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Retirement Income Overview & Benefit Options Presented by Jan Hawkins Senior Retirement Benefits Officer Retirement Income Overview & Benefit Options Presented by Jan Hawkins Senior Retirement Benefits Officer Spring 2015 1

Retirement Income What Is IPERS? The largest public retirement system in Iowa ● Members Retirement Income What Is IPERS? The largest public retirement system in Iowa ● Members include employees of: ○ public schools, cities, counties, state government, state universities, State Board of Regents, & other Approximately 340, 000 members 2, 000 employers 108, 000 retirees $1. 8 billion in benefit payments paid annually 2 2

Retirement Income What Is IPERS? 401(a) (defined benefit plan) under IRS codes: ● Lifetime Retirement Income What Is IPERS? 401(a) (defined benefit plan) under IRS codes: ● Lifetime benefits are paid based on a formula, not on the amount of contributions. ● Formula factors ○ Age ○ Years of service ○ Highest average salary 3 3

Retirement Income What’s My Part? Contributions + interest ● Contributions based on gross wages Retirement Income What’s My Part? Contributions + interest ● Contributions based on gross wages ● Current Regular class contribution rate: ○5. 95% from you, the member ○8. 93% from your employer IPERS can adjust the total contribution rate by no more than 1. 0 percentage point up or down, following an actuarial valuation. 6 6

Retirement Income What Is “Vesting”? Vested status is obtained after: 28 quarters (7 years) Retirement Income What Is “Vesting”? Vested status is obtained after: 28 quarters (7 years) of reported wages, or When wages are reported in the same calendar year age 65 or older is attained 8 8

Retirement Income Vesting Entitles the member to: ○Monthly retirement or disability benefit ○A portion Retirement Income Vesting Entitles the member to: ○Monthly retirement or disability benefit ○A portion of employer’s investment if refund is taken and Is required for a service purchase 9 9

Retirement Income Benefit Formula – Years of Service • Each year worked earns 2% Retirement Income Benefit Formula – Years of Service • Each year worked earns 2% of the 60% payable for the first 30 years. • 1% for a maximum total of 65% payable for each additional year after 30. • Early retirement reduction if before normal retirement. 11 11

Normal Retirement Age Retirement Income (No Age Reduction) Age 65 Regardless of service Rule Normal Retirement Age Retirement Income (No Age Reduction) Age 65 Regardless of service Rule of 62/20 At least age 62 with 20 or more years of service Rule of 88 Age + Years of service = 88 or greater 12 12

Early Retirement Age Reduction Retirement Income Reduce 3% a year for portion of service Early Retirement Age Reduction Retirement Income Reduce 3% a year for portion of service through 06/30/12 • From nearest normal retirement eligibility (rule of 88; rule of 62/20; age 65) As of July 1, 2012 Reduce 6% a year thereafter • From age 65 13 13

Retirement Income Maximizing Years of Service Free credit ● Leaves of absence ○ Granted Retirement Income Maximizing Years of Service Free credit ● Leaves of absence ○ Granted prior to July 1998 ○ Requires verification from employer ● Active military duty ○ Entered military as an IPERS-covered employee and returned to IPERS employment within one year of discharge ○ Submission of DD 214 form required 14 14

Retirement Income Service Purchases Beginning 01/01/16: Purchasing will take place only during the retirement Retirement Income Service Purchases Beginning 01/01/16: Purchasing will take place only during the retirement process. • Increased accuracy of cost • Reduced risk of under- or overpaying Request an official cost quote when you apply for retirement benefits. • Application for Service Purchase 15 15

Retirement Income Service Purchase Options Refunded IPERS service IPERS employment not previously covered Other Retirement Income Service Purchase Options Refunded IPERS service IPERS employment not previously covered Other public system(s) (if not eligible to draw pension from the other system) Active duty military/leave of absence time not eligible for free credit Nonqualified service (air time) 5 -year limit IPERS buy-up credit conversion 16 16

