Pension Calculation Details

Before making important decisions pertaining to your retirement, MSEA advises you to discuss the matter with a counselor at the Maryland State Retirement Agency at 410/625-5555 or 800/492-5909, or visit their website.

Please note that the following information applies to education support professionals as well as teachers, with a few exceptions. Most ESP members are in the state retirement or pension systems as a member of their local governmental units. ESPs in Baltimore City, Baltimore County, Charles, Montgomery, and Wicomico are covered by retirement plans through their local school systems. If you work in one of these systems, please contact your district’s personnel office for more information.
 

Teachers’ Pension System

During the 2011 legislative session, the General Assembly passed legislation creating the Reformed Contributory Pension Systems (RCPS). The RCPS is a modification of the benefit for those in the Alternate Contributory Pension System (ACPS). The modified benefit decreases the multiplier in the current benefit formula from 1.8 percent to 1.5 percent of salary for participants. All members of the system hired after July 1, 2011 will be eligible for the benefit provided under the RCPS.
 
Full service pension allowances for members in the RCPS are calculated using the average of the highest five consecutive years of salary multiplied by the number of years and months of accumulated creditable service.
 

Service Pension Allowances

RCPS members are eligible for full service pension allowances upon meeting the requirement of the “Rule of 90.” The “Rule of 90” requires that the sum of a member’s age and their years of eligibility service equal to 90.
 
Alternatively, a member of the RCPS who is 65 years of age with at least 10 years of eligibility service will also be eligible for a full service pension allowance.
 
A member is eligible for an early service pension allowance under the RCPS upon attaining age 60 with at least 15 years of eligibility service.
 
Allowances for members who fail to make all required contributions are reduced by the actuarial equivalent of the total unpaid contributions plus interest to date of retirement. Service is accrued based on a
full normal school year (ten months).
 

Member Contributions

The bill established the employee contribution for members of the RCPS at 7 percent of salary. As of July 1, 2011, all members of the ACPS are required to contribute 7 percent of earnable compensation.
 

Cost of Living Adjustments

The bill establishes an annual compound COLA for members of the RCPS. The compound COLA remains linked to the consumer price index (CPI). The annual COLA is capped at 2.5 percent if the rate of return for investments in the prior year is achieved and is 1 percent if the investment target is not met. Retirement allowances are adjusted annually effective July 1, and are compounded each year.
 
This compound COLA also is applied to service credit earned after July 1, 2011 for members of the ACPS.
 

Optional Forms of Payment

Option 1 Payment guarantees cash reserve equal to excess of present value of pension allowance at date of retirement minus total amount of payments (less COLAs) made to date of death.
 
Option 2 100% joint and survivor annuity.
 
Option 3 50% joint and survivor annuity.
 
Option 4 Payment guarantees a minimum return of members’ accumulated contributions.
 
Option 5 100% joint and survivor annuity with adjustment to maximum benefit if beneficiary predeceases retiree.
 
Option 6 50% joint and survivor annuity with adjustment to maximum benefit if beneficiary predeceases retiree.
 
Except for a spouse or disabled child, the beneficiary designated under Options 2 or 5 cannot be more than 10 years younger than the retiree (IRS regulation).
 
Legislation enacted during the 2011 session only affected the employee contribution and COLA features of the ACPS. For more information on the benefits provided under these plans, please consult the State Retirement Agency at 800/492-5909 or call Randal Mickens at MSEA at 410/263-6600 ext. 3628.
 

Teachers’ Retirement System

The Teachers’ Retirement System (TRS) was established on August 1, 1927, and is administered in accordance with the State Personnel and Pensions Article of the Annotated Code of Maryland. Prior to January 1, 1980, membership in the TRS was a condition of employment for state and local teachers and certain board of education, public library, and community college employees.
 
Effective December 31, 1979, the TRS was effectively closed to new membership when the Teachers’ Pension System (TPS) was established. Individuals who were members of the TRS on December 31, 1979 continued their TRS membership unless, or until, they elect to transfer to the newly created pension system.
 

Service Retirement Allowances

TRS members are eligible for full service retirement allowances upon attaining age 60 or upon accumulating 30 years of eligibility service regardless of age.
 
Full service retirement allowances equal 1/55 (1.818 percent) of the highest three years’ average final salary (AFS) multiplied by the number of years and months of accumulated creditable service. Allowances
for members who fail to make all required contributions are reduced by the actuarial equivalent of the total unpaid contributions plus interest to date of retirement. Service is accrued based on a full normal school year (ten months).
 

Member Contributions and COLAs

All member contributions to the TRS are based on a specified percentage of annual earnable compensation. Members who elected in 1984 to receive unlimited future cost of living adjustments (COLA)
contribute 7 percent. This option is referred to as Selection A (Unlimited COLA).
 
Members who elected in 1984 to receive limited future COLAs contribute 5 percent, for a COLA capped at 5%. This option is referred to as Selection B (Limited COLA).
 
The member contribution rate for all other TRS members is the same as for members of the ACPS, under an option that provides a two-part benefit calculation upon retirement. This option is referred to as Selection C (Combination Formula).
 

Optional Forms of Payment

Same as for Teachers’ Pension System, as outlined above.
 

For more information

For more information regarding your retirement and pension benefits, please contact the State Retirement Agency at 410/625-5555 or 800/492-5909. There is also a wealth of information on the State Retirement Agency’s website. For pension and retirement questions at MSEA, please contact Randal Mickens at 410/263-6600 ext. 3628.