Pension and Retirement

Employees leaving MOT and NOT going to work for another state organization as a benefit eligible employee have two pension contribution options:

1. Withdraw their contributions (can be rolled over into a deferred compensation account)

• Employees leaving state service can contact the Pension Office at pensionoffice@delaware.gov and request a Contributions and Interest statement, which is mailed to the employee after total contributions have been verified (typically 45 days after the last paycheck).

• Once the employee knows the total amount, they can contact their IRA/deferred account plan to request the form to roll funds. 

• Payment may not be made until three (3) months following your final pay. 

• The State is required by Federal Law to withhold 20% of the taxable portion of your refund, unless you choose to have that portion of the refund subject to withholding made payable directly to your IRA or to another employer plan that accepts rollovers. 

• Any refund issued prior to your obtaining age 59 1/2 years will be subject to a 10% penalty for early withdrawal by the IRS. 

• If an employee leaves state employment, withdraws their pension contributions, and then returns, previous credit is not restored. Contributions must be repaid and interest withdrawn, plus applicable penalty interest, and, if not vested, you must work for five (5) consecutive years in a pension creditable position. 

2. Retain their contributions

• Ten month employees receive twelve months of creditable service time if they complete their contract for that year. 

• Mid-year hires receive credit for ten months of service.

• Employees with a leave of absence earn service time, as long as they were paid in every pay cycle. 

• Employees may be entitled to payment for sick and annual leave accruals. 

• Payments can be rolled into a tax-sheltered account such as a 401(A), 457(B), 403(B)

There are two basic types of buy-ins:

1. Sick Leave: 21 days of sick leave = 1 month buy-in

2. Actuarial (Military or Governmental service)

Payment for the purchase of an approved buy-in is calculated at the time of the employee’s retirement. Written notification will be mailed directly to the home address the month the retiree will receive their first pension benefit. Must be paid prior to issuance of first benefit

Buy-ins can be purchased one of three ways:

1. Deducted from first monthly pension, if sufficient to cover the entire cost

2. Personal check

3. Rollover from a qualified tax-sheltered account: 401(A), 457(B), 403(B) (under certain circumstances), or an IRA

• If Employee elects a buy-in, they will receive a letter from OP soon after the application is approved with cost of buy-ins.

• Buy-ins take up to 12 years to recoup but Employees can use a tax sheltered annuity to pay for them.

• Sick leave buy-ins count for medical creditable service time; Actuarial buy-ins do not.

• Pension is paid once a month on the last business day of the month.

• The first pension check will be on a 1 month lag (retire June 1 and receive the check July 31), with double pay and double deductions. 

• There is a one month lag (retire 6/1 and payment is 7/31). However, the first paycheck is double pay and double deductions.

• Pension calculations are based on the highest three years of Comp in a rolling calendar year (any 12 months, not Jan to Dec).

• Payments are taxable by the federal government and may be taxable by state.

• Leave payouts can be rolled into deferred comp to avoid taxes.

CALCULATING YOUR PENSION PAYMENT

1. Log into MyDelaware.Gov, click on Annual Statement, click on Comprehensive Statement for the most recent year. If there is no statement, you are not vested.

2. Enter you combined highest 3 year compensation

3. Enter your creditable service prior to 1997 (0 for most employees)

4. Enter Creditable Service after 1996

5. Enter your additional service and age at retirement

6. The estimated amounts listed compare your pension payments across all survivor options

TAXES

• Monthly pension is taxable by the Federal Government

• May or may not be taxable in the State where the retiree maintains permanent residence

• Form 1099-R

If retiring with less than 20 years, the state will pay a percentage of the state share portion of your coverage:

Hired on or before December 31, 2006

• • Less than 10 years = 0%

  • 10 to less than 15 years = 50%

  • 15 to less than 20 years = 75%

  • 20+ years = 100%

Hired on or after January 1, 2007

• • Less than 15 years = 0%

  • 15 to less than 17.5years = 50%

  • 17.5 to less than 20 years = 75%

  • 20+ years = 100%

HEALTH INSURANCE

• Must be collecting a monthly Pension or LTD benefit

• When pensioners and/or their covered spouse turn 65, Medicare is required

• All plans coupled with prescription plan coverage

  • Changes in coverage occur once a year during the open enrollment period in May; changes are effective July 1st

  • Medicare–eligible members’ open enrollment period occurs in October; changes effective January 1st

OTHER BENEFITS

Securian Financial

• Available to eligible active members who want to maintain Group Universal Life (GUL) after retirement

• Premiums must be paid directly to Securian

Flexible Spending Account (FSA)

