Planning for Retirement

Planning for RetirementPlanning for RetirementPlanning for RetirementPlanning for Retirement

Presented by:

Nicole Zimm

Benefit Policy Analyst - UW System Administration

Revised 4/11

Planning for Your RetirementPlanning for Your RetirementPlanning for Your RetirementPlanning for Your Retirement

It’s never too early to start planning for retirement

Review the Roadmap to Retirement

Use your benefits wisely while employed

Review your benefits at least on an annual basis

Ask yourself the following questions:

• Am I financially able to retire?

• Am I psychologically ready to retire?

Fully understand the impact of recent benefit changes on your future retirement benefits

http://www.uwsa.edu/hr/benefits/retsav/roadmap.pdf

Finances in RetirementFinances in RetirementFinances in RetirementFinances in Retirement

Understand your retirement income sources

• For a career public employee who retires at normal retirement age, the WRS and Social Security will replace 50% – 85% of pre-retirement gross income

• Tax-Sheltered Annuity and/or Wisconsin Deferred Compensation account(s)

• Individual Retirement Accounts (IRA)

• Retirement plans from other employers

• Post-retirement employment

Understand the cost of retiree health insurance and how long your sick leave credits used to pay for retiree health insurance will be expected to last in retirement.

Sick Leave Credits and Sick Leave Credits and Retiree Health InsuranceRetiree Health InsuranceSick Leave Credits and Sick Leave Credits and

Retiree Health InsuranceRetiree Health Insurance

Health Insurance in RetirementHealth Insurance in RetirementHealth Insurance in RetirementHealth Insurance in Retirement

Must pay total monthly health insurance premium for coverage in retirement

Sick leave balance at retirement is converted to a dollar amount to pay for State Group Health Insurance premiums only.

Once sick leave account is exhausted, premiums can be deducted from annuity. If annuity is not large enough, premium can be paid directly to carrier.

Sick Leave Conversion Credit Sick Leave Conversion Credit ProgramProgram


Two Sick Leave Conversion Programs

Accumulated Sick Leave Conversion Credit (ASLCC) Program

Provided for in state statute – would have to pass legislation to change program (no legislation introduced to date)

Supplemental Health Insurance Conversion Credit (SHICC) Program

Provided for in compensation plans and collective bargaining agreements – per OSER and DOA, this program will continue through at least June 30, 2011 for everyone.

Study of program due by June 30, 2012. DOA has indicated that if there any changes to the program, there will be ample notice given so employees can prepare accordingly.



Accumulated Sick Leave Conversion Credit (ASLCC) Program

Sick leave balance at retirement is multiplied by highest hourly rate while in state or UW service and converted to a dollar amount to pay for State Group Health Insurance premiums in retirement.

If unclassified, can determine hourly rate by dividing your highest base salary by either 9 or 12 months (depending on your employment contract) and then dividing by 174 hours.

Example: $75,000 ÷ 12 months ÷ 174 hours = $35.92/hour



Supplemental Health Insurance Conversion Credit (SHICC) Program

Must have at least 15 years of continuous UW/state service. These supplemental credits are multiplied by your highest hourly rate and added to your credits under the ASLCC program.

• Earn 52 hours per year for years 1 – 24• Earn 104 hours per year for year 25 and beyond• Not available to those represented by Trades• Protective employees earn credits at a different rate• Your total supplemental credits cannot exceed your total

sick leave balance at retirement

Sample Sick Leave Credit CalculationSample Sick Leave Credit CalculationSample Sick Leave Credit CalculationSample Sick Leave Credit Calculation

Highest Hourly Rate = $38.314Sick Leave Balance at Term: 2,000 hours

Years of Continuous Service: 26

Highest Hourly Rate

Sick Leave Credits

Supplemental Sick Leave

CreditsYears 1-24

Supplemental Sick Leave

CreditsYears 25+

Total Sick Leave Credits

24 years 2 years

x 52 hrs/yr x 104 hrs/yr

2,000 hours 1,248 hours 208 hours

x 38.314/hr x $38.314/hr x $38.314/hr

$38.314/hr $76,628 + $47,815.87 + $7,969.31 = $132,413.18

Note: Total hours of supplemental sick leave credits granted can NEVER exceed actual sick leave balance at time of retirement.