Retirement Income How Much Will It Cost? Submit an Application for Service Purchase (available Retirement Income How Much Will It Cost? Submit an Application for Service Purchase (available at www. ipers. org). Your service purchase cost will be calculated. ● Official cost quotes generated only after your Application for Retirement Benefits is on file. ● You will receive the cost per quarter and the entire purchase cost. Cost quotes are valid for six months. Remember, completing the Application for Service 17 17

Retirement Income Saving Up for a Purchase Request a basic cost estimate anytime before Retirement Income Saving Up for a Purchase Request a basic cost estimate anytime before retirement. ● Application for Service Purchase Save money in a separate retirement account that can eventually be rolled over to IPERS for your service purchase. 18 18

Retirement Income Monthly Benefit Six monthly payment options ● Always lifetime to member ● Retirement Income Monthly Benefit Six monthly payment options ● Always lifetime to member ● Different death benefit provisions IMPORTANT! Option choice cannot be changed once benefits are paid. 20 20

Option Summary Retirement Income Always lifetime to member! OPTION 1 Guaranteed death benefit in Option Summary Retirement Income Always lifetime to member! OPTION 1 Guaranteed death benefit in $1, 000 increments OPTION 2 Death benefit only if balance of investment remains OPTION 3 No death benefit OPTION 4 Dual life annuity OPTION 5 Guaranteed 10 year monthly benefit payments OPTION 6 Dual life annuity with pop-up feature for member 21 21

Retirement Income Pre-Retirement Death Benefits Designated sole beneficiary of vested member can elect lump Retirement Income Pre-Retirement Death Benefits Designated sole beneficiary of vested member can elect lump sum payment or lifetime monthly benefit (provided monthly benefit is $50 or more). If member not vested at death, beneficiary only eligible for lump sum payment. If designated beneficiary is more than one individual or entity, death benefit can only be paid in lump sum payment. Federal law now allows multiple beneficiaries to rollover lump sum payments. If no beneficiary has been designated, lump sum payment made to the estate. 22 22

Retirement Income Important Facts to Remember! Working any time in a month makes you Retirement Income Important Facts to Remember! Working any time in a month makes you ineligible for benefits that month. You can get a paycheck in the same month you start IPERS payments. 23 23

Retirement Income Getting Monthly Benefits Started Must terminate employment unless age 70 Must be Retirement Income Getting Monthly Benefits Started Must terminate employment unless age 70 Must be age 55 or older ● Unless vested and eligible for IPERS disability benefits, first month of entitlement is month following the month you terminate employment Must submit completed application Benefits paid the last business day of month 24 24

Retirement Income Taxes Benefit payments are subject to federal and state income tax ● Retirement Income Taxes Benefit payments are subject to federal and state income tax ● You can request that the tax can be withheld from monthly benefit payment 1099 R mailed each January For detailed tax information, contact the IRS for publication 575 or consult a tax advisor 25 25

Retirement Income Reemployment Must have a bona fide retirement. It’s your responsibility to contact Retirement Income Reemployment Must have a bona fide retirement. It’s your responsibility to contact IPERS if you are returning to an IPERS-covered position. ● It’s possible that returning to an IPERS-covered position will affect your benefit. Know the Social Security earning limits 26 26

Retirement Income Bona Fide Retirement To qualify for a bona fide retirement, you must: Retirement Income Bona Fide Retirement To qualify for a bona fide retirement, you must: End all service with covered employers, including non-covered service. File an IPERS benefit application. Stay out of all employment with a covered employer for one month. 27 27

Retirement Income Reemployment Guidelines Applies to IPERS-covered employment only $30, 000 earnings limit under Retirement Income Reemployment Guidelines Applies to IPERS-covered employment only $30, 000 earnings limit under age 65 (benefits reduced 50 cents for each dollar earned over the limit) No earnings limit after age 65 Benefits recomputed upon termination 28 28

