Penn State Intercom......July 12, 2001

Action required for SERS participants
to take advantage of changes in code

The Office of Human Resources would like to remind participants in the State Employees' Retirement System (SERS) that it is important to act on recent changes to the retirement code.

An important aspect of the recent state retirement legislation involves the election of the new Class AA. Election forms were recently mailed to all active SERS members. Class AA service is not automatic. Members must elect Class AA service by filling out the election form by Dec. 31.

Gov. Tom Ridge signed Act 2001-9 into law on May 17. This act allows most members, who are active contributing members or members on an approved leave without pay, to elect Class AA for most state service.

Class AA will increase the current 2 percent multiplier to 2.5 percent. For example, a member with 25 years of service and a final average salary of $40,000 would receive an annual benefit of $20,000 at normal retirement age under Class A (2 percent multiplied by 25 years multiplied by $40,000). The same benefit under Class AA would be increased to $25,000 (2.5 percent multiplied by 25 multiplied by $40,000). Class AA service generally provides a 25 percent increase in benefits.

The election of Class AA also will result in an increase in the current contribution rate of 5 percent to 6.25 percent. The new contribution rate will be effective the first pay in January 2002. SERS members are urged to consider the long-term benefit of the increased retirement benefits. The additional contributions also will increase the lump sum available when the member leaves service or retires.

Members are encouraged to return the election forms in the addressed stamped envelopes provided with the mailing. SERS has placed special accounting procedures for these forms to ensure all members make this very important election.

SERS will send a confirmation letter within three weeks of receiving election forms. Any questions concerning this information may be addressed to the local SERS office at (800) 633-5461.

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