Questions about Benefits When can I retire? What will my OSERS benefit be? When do I need to give notice for retirement? When am I vested? When will I receive my first benefit payment? What are the options for taking my retirement benefit? Does it stop when I die? Is my benefit taxable? Will my OSERS benefit affect my Social Security benefit? Will partial years count toward retirement? When will I reach Rule of 85? When will I receive COLAs? What are the limitations on Employment After Retirement? Can I retain my health insurance after I retire? If so, for how long? What will be withheld from my benefit payment? Q. When can I retire? A. You are eligible to retire and receive reduced benefits at or following age 55 if you have at least 10 years of credit (5 of which must be with Omaha Public Schools). You are eligible for unreduced retirement benefits as follows: - at or following age 65 with at least 5 years of credit - at or following age 62 with at least 10 years of credit - at or following age 55 when your age plus service equals or exceeds 85. Q. What will my OSERS benefit be? A. Your benefits are calculated using the following formulas: OMAHA
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Visit the Pension Benefit Estimate Calculator for an estimate of your retirement benefits. Q. When do I need to give notice for retirement? A. You must submit notice of your prospective retirement to the Office of the Superintendent of Schools and the Office of the Executive Director of the Omaha School Employees' Retirement System, no less than 60 days prior to the effective date of retirement. This is to facilitate the presentation of the application to the Board of Education and authorizing the Retirement System staff to process the application within the time requirements. Q. When am I vested? A. Vesting establishes a right to a future retirement benefit without additional service. You will be vested in OSERS as soon as you acquire five years of creditable service with Omaha Public Schools. Once vested, you may cease covered employment at any age, hold your membership by leaving your contributions with the Retirement System, and claim a monthly lifetime retirement benefit when you meet minimum eligibility requirements. Your benefit will be figured under the formula in effect when you end employment. You may, of course, request a refund of your contributions and earned interest after termination of service but before retirement payments start. By doing so you give up your vested status and your right to a monthly benefit based on the credit established before the refund. Back to Top Q. When will I receive my first benefit payment? A. Your first retirement payment will be issued the third of the month following the month in which your retirement becomes effective. For example, if your effective retirement date is July 1, and all your records are complete, your first retirement payment will be issued on August 3rd. Subsequent payments will be issued on the third day of each month. Q. What are the options for taking my retirement benefit? Does it stop when I die? A. Before the first Omaha School Employees' Retirement System benefit payment is made, you must elect the monthly annuity payment option desired. In the event of your death before 60 monthly payments (options A, C, D, E or F) or 120 monthly payments (option B) have been made, the monthly payments will be continued to your designated beneficiary(ies) or if no beneficiary(ies) has been named, to your estate, until the appropriate total number of monthly payments have been made. Option A (Five Years Certain plus Lifetime to the Retiree) This option pays the largest monthly benefit to the retiree, payable for the retiree’s entire lifetime. In the event of the retiree’s death before 60 monthly payments have been made, the monthly payments will be continued to the retiree’s beneficiary(ies) or estate until the remainder of the guaranteed 60 monthly payments have been made. Beneficiary designation: You may name any individual or other legal entity to receive the remaining payments. The designation may be changed at any time. Advantage: Since this option provides the largest retiree benefit, it is often the appropriate choice for a member with no dependents or for a member whose beneficiary would have adequate income from other sources after the retiree's death. Disadvantage: Monthly payments end with the month of the retiree's death or after the 60th payment, whichever occurs last. No beneficiary protection is provided after the first 60 payments. Option B (Ten Years Certain plus Lifetime to the Retiree) This option pays the second largest monthly benefit to the retiree, payable for the retiree’s entire lifetime. In the event of the retiree’s death before 120 monthly payments have been made, the monthly payments will be continued to the retiree’s beneficiary(ies) or estate until the remainder of the guaranteed 120 monthly payments have been made. Beneficiary designation: You may name any individual or other legal entity to receive the remaining payments. The designation may be changed at any time. Advantage: Since this option provides a longer guaranteed payment period in the event of the recipient's death, it is an appropriate choice for a single member with dependents still in college or high school. Disadvantage: Monthly payments end with the month of the retiree's death or after the 120th payment, whichever occurs last. No beneficiary protection is provided after the first 120 payments. The following Joint and Survivor annuity options are available. A spouse (regardless of age) is eligible to receive any one of the following Joint and Survivor annuity