Online Sick Leave Credit EstimatorOnline Sick Leave Credit Estimator

Project the value of your sick leave credits using UWSA’s online estimator: http://www.uwsa.edu/hr/benefits/sickLeaveEst/

You will need the following information before you can use the estimator:

•Your estimated retirement date•Your current sick leave balance•Your seniority/continuous service date•If classified, your current and/or expected highest hourly wage rate•If unclassified, you current and/or expected highest annual salary (this is your annual base salary and does not include overloads, summer pay or any additional pay)•The name of your current health plan and/or the name of the health plan that you expect to have in retirement

http://www.uwsa.edu/hr/benefits/sickLeaveEst/

Transfer to Retiree Health InsuranceTransfer to Retiree Health InsuranceTransfer to Retiree Health InsuranceTransfer to Retiree Health Insurance

At retirement, your sick leave credits are calculated by UWSA payroll staff and sent to ETF.

ETF will move you to retiree coverage under the State Group Health Insurance plan (you will receive new ID cards with new group number) – do not need to submit a new health insurance application.

ETF will track your sick leave credit usage and send you a statement each December.

If you have comparable health insurance elsewhere during retirement, can escrow (save) sick leave credits for future use.

Medicare and RetirementMedicare and RetirementMedicare and RetirementMedicare and Retirement

If retired and covered under State Group Health Insurance as a retiree, must enroll in Medicare at age 65

• Part A (hospital)• Part B (medical)• Do NOT enroll in Part D (Rx coverage) – your Navitus

Rx benefit continues under retiree health insurance• State Group Health Insurance will become your

Medicare supplemental and the premium will decrease

Not required to enroll in Medicare Part B if you and/or your spouse/domestic partner are covered under a group policy through active employment.

More information: http://www.medicare.gov

http://www.medicare.gov/

Retiree Health Insurance PremiumsRetiree Health Insurance PremiumsRetiree Health Insurance PremiumsRetiree Health Insurance Premiums

2011 Median Monthly Premium for HMO coverage (under age 65 & non-Medicare eligible)

• Single: $724.70• Family: $1,807.90

2011 Median Monthly Premium for HMO coverage (Medicare eligible)

• Single: $446.55• Family coverage;1 person w/ Medicare: $1,161.40• Family coverage with all under Medicare: $890.50

2011 Medicare Part B premium $96.40/month for most

Plan specific premiums on ETF’s website

http://www.etf.wi.gov/publications/dc_content/dc_2011/State_Rates_Page_2.pdf

Dane County 2011 Retiree Health Insurance Dane County 2011 Retiree Health Insurance PremiumsPremiums

Dane County 2011 Retiree Health Insurance Dane County 2011 Retiree Health Insurance PremiumsPremiums

Health Plan Single FamilySingle (under

Medicare)

Family (1 person

under Medicare)

Family(all under Medicare)

Dean $597.70 $1,490.40 $393.80 $988.90 $785.00

Physicians Plus $608.40 $1,517.20 $383.30 $989.10 $764.00

Unity – UW Health

$592.90 $1,478.40 $391.20 $981.50 $779.80

GHC-SC $584.20 $1,456.70 $412.00 $993.60 $821.40

If I retire before I’m Medicare eligible, how If I retire before I’m Medicare eligible, how much will health insurance cost?much will health insurance cost?

If I retire before I’m Medicare eligible, how If I retire before I’m Medicare eligible, how much will health insurance cost?much will health insurance cost?

Coverage Level

2011 Median Annual Cost of

HMO Coverage

(non-Medicare eligible)

Retire at age 55

Total cost of health insurance until age 65 assuming 7% annual inflation

Retire at age 60

Total cost of health insurance until age 65 assuming 7% annual inflation

Single $8,609$120,153

(over 10 years)$50,011

(over 5 years)

Family $21,477$299,745

(over 10 years)$124,761

(over 5 years)

If I retire when Medicare eligible, how much If I retire when Medicare eligible, how much will health insurance cost?will health insurance cost?

