To: Participants in the Alternate Retirement Plan (ARP)
From: Higher Education Unions
RE: Exploring the Possibility of Allowing ARP Participants to Transfer to the State Employees Retirement System (SERS)
Date: June 9, 2010
In response to requests from higher education unions, SEBAC is exploring the possibility of legislation allowing ARP participants to transfer into the State Employees Retirement System (SERS). As part of this process, the unions hired an actuary to determine how such a transfer might occur at no additional cost to the State. Enclosed you will find information from the actuary that allows each ARP participant to estimate the cost of transferring to SERS.
Please note that there is currently no agreement that allows participants to change retirement plans. The only way to achieve this for all ARP participants is through state legislative action or agreement with the administration. Proposed legislation died in Committee earlier this year, but may be reintroduced in the future if it appears appropriate. The assumption that the legislation would pass (if at all) only if there were no net cost to the pension fund comes from a combination of the current budget struggles, and the approximately $9 billion in underfunding of the pension plan. It also follows the model of similar legislation that passed in Florida, which allows individuals to transfer from their equivalent of the ARP to their equivalent of the SERS, but requires individuals to fund the full actuarial cost of that transfer.
The enclosed information enables each ARP participant to compute an approximate cost of purchasing past service credit in SERS. The employee can then determine if his or her ARP account balance is sufficient to finance the service transfer. If there are insufficient funds, the employee could either purchase less time or pay the additional cost out of pocket (the assumption is that this may be done through payroll deductions spread out over time). If there are surplus funds, the individual would keep the balance.
The actuarial information assumes employees would purchase service credit in whichever SERS Tier was available at their date of hire. Because this is a key factor in determining the cost, make sure you first determine your correct Tier.
· If you were hired before July 1, 1984, you are in either Tier I or IB. (Tier IB is with Social Security coverage).
· If you were hired July 1, 1984 or after, you would be in either Tier II or Tier IIA. There is no difference between the two in determining transfer cost.
This information concerns potential legislation. There is also a SEBAC grievance pending that seeks to allow an ARP to SERS transfer for (1) those who were improperly only provided ARP as their only choice or were put into the ARP as a condition of employment ; and (2) those who were given the choice, but given inadequate or incomplete information which caused them to select the ARP. We are awaiting the outcome of this grievance. The information provided by the actuaries would not be used for the first category of grievants, if SEBAC were to prevail, since SEBAC’s position is that those employees should receive full past-service credit at the State’s expense, and they would have to pay only the employer’s ARP contributions, and any employee contributions that would have been paid if they’d been in the applicable tier of SERS. That position, of course, would be subject to both proving the facts of how individuals were steered, and an arbitrator agreeing with SEBAC on appropriate remedy.
We encourage you to carefully look over the enclosed information and to determine how it would apply to you. Discussions concerning our next steps will be scheduled after everyone has had the opportunity to digest this material.
