Early Retirement Option Renewal
Issue: The state’s Early Retirement Option law for TRS members is set for a legislative review and renewal in 2013.
Answer: If legislators do not act to renew the law by June 30, 2013, the ERO statute will be automatically repealed and TRS members will receive refunds of all contributions paid to date to fund the ERO program.
If the law is not renewed, the last day for any member to retire under ERO would be June 30, 2013. That member would have to be age 55 on or before June 30, 2013. A member’s last day of work would be June 29, 2013. Renewal of the law would include an increase in the contributions participating members are required to pay to fund the program.
Under the ERO law, a member can reach age 55 after June 30 and be “deemed to be 55” and participate in ERO with a retirement date prior to July 1, 2013 only if their 55th birthday falls between July 1 and December 31 and the member is eligible for a pension of at least 74.6 percent of their final average salary.
If the law sunsets, members who reach age 55 after June 30, 2013 and would not receive a pension of at least 74.6% of the final average salary would no longer be able to retire under ERO in the six months following June 30.
Renewal of the law would include an increase in the contributions participating members are required to pay to fund the program.
- To renew the law, the General Assembly’s Commission on Government Forecasting and Accountability is recommending that the ERO contribution paid by retiring members participating in the program increase from 11.5 percent of their salary to 14.4 percent; a 25 percent increase.
- COGFA is recommending that the ERO contribution paid by school districts increase from 23.5 percent of the member’s salary to 29.3 percent; a 24.6 percent increase.
- COGFA is recommending that the contribution paid annually by active TRS members remain at 0.4 percent of their salaries.
- Right now, the current contribution rates only cover 86 percent of the future cost of pensions set up under ERO. The new contribution levels would fund 100 percent of the ERO costs.
Under state law, TRS and its actuaries, Buck Consultants, completed an “actuarial investigation” of the program in 2012 that included recommendations about whether contributions from active members, as well as one-time contributions from retiring members and their employers are sufficient to fund the program. The Buck recommendations were forwarded to COGFA, which made a formal recommendation to the General Assembly on January 10, 2013. Lawmakers now have until June 30, 2013 to act on the COGFA recommendation.
For more information, go to the TRS website