If I retire when Medicare eligible, how much If I retire when Medicare eligible, how much will health insurance cost?will health insurance cost?

Coverage Level

2011 Median Annual Cost

of HMO Coverage(Medicare eligible)

Total cost of 5 years of health insurance (assuming 7% annual inflation)

Total cost of 10 years

of health insurance (assuming 7% annual inflation)





Single (Medicare eligible)

$5,372 $30,816 $74,037 $134,656 $219,678

Family (1 person Medicare eligible)

$13,937 $80,147 $192,557 $350,218 $571,346

Family (all

Medicare eligible)

$10,714 $61,452 $147,643 $268,529 $438,078

How can I maximize my sick leave How can I maximize my sick leave credits at retirement?credits at retirement?


1.Minimize your sick leave usage - you are not required to use sick leave for an illness, doctor’s appt….you can substitute other paid leave.

2.Maximize your base pay rate - if you know there is an upcoming raise, wait to retire until you receive the raise.

3.Work longer - the longer you work, the more sick leave you accrue. If you wait until age 65 to retire, your health insurance premiums will be lower due to Medicare eligibility so your sick leave credits will last longer.

(more next slide)



4. Carry a family health insurance policy if married to/in a domestic partnership with another state/UW employee who earns sick leave - when state/UW employees are married/in a domestic partnership retire AND carry a family health insurance policy, can use both sick leave credit accounts to pay for retiree health insurance. If one dies, the other will have access to the spouse’s/partner’s credits to pay own health insurance premiums as long as a family policy was in effect at the time of death.

I’m concerned about changes to the Sick Leave Credit Program – what can I do?

I’m concerned about changes to the Sick Leave Credit Program – what can I do?

Everyone needs to look at individual situation and ask themselves the following questions:

Where you planning to retire in 2011 anyway?• If not, can you afford to retire earlier than expected?

Is the loss (or potential loss) of some sick leave credits worth retiring earlier than you wanted?

• Lost income• Reduced annuity• Younger when you start using sick leave credits• Sick leave credits may not carry you to Medicare age

Do you know the value of your supplemental sick leave credits?• You should understand the value of your credits before you make a

decision.

The Wisconsin The Wisconsin Retirement System and Retirement System and

Your AnnuityYour Annuity

The Wisconsin The Wisconsin Retirement System and Retirement System and

Your AnnuityYour Annuity

What is the WRS?What is the WRS?What is the WRS?What is the WRS?

Created to provide retirement income to retired public employees.

WRS is solvent, well-funded, has a diversified investment portfolio, is focused on long-term investing and will provide promised benefits. State statute guarantees payment of benefits.

Administered by the Department of Employee Trust Funds (ETF)

Investments managed by the State of Wisconsin Investment Board (SWIB)

9th largest public pension fund in U.S. and 30th largest fund in the world

Immediately vested

WRS Contribution RatesWRS Contribution RatesWRS Contribution RatesWRS Contribution Rates

For most, 11.6% of gross wages, up to IRS maximum, contributed to WRS to fund future benefits (13.3% for executives). Most employees currently pay 0.2% of earnings to WRS. Per 2011 Wisconsin Act 10 (Budget Repair Bill) employees

will pay half the total WRS contribution 5.8% for those covered by Teacher and General WRS

categories 6.65% for those covered by Elected/Executive WRS

category Total contribution rate actuarially determined on an annual

basis UW contributes 1.2% of gross wages to fund retiree health

insurance.

Possible Changes to the WRSPossible Changes to the WRSPossible Changes to the WRSPossible Changes to the WRS

The current administration plans to study the WRS over the next few years

Legislation will have to be passed in order to make any changes to the WRS

WI Act 10 (Budget Repair Bill) • Changed the employee-required contribution rate for all employees

(half of total contribution)o Effect – dollar value of account will actually increase because of

this change• Prospectively changed the formula factor for employees in the

Elected/Executive WRS Category from 2% to 1.6% (will have same formula factor as General/Teacher employees)

Historically, any changes to the WRS have been prospective and accrued benefits were not affected.

