Retirement - KPERS, Correctional KPERS and Judges
Guidelines for Sending Documents
Calculating Retirement Benefits
Retirement EligibilityA KPERS member can receive unreduced benefits:
Please note - The Retirement System grants one quarter of service credit for any time worked in a particular quarter. Any amount of employee contributions in a quarter indicates time worked. When years of service credit are added up, two remaining quarters will be rounded up to a year. A KPERS member can receive reduced benefits:
Reduction factors
Reduction example using a maximum benefit of $1,000
How to Calculate 85 Points
This is the age member will have 85 points if he or she continues to work.
Retirement DateA member’s retirement date is the later of the first day of the month following the last day on the payroll, or the first day of the month after KPERS receives a member’s Application for Retirement Benefit booklet (KPERS-15). A member must be off the payroll of all participating employers on his or her retirement date. Special Guidelines for School Employees If a superintendent’s contract ends June 30, he or she may retire July 1 or after. KPERS contributions will be deducted from all wages including any add-on pay (if hired before July 1, 1993). If a principal’s contract ends July 31, he or she may retire July 1 or after. KPERS contributions will not be taken out of the July check or any add-on pay. If the member waits until August 1 to retire, KPERS will be taken out of the July check and any add-on pay (if hired before July 1, 1993). If a teacher’s contract ends August 31, he or she may retire July 1 or after. KPERS contributions will not be taken out of the July or the August check or any add-on pay. If the member waits until September 1 to retire, KPERS will be taken out of the July and August checks and any add-on pay (if hired before July 1, 1993). A cook, custodian, secretary or bus driver may retire anytime during the year. KPERS contributions will be taken out of all compensation paid including any add-on pay (if hired before July 1, 1993). Compensation the employer pays the employee for unused sick leave, annual leave, comp-time, holiday pay, etc. A member may not use any early retirement incentive, even if paid before retirement, in the calculation of the final average salary.
Member’s Steps To Retire
Guidelines for Sending Documents
Proof of BirthA photocopy of one of the following:
If you are unable to provide proof according to 1-9 above cannot be provided, submit a photocopy of two of the following documents:
Proof of Name ChangeA photocopy of one of the following:
If you are unable to provide proof according to 1-3 above, submit a photocopy of two of the following documents:
Final Average SalaryCalculating Final Average Salary The Retirement System calculates retirement benefits using a formula set by state law. Final average salary is one of the factors in the formula. If the employee's membership date is July 1, 1993 or later, or any agency that affiliated with KPERS after January 1, 1994, the final average salary is:
If the employee’s membership date was prior to July 1, 1993 , or for non-school, if the employee was in their "year of service" prior to membership in a KPERS covered position on July 1, 1993, the final average salary is the higher of:
KPERS will calculate both the three-year and the four-year average, and use whichever is higher to calculate the member’s retirement benefit. If add-on pay is included in the final average salary, it is spread over all the days that the member worked in the calendar year prior to the member’s termination date. It is not credited only to the quarter in which it is paid. *Additional Compensation or "add-on pay" is compensation from the employer for unused sick leave, vacation or annual leave, holiday pay, etc. The Retirement System uses a member’s original hire date if transferring to an agency from a prior KPERS employer and the member has not withdrawn his or her KPERS contributions. The Retirement System annualizes earnings to calculate a final average salary. A member’s annual compensation as provided by the employer is divided into four equal quarters. The computer selects from a member’s compensation history the highest 16 or 12 quarters, which then forms the basis of final average salary. Final Average Salary "Spike" Law Employers sometimes pay a member for accumulated sick leave, vacation or annual leave, severance pay, etc. These payments often increase a member’s final average salary. The "Spike" law places the actuarial liability for certain payments on the participating employer. According to K.S.A. 74-49,126, employers are responsible when add-on payments for accumulated sick leave, vacation or annual leave, severance pay, etc. increase a member’s final average salary by more than 15 percent. The employer must pay the Retirement System a lump sum equal to the actuarial liability for benefits payable because of the amount over 15 percent. The employer may amortize the actuarial payments over a maximum of 15 years. Final Average Salary "Cap" Law K.S.A. 74-4902(9) states that if a member’s compensation used in calculating his or her final average salary is more than 15 percent higher than the preceding year, the amount which exceeds the 15 percent will not be included in compensation. Examples of compensation that are subject to cap:
Member contributions on the amount of such increase that exceeds 15 percent will be returned to the member. Compensation not subject to cap
Examples of compensation that are not subject to cap
Calculating Retirement BenefitsFinal average salary x percentage x years of service = annual benefit at normal retirement age Example: $30,000 x 1.75% x 30 = $15,750 annual benefit KPERS and Correctional KPERS Percentages
You can calculate an estimate online. It will be helpful to have a member’s most-recent annual statement information for reference. You can also download the Benefit Estimate Request form (KPERS-15E), and we can do it for you. KPERS provides up to two estimates per year for each member within five years of retirement. He or she must complete a KPERS-15E form for each estimate request. Compensation from regular pay and compensation from sick and annual leave must be reported on separate lines. Incomplete KPERS-15E forms will be returned along with a new form to be submitted. Estimates that the Retirement System calculates are “just estimates” and are based on information provided on the KPERS-15E form. Actual retirement benefits are calculated at retirement. If there is a discrepancy between an estimate and the actual monthly benefit amount, the benefit will be paid in accordance with applicable laws and regulations.
Retirement OptionsFirst a member must decide whether to receive his or her entire retirement benefit in monthly payments or, at the start of retirement, take part of his or her retirement benefit in an up-front, lump-sum payment and receive the balance of the benefit in reduced monthly payments. A member receives a single lump-sum equal to a given percentage of his or her lifetime benefit’s actuarial present value. The member will then receive the rest of his or her retirement benefit in reduced, regular monthly payments. The PLSO is available in 10, 20, 30, 40 or 50 percent amounts. The percentage a member selects determines the size of the lump sum and the resulting decrease in his or her monthly benefit amount. For example, a 40 percent PLSO payment would result in a single lump-sum payment equal to 40 percent of the actuarial present value of a member’s lifetime benefit, along with a permanent 40 percent reduction in the regular monthly payments. PLSO payments are taxable income under federal law unless directly rolled over into an eligible retirement account. KPERS is required to withhold 20 percent for federal income tax if a member receives the money directly. State taxes may also apply. While the State of Kansas does not tax KPERS benefits as a general rule, Kansas income tax may apply when a member takes PLSO money out of an account to which he or she has rolled it over. For additional tax information on the PLSO, contact a tax consultant or review the Internal Revenue Service’s Publication 575, Pension and Annuity Income, available on the IRS web site, www.irs.gov. PLSO and Future Benefit Increases Cost-of-living increases are based on the amount of a member’s monthly benefit. Any future increases would be based on the reduced monthly benefit at the time of the increase. Maximum Monthly Benefit Option Once a member has decided whether or not to take the PLSO, KPERS will establish a maximum monthly benefit amount. A member can choose to stay with this maximum monthly benefit amount without any additional options. He or she will receive a payment each month for this same amount until death, plus any cost of living adjustments. A beneficiary will receive the balance of any remaining contributions. No continued benefit after death. A member can provide a monthly benefit for someone after he or she dies by choosing a joint-survivor option. His or her regular monthly payments will be reduced, allowing for continued payment after death for the rest of a survivor’s life. The higher the survivor’s benefit payment is, the lower the member’s will be during retirement. Age difference is also a factor. 50 Percent Joint-Survivor Benefit A member will receive approximately 91 percent of the maximum monthly benefit, adjusted for age difference. A survivor will receive 50 percent of the reduced monthly benefit for his or her lifetime after a member’s death. 75 percent Joint-Survivor Benefit A member will receive approximately 87 percent of maximum monthly benefit, adjusted for age difference. A survivor will receive 75 percent of the reduced monthly benefit for his or her lifetime after a member’s death. 100 Percent Joint-Survivor Benefit A member will receive approximately 83 percent of the maximum monthly benefit, adjusted for age difference. A survivor will receive 100 percent of the reduced monthly benefit for his or her lifetime after a member’s death. If the person a member chooses to receive a benefit after his or her death dies before the member, the option is canceled. The monthly benefit will then increase to the original maximum monthly benefit amount. This is called the “pop-up feature.” A member cannot name someone else to receive the benefit. A life-certain option may better fit a member’s needs if:
