The below post is taken from the Video Blog, the Subject Matter Minute. If it’s a little hard to read, it’s because it’s taken from the spoken word. You can view the episode on YouTube if you would like. Find it here: Episode #21 – The Public Employee Pension Plan, Part 2
If YouTube is blocked for you or your agency, you can scroll to the bottom of this post to view it from Google Drive. (I would prefer you view in YouTube, so I know how many people have watched)
You can also listen to an audio version.
Hello and welcome to another episode of the Subject Matter Minute, I’m Matt Nagy. This is part 2 of a two-parter on our pension. If you missed it, the last episode was Episode #20, and it covers a ton of information about the pension… the first half of this two-part series. This one’s gonna be a little bit long, just like last time… I apologize up front, and I’ll save that little tidbit about my daughter for next time. 🙂
We’re gonna jump right in. As I said, please go back and watch the first episode, Episode #20, on your pension. In that, we covered a bunch of details… we covered what a pension is, how much comes out of your check, when you become vested, how you accumulate service credits, when you can retire, how much you can expect to get, and what you can do if you leave employment before you retire.
In part 2 we’re going to cover what happens to your pension if you die before retirement, beneficiaries, applying for retirement, retirement payments, returning to work after retirement, and a few other small items of interest.
Who knew there was so much involved in a pension! Maybe some of you guys who are getting close or are dealing with it knew, but the rest of us probably didn’t… I know I certainly didn’t.
First of all, number one thing when you first get your job with the state… make sure you go in log into your account and designate a beneficiary. This person will get your benefits if you die.
So if you die before retirement, whether or not you’re vested makes a difference in what your beneficiary will get, or the choices that they would have. If you’re not vested at the time of your death – you know less than 48 months of service – then your beneficiary will get a lump sum of twice the amount in your account. Now keep in mind we’re talking about the public employee pension plan. This is a bit different in the other ones like the public safety plans, but all of this is simply for the majority of us in the public employee pension plan.
If you are vested at the time of your death your beneficiary can either take a lump sum or take a lifetime monthly benefit. Basically what you would have gotten… sorry. A beneficiary must be at retirement age to receive the lifetime benefit.
I’m going to apologize up front… I will be referencing my notes because this is a lot of information, and while I know it, it’s a little bit hard to just throw out there… so forgive me for that.
As I was saying, if you were vested at the time of your death, your beneficiary can either elect a lump sum or a lifetime monthly benefit. Any beneficiary must be at retirement age to receive the lifetime benefit. A spousal beneficiary can wait before they start taking the benefits, but only till the member, you, would have been 70 and a half years old.
A non spousal beneficiary who is not of retirement age at the time of your death would only be eligible for the lump sum. There’s a lot of specific timing requirements for non spouse beneficiaries, so if that’s what’s going on and you need to know about that, please contact WRS.
There are other scenarios, such as people with more than one beneficiary, or if an entity is your beneficiary (like a trust). If if you need to know more about that go ahead and contact WRS on that as well.
One little interesting tidbit… you can change your beneficiary anytime pre-retirement, but your spouse has a say… basically your spouse’s consent is required. I thought that was pretty interesting.
So that’s if you die before you reach retirement age. We’re gonna talk about what happens when you die after you reach your retirement age in just a minute, but first let’s talk about applying for retirement. First of all you’ve got to choose a retirement date, obviously. If you want to retire as soon as you’re eligible, keep your birth date in mind because you need to be 60 under tier 1, or 65 under tier 2, or meet the rule of 85. I went over that in the first half of your pension, so check out that video… Episode #20. You apply for your benefits online and you need to log into your account on or shortly before your last working day.
This is a really good time to contact Wyoming Retirement System and talk to them about it because it’s a process and there’s some things you need to fully understand. These options I’m going to talk about in a minute… the choices you make cannot be undone. You need to pick between eight benefit payout options. Each one has a slightly different payout amount related to who gets what and how much. They’re all a little different. I’m gonna briefly cover each. If you need to know more information than I’m giving you, WRS has a fabulous video. There’s a link down below… watch it, you’ll get more information on each one.