The Core FundThe Core FundThe Core FundThe Core Fund

Core Fund is well-diversified• 55% in stocks• 29% fixed income• 16% private equity, real estate, multi-asset

All contributions invested in Core Fund unless you elect to participate in the Variable Fund.

Interest credited once per year – based on 12/31 investment returns

Market gains/losses recognized over a five year period so interest crediting, contribution rates and annuity dividends more stable.

The Variable FundThe Variable FundThe Variable FundThe Variable Fund

Variable Fund is composed wholly of stocks• 69% domestic stocks• 30% international stocks• 1% multi-asset category

If enrolled in Variable Fund, ½ of contributions credited to Variable Fund and ½ to Core Fund.

Interest is credited once per year, and investment returns are fully recognized each year (no smoothing mechanism)

DefinitionsDefinitionsDefinitionsDefinitions

WRS Annuity: monthly check that you will receive in retirement for the rest of your life.

Minimum Retirement Age: earliest age that you can receive a WRS retirement benefit; age 55 (general/teacher) or age 50 (protective)

Years of Creditable Service: amount of WRS service based on number of hours worked in a year. • Classified employees: service reported on

calendar year basis (1 year = 1904 hours)• Unclassified employees: service reported on

fiscal year basis (1 year = 1320 hours)

DefinitionsDefinitionsDefinitionsDefinitions

Seniority/Continuous Service Date: date you began state/UW employment (adjusted for breaks in service); used to determine value of sick leave credits.

Formula vs Money Purchase Calculations: 2 methods used to calculate retirement annuity.

Age Reduction Factor: factor used to reduce formula calculation if you retire before “normal retirement age” of 65. There is no age reduction factor if you retire at 65 or later or if you are age 57 or later with 30 years of creditable WRS service.

Two Types of Retirement CalculationsTwo Types of Retirement CalculationsTwo Types of Retirement CalculationsTwo Types of Retirement Calculations

At retirement, annuity is calculated under two methods – you receive the higher

Formula calculation based on:• Final Average Earnings (FAE)

→FAE = Total of highest 3 yrs of earnings ÷ Total WRS service during those 3 years ÷ 12

• Years of creditable WRS service• Formula factors based on employment category• Age reduction factor based on age at retirement and

years of service• Formula benefits capped at 70% of FAE

Formula calculation methodYears of Service x FAE x Formula Factor(s) x Age Reduction Factor

Two Types of Retirement CalculationsTwo Types of Retirement CalculationsTwo Types of Retirement CalculationsTwo Types of Retirement Calculations

Money Purchase Calculation based on: • Total $$ amount of WRS account at retirement

o “Employee” + matching employer contributions + interest

• Money purchase factor based on age at retirement

Money Purchase Calculation MethodM. P. Balance at Retirement x M. P. Factor

You can see which calculation type is currently higher for you if you look at the bottom of the last page of your ETF Annual Statement of Benefits.

The information you entered:

Name: U.W. Système

Your age at retirement will be: 57

You plan to retire in: 2011

The age of your Named Survivor will be: 55

The Named Survivor specified is your spouse.

Your Employment Terminated after 1999

Your years of General/Teacher/Educational Support Creditable Service Before 2000 will be: 26.50

Your years of General/Teacher/Educational Support Creditable Service After 1999 will be: 12.50

Your 3 High Years of Earnings and Related Service: Year 1) $74,000.00 (1.00) Year 2) $74,000.00 (1.00) Year 3) $73,500.00 (1.00) Your calculated monthly Social Security amount will be: $1,457.00

Your Money Purchase balance is: $545,000.00

Factors Used in Your Calculation:• The age reduction factor used to calculate your formula annuity for the General/Teacher/Educational

Support employment category is: none • The money purchase factor used to calculate your money purchase annuity, variable adjustment to

your formula annuity, and/or benefits from your additional contributions is: .005820

