July 30, 2018
Earlier this year, SURS announced that the factors table used to calculate SURS retirement benefits under the Money Purchase calculation will change effective July 2, 2019. This change is a result of a study required by state statute. Read on to determine if you are impacted by this change, and for important considerations if you are thinking about retirement.
What If I'm Considering Retirement Soon?
If you are planning to retire in the next two years, or deciding whether to retire this year or next year, carefully consider the impact of the factors change. Members retiring on or after July 2, 2019 with the highest retirement calculation under the Money Purchase calculation will be impacted by these changes. The following resources are available to help answer your questions:
- SURS Money Purchase Factor Change Fact Sheet is an excellent resource, which includes an expanded FAQ and a "Should I Retire?" decision tree.
- SURS Money Purchase Video – Closed captioning is available on this 8-minute video.
- SURS Money Purchase Recorded Webinar - background information and explanation on the effects of this change.
- Benefit Estimator - See how the factor changes may impact you by performing estimates for retirement dates before and after the July 2, 2019 date, and then compare your results.
- SURS Counseling Appointments - Employees who are within 4 years of retirement eligibility may attend a confidential SURS counseling appointment once every 12 months.
- Contact SURS - If you have additional questions, contact SURS at 217-378-8800 or 800-275-7877.
Does This Impact Me?
The money purchase factors change will NOT affect you, if you are:
- Not yet eligible for retirement
- Already retired
- Participating in the SURS Self-Managed Plan (SMP)
- Retiring under the General Formula calculation
- SURS-eligible on or after July 1, 2005 (i.e., not eligible for the Money Purchase formula)
What Will Change?
If you retire on or after July 2, 2019, this change in factors will result in an approximately 5% to 6% reduction in monthly retirement benefits under the Money Purchase calculation. SURS estimates that working employees can recover this monthly reduction by delaying retirement for approximately 6 to 7 months, due to the additional contributions and interest that would be added.
Why is This Changing?
SURS is required to conduct an experience study at least once every three years, which looks at economic and demographic assumptions. In addition, the state actuary recommends an economic assumption study be completed annually. The results of these studies are then evaluated to determine which, if any, of the assumptions need modification to provide better estimates of future liability and asset growth for the System. If the assumptions are modified, the Money Purchase factors also change accordingly to reflect the changes in economic conditions, demographics and life expectancies.
The changes to the Money Purchase factors are the result of a recent actuarial experience study, which recommended a reduction of the assumed rate of interest return and updated mortality tables to reflect an overall increased life expectancy. The SURS board voted in March to reduce the long-term assumed rate of investment return from 7.25 percent to 6.75 percent. This rate impacts money purchase factors used in calculating retirement benefits. SURS members who are more than three years away from retirement will likely be subject to future experience studies that could result in different factors.
What is the Money Purchase Calculation?
SURS calculates a retirement benefit using all formulas for which the member is eligible, and the member's annuity is based on the formula that provides the highest benefit. The Money Purchase calculation is one type of calculation that utilizes an actuarial “factor” based on the member’s age, normal retirement contributions, and interest at retirement to determine the benefit amount. The Money Purchase factors are, in effect, an actuarial representation of the member’s life expectancy. The Money Purchase factors are used to divide the member’s normal retirement contributions and interest into the monthly annuity, based upon their age at retirement.
Retirement calculations are unique to each individual. For this reason, SURS encourages employees who are considering retirement in the next two years and who might be affected by the Money Purchase factor changes to log on to your personal account on the SURS Member Website and utilize the benefit estimator. By calculating estimates for retirement dates before and after the July 2, 2019 effective date, you can gain a clearer picture of how the factor changes could impact benefits.