Employee Benefits
Penn State Intercom......May 24, 2001

Changes coming to
state retirement code

On May 8, the Pennsylvania General Assembly passed House Bill 26 to amend the provisions of the State Employee's Retirement Code by enhancing retirement benefits and reducing the vesting period. Gov. Tom Ridge signed the bill into law on May 17. Most changes incorporated in the law will become effective July 1.

As these changes will affect both present and future SERS participants, the Employee Benefits Division has tracked the movement of this legislation closely. It is important to note that this legislation does not affect individuals enrolled in the TIAA-CREF retirement program. Faculty and staff make an irrevocable decision when selecting their retirement plans.

Final details are not yet available. Please note that the following items are subject to change.

* Retirement benefits under SERS are determined by formula (2 percent multiplied by a participant's years of credited service in SERS, multiplied by the final average salary). The new legislation will increase the annual benefit accrual rate from 2 percent to 2.5 percent. The increased retirement benefit will become effective July 1.

* Employee contributions will increase from 5 percent to 6.25 percent of gross salary effective Jan. 1. This will apply automatically to new SERS members who elect coverage on or after July 1.

* The change will not be automatic for current SERS members. Those who wish to elect the 2.5 percent accrual rate and the 6.25 percent contribution rate must make that election by filing the appropriate document no later than Dec. 31.

* SERS will be mailing those documents to members' home addresses. The University will be providing this information. To update a home address with the University, a new W-4 form must be completed.

* The current 10-year vesting requirement will be lowered to five years.

* Faculty and staff who are enrolled in SERS and already have elected to terminate their employment on June 29 and retire on June 30 will have the opportunity to change their termination date to July 2 in order to take advantage of this new legislation.

* Employees must be on Penn State's payroll as of July 1. Since that is a Sunday and most employees are not regularly scheduled to work that day, it is recommended that employees terminate their employment on Monday, July 2. These employees will need to contact their Human Resources Representatives to change their termination and retirement dates and also contact their local SERS field office to complete the appropriate paperwork to adjust their retirement date.

* Those faculty and staff who had previous credit in the Public School Employee's Retirement system but who did not request to purchase multiple service credit within the 30-day time limit, now have the opportunity to receive credit for their previous public school service if requested by Dec. 31, 2003. Until now, newly-hired faculty and staff who enrolled in SERS, but who were enrolled previously in the Public School Employees' Retirement system, had to apply to SERS for their multiple service credit within 30 days from their date of hire.

* Normal retirement age under SERS will continue to be either age 60 with a minimum of three years of credited service, or 35 years of credited service regardless of the participant's age. While the bill does not provide a "30 and out" window, some participants may feel that the increase in the modifier will offset any age-related penalty for retiring early.

* SERS anticipates that they will be prepared to provide new retirement estimates in early June, based on the 2.5 percent accrual rate.

The Employee Benefits Division staff is available to discuss University-related retirement issues and to provide general guidance. However, individual retirement income questions should be directed to the local SERS field office. Additional information, as available, will be forwarded to the Human Resources Representatives and will be available on the Office of Human Resources Web site at http://www.ohr.psu.edu/benefits/benefits.htm.

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