Option 1 – single lifetime benefit with beneficiary
This is a lifetime benefit for you alone. When you die, your beneficiary gets a lump sum of any remaining balance in your account. There’s something to keep in mind here… typically, retirees burn through the money in their account within three to five years, so really that doesn’t leave much for a beneficiary.
Option 2 – 100% joint and survivor benefit
This is the most straightforward one for members with spouses, probably the one that’s used the most. It’s a lifetime benefit for you, and then a hundred percent lifetime benefit for your spouse should you die.
Option 2 P – 100% joint and survivor benefit with a pop up provision
It’s the same as option two, you have a lifetime benefit and then your beneficiary gets a hundred percent, but this one has a pop up in that if your beneficiary dies before you, then you pop up to option 1. The reason that’s important is that option 1 typically pays out more per month.
Option 3 – 50% joint and survivor benefit
You can probably start to figure these out, right? It’s a lifetime benefit for you and a 50% lifetime benefit for your beneficiary upon your death.
Option 3p – 50% joint survivor benefit with a pop up provision
Exactly the same as the option 3, but should your beneficiary die before you, you pop up to option 1.
Option 4 – 10-year certain benefit
A lifetime benefit for you, but if you die before 10 years of benefits, your beneficiary will only get the benefit to the end of that 10 years. You’re limiting your beneficiary to a 10-year period.
Option 4b – 20-year certain benefit
Same deal, but your beneficiary has up to 20 years, if you should die, to get the benefits.
I know I’m going fast but this is gonna be a long episode!
Option 5 – Single lifetime benefit without beneficiary
It’s exactly that… it’s a lifetime benefit you, and there’s no beneficiary involved. So if you’re single, there’s no one to leave money to, this is the one to take… you’ll get the highest payout per month.
We’re gonna complicate this further… you can also add what’s called a self-funded COLA. COLA stands for cost of living adjustment. This allows you to have your pension payments go up every year by a certain percentage. (cost-of-living) You can choose between one, two, and three percent. Initially, you have a lower payout per month, but then after a two-year waiting period, your pension goes up every year by the percentage you choose. So, I see this as something for people who think that they’re gonna be retired for a while, who expect to live a long time, perhaps have good longevity genes in their family. I think it’s a good option…
A few little tidbits… you’ll get your retirement payments the month following your termination. (Actually it can be up to 2 months) You can have your money direct deposited into your bank. And something to remember is that your monthly benefit is reported the IRS as income, so you’re gonna need to pay taxes if they’re due.
The next section in the handbook goes over the rehired retiree rule. Very hard to say. There are a lot of details to it, but one major point is that if you are truly retired, and then you come back to a job that’s in the same pension plan, you’re gonna have to choose whether or not to keep getting your pension while you’re a state employee, or stopping the pension and adding to your credits. If you keep getting your pension you won’t get any more credits. If you stop getting your pension then you’ll just add on years of service to what you had previously.
Feel free to contact WRS on this and/or read through the handbook for more information. I have a little funny down below… there’s a link to a video. We did aN HR conference this year, and Doug McGee from WYDOT did a little bit on the rehired retiree. Watch it if you want to get a good laugh about the rehired retiree.
Next, the hand book covers disability. If you become incapacitated to the point where you can’t perform your duties, you may be eligible for a disability retirement. To be eligible, you must have three things apply. You must be disabled and apply for disability while you’re a contributing member of the WRS. AND after you’ve had ten or more years of service. AND before age sixty in Tier 1 or before age sixty-five in Tier 2. If you have all of those things then you are eligible for a disability retirement. (actually you are eligible to APPLY for disability. WRS still has to make sure you are eligible)
There’s some differences, so you’re gonna need to contact WRS, obviously.
I feel like I’m talking really fast and maybe even breathing hard from it. I’m gonna quit there, okay? There are a few other topics of interest in the handbook that you can check out. They talk about military deployment, divorce, life insurance, dispute resolution, and more, but I think we’ve covered all the important aspects, you know the meat of the WRS system.
Hopefully these two videos give you what you need… I still suggest you talk to WRS if you’re getting close, but you know, this is a nice review at any point to refresh. All right I’m gonna let you go, I’m gonna see you next time on the Subject Matter Minute!