OPERS Members - You Have 3 Retirement Plan Options

OPERS Members - You Have 3 Retirement Plan Options
OPERS Members - You Have 3 Retirement Plan Options

If you are an OPERS employee, you may or may not already know that you have a choice in the type of retirement plan that you participate in. OPERS has 3 choices.

  1. Traditional Pension Plan
  2. Member-Directed Plan
  3. Combined Plan

In this article, we will discuss the differences between the Traditional Pension Plan and the Member-Directed Plan. The Combined Plan, as it sounds, is a combination of the Traditional Pension Plan and Member-Directed Plan.

If you are well established in your OPERS career and you are already in the Traditional Pension Plan, it is likely that it will be beneficial for you to stay in that plan. If you are early in your OPERS career, it is likely that you would find that the Member-Directed Plan is more beneficial for you. Those are generalizations and there is a lot that goes into determining which is the right plan for you, so please give us a call and we would be happy to discuss the options with you and help you make a decision based on your specific situation.

OPERS Traditional Pension Plan Overview

The Traditional Pension Plan is a defined benefit plan that provides a fixed monthly income in retirement (pension). At retirement, your pension amount is determined by a formula that rewards you for working longer. The formula uses your final average salary (the average of your highest 3-5 salary years) and your years of service.

The benefit that is calculated with this formula is what your pension would be if you chose to only cover your life (single life). Meaning, you would get that amount for your lifetime and then when you pass away, your spouse would not get your pension. Instead, if you decide to do a joint life pension, your monthly benefit will be reduced but your spouse will get your pension when you pass away.

Health Care Under the Traditional Pension Plan

When you retire you may have access to health care, but this is not a guaranteed benefit. Eligibility depends on your age at retirement, your service years, and/or which retirement group you are in. (OPERS has 3 retirement groups: A, B, and C and you can find out which group you are in on your annual statement or on your online portal. Your group not only determines health care eligibility, but it also determines when you are eligible to retire and how your benefit is calculated).

Health care is not provided for your spouse so if you retire before they are 65 and if they do not have health care from their employer, you will have to purchase theirs on the marketplace.

Employee & Employer Contributions Under the Traditional Pension Plan

Employee Contribution:

An employee's contribution rate is the same for all three of the OPERS retirement plans.

Currently, OPERS members contribute the following percentage of their salary:

  • 10% for local and state government employees
  • 12% for public safety employees
  • 13% for law enforcement employees

Employer Contribution:

Currently, employer contribution rates are:

  • 14% for state government employees
  • 14% for local government employees
  • 18.1% for law enforcement or public safety employees

For members participating in the Traditional Pension Plan and the Combined Plan, the employer contribution is used to fund the pension trust fund as well as the health care trust fund.

If you retire from OPERS and you chose the Traditional Pension Plan, the employer/employee contributions do not impact your final benefit since your pension is calculated based on the formula that was discussed above (using your Final Average Salary and your service years).

OPERS Member-Directed Plan Overview

The Member-Directed Plan is a defined contribution plan where you contribute to an account that is similar to a 401(k) and you get to decide how your contributions are invested.

In retirement, your benefit is based on the amount you contributed and the growth of the account. Again, this is similar to a 401(k) in the private sector.

At retirement, if you decide that you want a monthly benefit, you do have the option of turning the account into an annuity. The calculation formula for members in the member-directed plan who choose to have a monthly benefit is their final account value multiplied by an annuity factor that is determined by OPERS.

Employee & Employer Contributions Under the Member-Directed Plan

Employee Contribution:

An employee's contribution rate is the same for all three of the OPERS retirement plans.

Currently, OPERS members contribute the following percentage of their salary:

  • 10% for local and state government employees
  • 12% for public safety employees
  • 13% for law enforcement employees

Employer Contribution:

Currently, employer contributions for those in the Member-Directed plan is 7.5%. This is deposited into the member's employer contribution account and invested as directed by the member.

A percentage of the remaining portion of the employer contribution amount (determined by the OPERS Board of Trustees, based on the OPERS actuary's recommendation) will be credited to a Retiree Medical Account, which is invested as directed by OPERS investment professionals.

Health Care Under the Member-Directed Plan

With the Member-Directed Plan, you do not qualify for health care when you retire but you will have a Retiree Medical Account (RMA) that you can use for health care expenses. This account is funded from contributions from your employer, currently 4% of your salary.

The Retiree Medical Account investments are managed and directed by OPERS. The interest rate is tied to the performance of the OPERS Stable Value Fund. If the investment return is positive, interest will be applied in the same amount as the return but will not exceed 4 percent. If the investment return is negative, zero interest will be applied.

In retirement, the RMA can be used for the payment of health care expenses including insurance premiums, co-pays, medical services, and even transportation to receive medical care. You can also use it to pay for limited amounts of long-term care insurance.

If you were hired after July 1, 2015 you are fully vested in the RMA in 15 years. If you were hired prior to that, you are vested in 5 years.

Investment Choices Under the Member-Directed Plan

Remember that if you participate in the Member-Directed Plan, you choose the investments in your retirement plan account (similar to a 401(k)). You get to select from the funds that OPERS offers which include Index Funds and Target Date Funds.

OPERS also offers a mutual fund-only Self-Directed Brokerage Account through Charles Schwab's Personal Choice Retirement Account®. This means that the Advisors at Whitaker-Myers Wealth Managers can be the Advisor on your OPERS Member-Directed Plan account. Once the account reaches $10,000, a Whitaker-Myers Advisor can get you access to the high-quality mutual funds that we recommend within your OPERS account.

If you just switched your account over to the Member-Directed Plan and do not have a $10,000 balance yet, your Whitaker-Myers Advisor would be happy to help you in picking the OPERS funds that are available to you.

If you are an OPERS member, the retirement plan you choose can have significant impacts on your retirement benefits.  We know this was a lot of information, so if you still have questions, please give us a call and we’d be happy to help guide you through the decision. Everyone's situation is unique and that is why you should talk with an Advisor before making a decision on which retirement plan is the best option for you. 

You can meet our team of Advisors and reach out to one of us here:

https://www.whitakerwealth.com/your-team

 

Whitaker-Myers Wealth Managers, LTD is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.