another Massachusetts contributory retirement system on or after July 1, 2001 have 180 days in which to elect to participate in Retirement Plus; if they did not respond, they are not enrolled in Retirement Plus.
Eased Restrictions on Retiree Re-Employment
During a period of a “critical shortage” of teachers as declared by local school districts, and approved by the Massachusetts Department of Education, MTRS retirees are now allowed to return to public teaching service in Massachusetts without restriction. Members who retire under Retirement Plus, however, must be retired for at least two years before they may be rehired without restriction.
Effective April 2, 2012, superannuation retirees, who have been retired more than a year, will be allowed earnings of up to $15,000 above the salary currently being paid for the position from which he/she retired when added to his/her retirement allowance. Please note, the new law did not increase the number of hours of public employment that are allowed to be worked during a calendar year. It remains at 960 annual hours.
Since the calculation for post-retirement limits for public employment is based on a calendar year basis under the provisions of G.L. c. 32 § 91 (b), adding the additional $15,000 towards post-retirement limits during calendar year 2012 will be afforded to only those retirees whose retirement became effective on or before April 1, 2011. In subsequent calendar years, retirees who have retired before January 1st of the prior calendar year will be afforded the additional $15,000 towards their post-retirement limit.
You are eligible to receive a cost-of-living adjustment (COLA) in the second year of retirement. COLAs may only be granted by the Massachusetts Legislature, not the MTRS and are not guaranteed. In recent years, the maximum increase has been $390 per year ($32.50 per month). By law, the annual COLA is equal to the increase in the Consumer Price Index (CPI) or 3%, whichever is less. Currently, a COLA is granted only on the first $13,000 of your retirement allowance.
The Government Pension Offset (GPO)
The Government Pension Offset is a law that affects spouses and widows or widowers. If you receive a pension from a federal, state or local government based on work where you did not pay Social Security taxes, your Social Security spouse’s or widow’s or widower’s benefits may be reduced. Here are answers to questions you may have about the reduction.
How much will my Social Security benefits be reduced?
Your Social Security benefits will be reduced by two-thirds of your government pension. In other words, if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted from your Social Security benefits. For example, if you are eligible for a $500 spouse’s, widow’s or widower’s benefit from Social Security, you will receive $100 per month from Social Security ($500 – $400 = $100).
If you take your government pension annuity in a lump sum, Social Security still will calculate the reduction as if you chose to get monthly benefit payments from your government work.
Why will my Social Security benefits be reduced?
Benefits that Social Security pays to wives, husbands, widows and widowers are “dependent’s” benefits. These benefits were established in the 1930s to compensate spouses who stayed home to raise a family and who were financially dependent on the working spouse. But as it has become more common for both spouses in a married couple to work, each earned his or her own Social Security retirement benefit. The law has always required that a person’s benefit as a spouse, widow, or widower be offset dollar for dollar by the amount of his or her own retirement benefit.
For more information:
Windfall Elimination Provision
Your Social Security retirement or disability benefits may be reduced if you work for an employer who does not withhold Social Security taxes from your salary, such as a government agency or an employer in another country. If this is the case, any pension you get based on that work may reduce your Social Security benefits.
The Windfall Elimination Provision affects how the amount of your retirement or disability benefit is calculated if you receive a pension from work where Social Security taxes were not taken out of your pay. A modified formula is used to calculate your benefit amount, resulting in a lower Social Security benefit than you otherwise would receive.
When your benefits may be affected:
The Windfall Elimination Provision primarily affects you if you earned a pension in any job where you did not pay Social Security taxes and you also worked in other jobs long enough to qualify for a retirement or disability benefit.
For example, this provision affects Social Security benefits when any part of a person’s federal service after 1956 is covered under the Civil Service Retirement System (CSRS). However, federal service where Social Security taxes are withheld (Federal Employees’ Retirement System) will not reduce your Social Security benefit amounts.
The Windfall Elimination Provision may apply if:
- you reached 62 after 1985; or
- you became disabled after 1985; and
- you first became eligible for a monthly pension based on work where you did not pay Social Security taxes after 1985, even if you are still working.
You will receive a greatly reduced percentage of what you are entitled to in Social Security unless you:
- were eligible to retire prior to January of 1986
- have 30 years of substantial earnings
- are eligible for Medicare