options. If the designated joint annuitant is not the retiree's spouse then availability of some of the following Joint and Survivor annuity options is limited subject to the age limitations imposed by Internal Revenue Service regulations : for purposes of Option C, Option D, and Option F, a joint annuitant’s adjusted age is the attained age of the joint annuitant plus the number of years, if any, by which the retiree’s age is younger than age seventy. Option C (100% Joint and Survivor) This option provides monthly annuity payments for the remaining lifetimes of both the retiree and the joint annuitant. The amount of the annuity is reduced from the Five Years Certain amount to provide for the two-lifetime payment period. At the death of the retiree, if the joint annuitant is still living, the joint annuitant will receive the same amount of monthly annuity for her/his remaining lifetime. You may use this option for either a spouse or a non-spouse joint annuitant. However, if the joint annuitant is not your spouse, IRS regulations will only permit use of this option if the adjusted age (see definition above Option C) of the non-spouse joint annuitant is no more than 10 years younger than the attained age of the member in any calendar year. Option D (75% Joint and Survivor) This option provides monthly annuity payments for the remaining lifetimes of both the retiree and the joint annuitant. The amount of the annuity is reduced from the Five Years Certain amount to provide for the two-lifetime payment period. At the death of the retiree, if the joint annuitant is still living, the joint annuitant will receive 75% of the amount of the previous monthly annuity for his/her remaining lifetime. You may use this option for either a spouse or a non-spouse joint annuitant. However, if the joint annuitant is not your spouse, IRS regulations will only permit use of this option if the adjusted age (see definition above Option C) of the non-spouse joint annuitant is no more than 19 years younger than the attained age of the member in any calendar year. Option E (50% Joint and Survivor) This option provides monthly annuity payments for the remaining lifetimes of both the retiree and the joint annuitant. The amount of the annuity is reduced from the Five Years Certain amount to provide for the two-lifetime payment period. At the death of the retiree, if the joint annuitant is still living, the joint annuitant will receive 50% of the amount of the previous monthly annuity for his/her remaining lifetime. You may use this option for either a spouse or a non-spouse joint annuitant. No IRS imposed age limitation regulations restrict use of this option. Option F ("Pop-up" Joint and Survivor) This option provides monthly annuity payments for the remaining lifetimes of both the retiree and the joint annuitant. The amount of the annuity is reduced from the Five Years Certain amount to provide for the two-lifetime payment period. At the death of the joint annuitant, if the retiree is still living, the retiree will receive a monthly annuity in an amount equal to the Five Years Certain annuity for the remainder of her/his lifetime. You may use this option for either a spouse or a non-spouse joint annuitant. However, if the joint annuitant is not your spouse, IRS regulations will only permit use of this option if the adjusted age (see definition above Option C) of the non-spouse joint annuitant is no more than 10 years younger than the attained age of the member in any calendar year. Beneficiary designation: You may name one person as your joint annuitant - a spouse, a child, a parent or any other individual (subject to the IRS age restrictions mentioned earlier). That designation may not be changed. If you and your named joint annuitant were to both die before receiving 60 total monthly payments, the remainder of the 60 monthly payments would be made to the individual, trust or other legal entity you had named on the designation of beneficiary card or to the estate if no beneficiary is designated. Advantage: These options provide income to the retiree and the named joint annuitant for life. Disadvantage: The retiree benefit reduction required to pay for the joint annuitant coverage reduces monthly income for the retiree’s lifetime. Back to Top Q. Is my benefit taxable? A. Under the Internal Revenue Code, retirement benefits are taxable beginning with the first payment. If you made retirement system contributions before January 1, 1985, those contributions were income taxed before they were placed in the retirement fund. This amount is termed your "investment in contract". Therefore a small portion of each benefit payment would be excluded from income tax and considered a return of your previously taxed "investment in contract". If you purchased any service credit with previously income taxed money, those amounts would be treated as indicated above. Retirement system contributions following January 1, 1985, service credit purchases paid with tax-deferred funds, and all interest credited to your account will be taxable, whether received as a retirement benefit, a withdrawal of account funds, or a death benefit. During January of each year following retirement you will receive a 1099R in order to complete your income tax forms. The 1099R will inform you of the amount of your benefit that must be included as taxable income when filing your tax returns, the amount of your benefit on which income taxes were previously paid and the amount of income taxes that have been withheld. The amount of your benefits excluded from additional taxes is a partial return of your "investment in contract". When these excluded amounts equal your entire "investment in contract", then all further payments are fully taxable. Federal Income Tax - At retirement you can determine the amount of Federal income tax withholding you want by filing a W-4P with the Compensation and Benefits Office of the Omaha Public Schools. You may change your withholding status at any time by sending a new W-4P to the Compensation and Benefits Office. State Income Tax - OSERS retirement benefits paid to Nebraska residents are subject to Nebraska state income tax. According to the Nebraska Department of Revenue, OSERS benefits paid to retirees who are not Nebraska residents are not subject to Nebraska state income tax (please verify this information with your own tax professional). At retirement you can determine the amount of Nebraska income tax withholding you want by filing a Withholding Form for State of Nebraska Individual Income Taxes with the Compensation and Benefits Office of the Omaha Public Schools. You may change your withholding amounts at any time by sending a new Withholding Form for State of Nebraska Individual Income Taxes to the Compensation and Benefits Office. Please be advised that the retirement staff is not qualified to offer individual tax advice or information. Questions concerning taxes should be directed to a tax professional or to the appropriate taxing agency. Q. Will my OSERS benefit affect my Social Security benefit? A. OSERS benefits and Social Security or Railroad Retirement pension eligibility will have no affect on each other. You may contact the Social Security Administration by calling 1-800-772-1213. Back to Top Q. Will partial years count toward retirement? A. Yes! Before September 1, 2005, creditable service was accumulated in accordance with the negotiated agreements for each of the various employment contracts. If you had worked enough days to acquire one-half year of service credit, that time was included in your service record. Beginning September 1, 2005, a creditable year of service is defined for all members of the Retirement System as 1,000 or more hours of compensated service within a fiscal year. If you perform less than 1,000 hours of compensated service, one-tenth of a year of creditable service will be included in your service record for each 100 hours of compensated service. All time earned, whether full years or fractional years, is used in the benefit calculations. Q. When will I reach Rule of 85? A. You will reach Rule of 85 when you have any combination of age and creditable service that equals 85. One-half year of service can be combined with one-half year of age to also reach the Rule of 85 (i.e. 55 ½ years of age added to 29 ½ years of service equal 85). Retirement under the Rule of 85, as well as all other forms of early retirement, requires the retiree to have reached at least 55 years of age. Q. When will I receive COLAs? A. On January 3rd of each year a general cost of living adjustment will be made to each retirement benefit being paid. This general COLA will be 1 ½ percent of the Omaha retirement benefit, not to exceed the increase in the consumer price index over the preceding year. If the consumer price index has increased more than 1 ½ percent and if the Board of Trustees determines that a supplemental COLA is prudent and actuarially permissible, then upon recommendation of the Board of Trustees, the Board of Education may authorize a supplemental COLA payment. Again, this supplemental COLA cannot exceed the increase in the consumer price index. In addition to the general COLA, which is paid to both members and beneficiaries, a medical cost of living adjustment is paid, but only to members who have been retired 10 years or more. On October 3rd of each year, these retired members will be paid a medical COLA using the following formula: A. Years of Retirement System Service Credit (how may years did you make retirement system contributions) divided by 20 (number cannot be larger than 1) B. Multiply the product of Step A by the number of years the member has been retired C. Multiply the product of Step B by $10 Q. What are the limitations on Employment After Retirement? A. The Retirement System has no restrictions on employment after retirement, for employers other than Omaha Public Schools. Re-employment with the Omaha Public Schools may occur after at least a 30 day break in service and subject to Board policy and IRS regulation. Social Security has earning restrictions for those members receiving Social Security benefits before their full Social Security retirement age. Please call the Social Security Administration at 1-800-772-1213 for complete details. Back to Top Q. Can I retain my health insurance after I retire? If so, for how long? A. While members frequently ask the Retirement System about their health care options upon retirement, the Retirement System has no role in administering health insurance for retirees. Detailed questions concerning your health insurance options should be directed to the Omaha Public Schools Compensation and Benefits Office at 402 557-2119. When members retire from employment with Omaha Public Schools, thus losing their health insurance benefits, in most instances the Educators Health Alliance permits them to purchase group insurance similar to what they were being provided as an active employee. For more information, you can access their web site at: http://www.educatorshealthalliance.org Q. What will be withheld from my benefit payment? A. At your direction, both Federal income tax and Nebraska income tax can be withheld from your benefit payment. Please see the question titled "Is My Benefit Taxable" for more details.
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