Sample retirement annuity estimateSample retirement annuity estimate

Sample Retirement Annuity Estimate Sample Retirement Annuity Estimate & Annuity Options& Annuity Options

Your Estimated Monthly Benefit Amounts

Your benefit is higher under the: formula calculation

REQUIRED CONTRIBUTIONS

Regular OR Accelerated Payments

Until Age 62 After Age 62

Life Annuity Options:

- For Annuitant‘s Life Only $4,107.84 or $5,148.17 $3,691.17

- 60 Payments Guaranteed $4,095.52 or $5,137.10 $3,680.10

- 180 Payments Guaranteed $3,988.71 or $5,041.13 $3,584.13

Joint and Survivor Annuity Options:

- 75% Continued to Named Survivor $3,734.03 or $4,812.27 $3,355.27

- 100% Continued to Named Survivor $3,627.22 or $4,716.30 $3,259.30

- Reduced 25% on Death of AnnuitantOR Named Survivor

$3,820.29 or $4,889.79 $3,432.79

- 100% Continued to Named Survivor with 180 Payments Guaranteed

$3,623.11 or $4,712.61 $3,255.61

How do I select an annuity option?How do I select an annuity option?

When selecting an annuity option, you should consider the following:

How much money do you need to maintain your standard of living – is the annuity sufficient or do you have other income sources?Are you single or married/in a domestic partnership?Is there a large age difference between you and your spouse/domestic partner?Do you want to ensure your spouse/partner is guaranteed an annuity upon your death?Do you want to make sure the full value of your WRS account is paid out, no matter how long you live?Do you want to maximize your annuity today (not concerned with death benefits payable)?Do you plan to start Social Security at age 62?

Resources:

Review the ETF brochure Choosing an Annuity OptionUse ETF’s Accelerated Payment Calculator to see if choosing an accelerated option is a good choice for you.

Annuity AdjustmentsAnnuity AdjustmentsAnnuity AdjustmentsAnnuity Adjustments

Final annuity calculation – once ETF receives all final earnings information, ETF will finalize your annuity payment and any back payments will be paid on the first annuity check based on the final annuity calculation.

Annual adjustment – your annuity may change on an annual basis due to an annuity adjustment based on the performance of the WRS. Any changes will be reflected on your May 1st check. History of changes: http://www.etf.wi.gov/retirees/dividends.htm

You do not receive a monthly annuity statement from ETF – you only receive a statement if something changes the amount you receive (final calculation, change tax withholding, annual annuity adjustment…)

Taxes and Your AnnuityTaxes and Your AnnuityTaxes and Your AnnuityTaxes and Your Annuity

Your WRS annuity is taxable income for state and federal tax purposes.

Can change your tax withholding at any time with ETF.

ETF will send you a 1099R tax statement every January.

Your annuity is not “earned” income so there are no Social Security or Medicare taxes withheld.

Choosing Your Retirement DateChoosing Your Retirement DateChoosing Your Retirement DateChoosing Your Retirement Date

If your annuity is higher under money purchase calculation, maximize interest crediting.

• If you term on or before December 30th, will receive a prorated percentage of 5% interest on account for that year.

• If you term December 31st or later, will receive the effective interest rate(s) for the prior year.

If you are paid on a fiscal year basis and annuity is higher under formula calculation, consider retiring just after the end of the fiscal year to maximize final average earnings.

If you retire on or after official seniority/continuous service date, you may be eligible for additional sick leave credits to fund retiree health insurance.

Usually the longer you wait to retire, the better due to increased service, earnings, contributions, lower age reduction factor and higher money purchase factor.

How do I know the value of my annuity/how How do I know the value of my annuity/how do I order a retirement application?do I order a retirement application?

How do I know the value of my annuity/how How do I know the value of my annuity/how do I order a retirement application?do I order a retirement application?

There is an online retirement calculator on ETF’s website: etf.wi.gov/calculators/disclaimer.htm

• Use the information from your ETF Statement of Benefits to help you complete the information needed for the calculator

• You must project future service and earnings yourself – calculator does not project future interest, service or earnings.