Retirement Income When to Contact IPERS 3– 5 years from possible retirement for estimates Retirement Income When to Contact IPERS 3– 5 years from possible retirement for estimates 5– 6 months from retirement to obtain application packet At termination, if before age 55 for additional options If a disability occurs 30 30

Contact us: Retirement Income The purpose of this presentation is to give you a Contact us: Retirement Income The purpose of this presentation is to give you a brief overview of IPERS and upcoming law changes. For detailed information on your account: Call toll free 1 -800 -622 -3849 or locally at 515 -281 -0020 Phones are answered by Retirement Benefit Officers from 7: 30 am to 5: 00 pm Monday through Friday, excluding holidays. Website: www. ipers. org • E-mail requests: [email protected] org • Retirement calculators • Handbook • Newsletters 31 31

Retirement Income Thank You! Presented by Jan Hawkins Senior Retirement Benefits Officer 32 Retirement Income Thank You! Presented by Jan Hawkins Senior Retirement Benefits Officer 32

Neither Nationwide® nor any of its representatives give legal or tax advice. Information provided Neither Nationwide® nor any of its representatives give legal or tax advice. Information provided by Retirement Specialists is for educational purposes only and is not intended as investment advice. Nationwide Retirement Solutions, Inc. and Nationwide Life Insurance Company (collectively "Nationwide") have endorsement relationships with the National Association of Counties and the International Association of Firefighters-Financial Corporation. More information about the endorsement relationships may be found online at www. nrsforu. com. Nationwide Retirement Solutions, Inc. and its affiliates (Nationwide) offer a variety of investment options to public sector retirement plans through variable annuity contracts, trust or custodial accounts. Nationwide may receive payments from mutual funds or their affiliates in connection with those investment options. For more detail about the payments Nationwide receives, please visit www. nrsforu. com. Retirement Specialists are registered representatives of Nationwide Investment Services Corporation, member FINRA. In MI only: Nationwide Investment Svcs. Corporation. Nationwide, the Nationwide framemark, and On Your Side are service marks of Nationwide Mutual Insurance Company. © 2012 Nationwide Retirement Solutions Inc. All rights reserved. NRM-6817 AO. 4 (12/12)

Retirement Income Building your retirement income Retirement Income Building your retirement income

Retirement Income Three sources of retirement income Social Security Pension Personal Savings 35 Retirement Income Three sources of retirement income Social Security Pension Personal Savings 35

Retirement Income Social Security is only the foundation Calculating your benefit: The amount of Retirement Income Social Security is only the foundation Calculating your benefit: The amount of your social security benefit depends a lot on when you retire. Delaying your retirement by even a few years can result in a higher monthly benefit. For more information, visit www. socialsecurity. gov 36

Retirement Income Your pension may not be enough How much is enough? Experts agree Retirement Income Your pension may not be enough How much is enough? Experts agree you’ll need at least 80% of your current income to maintain the same standard of living in retirement*. *Retirement Savings Rule of Thumb, www. debt. org/retirement/how-much-do-i-need-tosave/, accessed Dec. 3, 2012 37

Retirement Income It’s up to you to bridge the income gap Personal savings options: Retirement Income It’s up to you to bridge the income gap Personal savings options: ● Employer-sponsored plans (401 k, 457 b, 403 b, etc. ) ● Traditional or Roth IRAs ● Annuities ● Other investments (stocks, bonds, mutual funds etc. ) Qualified retirement plans, deferred compensation plans and individual retirement accounts are all different, including fees and when you can access funds. Withdrawals may be subject to surrender charges, other fees and/or a 10% tax penalty if withdrawn before age 59½. 38

Retirement Income Working longer isn’t always an option 70% 60% 50% 40% 70% of Retirement Income Working longer isn’t always an option 70% 60% 50% 40% 70% of retirees expect to keep working in retirement 30% 27% 10% of retirees actually do Source: 2012 RCS Fact Sheet #2, EBRI, March 2012 39