With a life-certain option a member will receive a reduced benefit for life. If he or her dies within the guaranteed period of time from his or her retirement date, a beneficiary will receive the same monthly benefit for the rest of the guaranteed period. A member can change beneficiaries at any time, and he or she can have any number of beneficiaries at once. They will equally share the benefit for the remaining time period. Life-certain options:
Life-Certain Option - An example Mary has a maximum monthly benefit of $1,000. She chooses the ten-year
life-certain option. She receives $950 monthly for the rest of her
life, no matter how long she lives. Mary’s seven years plus her daughter’s three years total the ten years Mary was guaranteed. If Mary had two daughters named as beneficiaries at the same time, they would share the $950 monthly and each would receive $475 for the three years. If a member selects a retirement benefit option under which the member’s spouse would receive less than one-half of the member’s monthly retirement benefit when the member dies, the Retirement System must have the spouse’s notarized signature on file. This will signify the spouse’s acknowledgment of the retirement benefit option the member has chosen. Also, the member chooses the PLSO, the spouse’s signature is required.
Death BenefitRetirees have a $4,000 death benefit payable to their beneficiaries regardless of what payment option they choose. Retirees can name a funeral establishment (instead of a person, estate or trust) as the death benefit beneficiary. Under federal tax law, the $4,000 death benefit is taxable income to the beneficiary. If the retiree chooses to name a funeral establishment instead of an individual as beneficiary, the $4,000 will go directly to the establishment and no individual will be taxed. An original death certificate is required. The Retirement System cannot accept photocopies.
Tax InformationRetirement benefits are not subject to Kansas income tax. Most retirement benefits will be subject to federal taxes. If the member made contributions to the Retirement System before July 1, 1984, or has paid for a service purchase with post-tax dollars, part of the member’s pension will not be taxable under federal law. Federal law allows the member to "recover" tax-free, those contributions the member made on a post-tax basis, and regulates the rate at which the member makes this recovery. When a retiree’s monthly retirement benefit exceeds $1,560 per month, the Retirement System automatically withholds taxes based on, "married with three dependents." A retiree can change this with the Internal Revenue Service form W-4P Withholding for Pension Payments. When the retiree’s monthly retirement benefit is under $1,560 per month, the Retirement System does not withhold deductions for federal taxes. A retiree can change this with the Internal Revenue Service form W-4P Withholding for Pension Payments. If a retiree elects not to have taxes withheld or not enough is withheld, the retiree may have to pay estimated taxes during the year. If estimated taxes are due but not paid, the retiree will have penalties to pay at the end of the year. The retiree’s decision on withholding is an important one. Members should consult a qualified tax consultant.
Working After RetirementA member must wait 30 days after his or her retirement date to go back to work for any Retirement System employer. The member's retirement date is not the last day at his or her employer. It is usually the first day of the month following the member's last day at work. To calculate the 30-day waiting period, count the day after the member's retirement date as day one. Example
Reporting Retiree Employment and Making Contributions Designated agents need to report most KPERS retirees who work for their employer. Complete a Report of Employment for KPERS Retirees (KPERS-1R) within ten days anytime an employee meets the following criteria: If employee retired from your employer
If employee retired from a different KPERS employer
For further details, please refer to the following designated agent memos:
Retirees have an annual earnings limit of $20,000 if they:
Example If a retiree reaches the $20,000 limit before the end of the year he or she can:
Complete a KPERS Retiree Earnings Limit form (KPERS-15S) for employees who reach the $20,000 annual earnings limit.
Special Exceptions to the Earnings Limit Retirees returning to work in some positions are exempt from the earnings limit:
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