• Per IRS tax code there is no provision for retirees to participate

• Benefit terminates the effective date of retirement or date of last FSA payroll deduction

Deferred Comp Accounts

• Final check is the last time you can contribute to this account

SURVIVOR

A survivor is a person eligible to receive a monthly pension at the time of the active member or pensioner’s death

• Spouse

• Child/children under age 18, unmarried, and if between the ages of 18 and 22, a full-time student

• Child permanently disabled as a result of a disability that began before the child attained age 18

• Dependent parent(s)

Monthly pension reduced for lifetime

• 50% = No reduction

• 66.67% = 2% reduction

• 75% = 3% reduction

• 100% = 6% reduction

BENEFICIARY

A beneficiary is named on the Member Actuarial Information form or the Contributory Designation/Change of Beneficiary form and receives a lump sum distribution of the balance of member paid pension contributions, plus interest, in the event there is no eligible survivor at the time of the member’s death.

There is a burial benefit of $7,000 offered at no cost to the pensioner and paid to the beneficiary's designation. 

Employees who recently got married or divorced should update their Pension Beneficiary Form. 

• The HR office will need a copy of the marriage license or divorce decree. 

• If tax deductions are changing, please complete new state and federal W4 forms (found in the payroll section).

4 Months from Retirement

• Notify supervisor and Human Resources department four (4) months prior to your retirement date to ensure timely processing of pension benefits.

• Human Resources begins the process of verifying service by initiating an electronic Pension Application (Pen-App). The Office of Pensions verifies the employee’s service and sends a confirmation email back to the Human Resources department after creditable service is verified.

• Human Resources schedules an appointment to sign the pension application and complete the necessary paperwork.

• Human Resources requires the employee to bring the following personal documents to their appointment.

  • 1. Birth certificate (or federally compliant Delaware driver’s license or ID card) for employee, spouse and eligible dependent(s)

    2. Signed Social Security card for employee, spouse and eligible dependent(s)

    3. Marriage certificate, death certificate, or divorce decree, as applicable

    4. Medicare card for employee, spouse and eligible dependent(s)

• Coverage under pension healthcare benefits requires enrollment in Medicare Part A and Part B when eligible due to either age 65 or disability. Inform your organization’s Human Resources department if you and/or any of your eligible health insurance covered dependents are Medicare eligible.

  • 1. Complete a Centers for Medicare and Medicaid Services (CMS) L-564 form (also known as the “Request for Employment Information” form). The form requires a human resources representative’s signature for each individual who is Medicare eligible.

    2. Apply for Medicare Part B by contacting a local Social Security Administration (SSA) field office with a completed CMS L-564 form. The effective date of Part B should have an effective date equal to the pension effective date.

    3. Schedule the appointment with the local SSA field office at least three months prior to the pension effective date to avoid health benefit enrollment delays.

45 days from Retirement

• Signed Pen-App and required forms and documents should be received by the Office of Pensions.

• If Medicare-eligible, submit a copy of either a Medicare card or a benefit verification letter from the Social Security Administration showing the effective dates of Medicare Part A and Part B for each Medicare eligible individual.

• Complete the Sick\Vacation Deferral Form with your human resources representative and send to the Office of the State Treasurer at least 30 days before you receive your final paycheck. – The form can be found on the Office of State Treasurer’s web site.

Officially Retired

• The Office of Pensions calculates the monthly pension amount after the final paycheck is paid.

• A buy-in statement is mailed if there are buy-in options. The statement must be returned before the first pension payment is paid.

• First pension payment will be on a lag pay. (Example: if you retire May 1st, then May and June pension payment will be paid on the last business day in June)

• Instructions on how to log in and view pension payment information online is mailed. Viewing pension payment is available after the first pension payment is generated.

After You Retire

• The Office of Pensions will be your contact for benefits, change of address, payroll and any other forms you need updated you can find the Retiree Forms here.

• Continue to view our website for updated information such as pay dates and office closings

• All changes of address must be in writing, the form can be found here

• You will receive a retiree annual statement

• 1099R’s and W-2’s will be mailed in January every year

Per Delaware statute and IRS guidelines:

• If under age 65 –must have a bona fide separation of at least six months

• If over age 65 –a bona fide separation is not required

• Must be in a non-pension covered position

Earnings limit $50,000 –Monthly pension offset $1 for every $2 earned over the limit

Only applies if considering employment with an organization participating in the State Employees’ Pension Plan

https://open.omb.delaware.gov/pensionPlans/StateEmp/sep_ReturnToWorkCriteria.shtml