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On Wednesday, August 29, 2007, the Board of Trustees
of the Teachers and State Employees Retirement System and the Local
Governmental Employees Retirement System had a special called meeting.
The meeting was called pursuant to the provisions of SB 580, which as
reported to you in the August 15th legislative update allows for an
optional conversion of the balance of your 401k funds to your regular
retirement system upon retirement.
The Board approved the new factor tables recommended by the N.C.
Retirement Division staff that will be used to convert 401k plan funds
in order to increase monthly retirement benefits from your respective
Retirement System. The approved tables are effective September 1, 2007.
As previously advised, SB 580 gives you the voluntary option of
converting your 401k funds at the time of your retirement. This would
allow you to have an increased retirement benefit, immediate payout at
retirement (where as 401k funds are not available without penalty until
age 59 ½ ) and would qualify your total combined retirement benefit for
regular COLA increases as passed by the General Assembly. As you know,
401k funds do not qualify for such increases. For additional
information, refer to the August 15, 2007 PBA legislative update. (www.ncpba.org
click on legislative)
To better illustrate what the new benefit means to you, please refer to
the formula below.
Current Retirement Formula
State: Final Compensation Income x 1.82% x years of service
Local: Final Compensation Income x 1.85% x years of service
Plus Separation Allowance, if applicable
Plus 401k fund available at age 59 ½ without penalty
New Option
State: Final Compensation Income x 1.82% x years of service + 401k
Conversion Funds
Local: Final Compensation Income x 1.85% x years of service + 401k
Conversion Funds
Plus Separation Allowance, if applicable
401k Conversion fund formula table Passed by Board of Trustees
(At age of retirement with 30 Years of Service)
45 20.207*
46 19.891
47 19.574
48 19.181
49 18.852
50 18.522
51 18.192
52 17.762
53 17.422
54 17.085
55 16.750
56 16.282
* Calculated life expectancy at age of retirement
Sample Formula
State: 50,000 x 1.82% x 30 yrs. = 27,300 per year
Local: 50,000 x 1.85% x 30 yrs.= 27,750 per year
401k Contribution
Total 401k contributions and earnings at time of retirement divided by
single life factor (from table by age) = annual benefit
Sample Conversion
401k contributions and earnings at time of retirement Total 150,000
divided by 18.192 (age 51) = 8,245.38 per year
Sample Separation Allowance
Final Salary 50,000 x .85% x 30yrs = 12,750
Sample Final Retirement Income
State: Regular Retirement (27,300) + separation allowance (12, 750) +
401K conversion (8,245.38) = 48, 295.38
Local: Regular Retirement (27,750) + separation allowance (12, 750) +
401K conversion (8,245.38) = 48, 745.38
This provides a final retirement income of 96.6 percent of final
compensation for state retirees and 97.5 percent of final compensation
for local retirees.
Remember that both retirement options are available to you upon
retirement.
Please call the PBA office if you have any questions.
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