You can request an official estimate/application from ETF once per year for a retirement date of no more than one year in the future.

• Can contact ETF at 1-877-533-5020 to request an estimate/application

Retiring on Short NoticeRetiring on Short NoticeRetiring on Short NoticeRetiring on Short Notice

Given upcoming WRS and health insurance changes, some employees are choosing to retire within the next few months. Before retiring “quickly”, you should:

Review ETF’s document Retiring on Short NoticeRequest a retirement application from ETF (there is currently a 10-12 week backlog at ETF)You can use an old retirement application if you have one (it will be updated upon entry)If you do not receive your application before your termination date, you have up to 90 days after your termination date to submit your retirement application to ETF (annuity will begin day after your termination date).Can submit an Annuity Option Change Form instead of a retirement application if you do not receive your application timely

Retiring on Short NoticeRetiring on Short NoticeRetiring on Short NoticeRetiring on Short Notice

(continued from previous page)

If you have any accumulated leave (vacation, sabbatical/ALRA, personal holiday) at the time of termination, determine how you want to receive payout

•If you take a lump sum paymentoPayout directly to you (fully taxable)oDefer to TSA and/or WDC accounts (defer all taxes except Social Security)oPayout is NOT reportable to WRS (no WRS contributions due on payout and you will receive no WRS credit for these earnings)

•If you remain on payroll past last physical day of employmentoReceive regular paycheckoAll earnings/service reportable to WRS (increase WRS annuity)oContinue to accrue leave (increase sick leave credits)oContinue all benefits like an active employee (continue to receive employer contribution towards all benefits)

What happens to my other benefitsWhat happens to my other benefits at retirement? at retirement?


State Group Life Insurance• Automatically continues (if eligible) • Premiums taken from annuity until age 65; no premium

due once you turn 65. • Coverage is reduced to 75% of basic at age 65 and 50% at

age 66. • Spouse and Dependent coverage ends at retirement – can

convert to an individual policy at a higher premium

Income Continuation Insurance• Ends at retirement



VSP Vision, Dental Wisconsin, Anthem DentalBlue, EPIC Benefits+, UIA Life Insurance, AD&D Life Insurance •Can continue indefinitely in retirement through direct payment to carrier

Individual and Family Life, UW Employees Inc. Life•Can be converted to an individual policy but premiums are much higher

CAUTION: All continuation/conversion applications must be submitted on a timely basis or the right to continue/convert coverage will be lost.

Evaluate the level of life insurance you need as you age.



Employee Reimbursement Account (ERA)

Medical Account: 1.Can contribute remainder of election either as a tax-free lump sum on your final paycheck(s) or as a personal after-tax payment

• Will be able incur eligible expenses through end of plan year

2.If you do not contribute annual election, can incur eligible expenses until the end of the month that last check is payable.

Dependent Care Account: contributions end on last paycheck (cannot contribute remainder of election); can incur expenses through end of plan year.

ResourcesResourcesResourcesResources

UWSA Benefits Page: http://www.uwsa.edu/hr/benefits/

UWSA Retirement Page: http://www.uwsa.edu/hr/benefits/retsav/index.htm

Benefits at Retirement: http://www.uwsa.edu/hr/benefits/lifevent/uws73.pdf

UWSA TSA Page: http://www.uwsa.edu/hr/benefits/retsav/tsa.htm

Budget Repair Bill Page: http://www.uwsa.edu/hr/benefits/budgetbill.htm

ETF’s Main Page: etf.wi.gov/index.htm

ETF’s Calculators Page: http://www.etf.wi.gov/calculator.htm

ETF’s Video Library: http://www.etf.wi.gov/webcasts.htm

SWIB’s main page (review investment earnings): www.swib.state.wi.us/

Thinking of Retiring?Thinking of Retiring?Thinking of Retiring?Thinking of Retiring?

Contact

Demi Wiemann ([email protected])or

Nicole Zimm ([email protected])

for counseling & continuation forms

Date post:	21-Jan-2016
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Planning for Retirement

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