oversight

State Pension Plans: Similarities and Differences Between Federal and State Designs

Published by the Government Accountability Office on 1999-03-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States General Accounting Office

GAO             Report to Congressional Committees




March 1999
                STATE PENSION
                PLANS
                Similarities and
                Differences Between
                Federal and State
                Designs




GAO/GGD-99-45
GAO   United States
      General Accounting Office
      Washington, D.C. 20548

      General Government Division



      B-279261

      March 19, 1999


      The Honorable Thad Cochran
      Chairman
      The Honorable Daniel Akaka
      Ranking Minority Member
      Subcommittee on International Security,
        Proliferation and Federal Services
      Committee on Governmental Affairs
      United States Senate

      The Honorable Joe Scarborough
      Chairman
      The Honorable Elijah E. Cummings
      Ranking Minority Member
      Subcommittee on Civil Service
      Committee on Government Reform
      House of Representatives

      This report describes the design components of retirement programs that
      states offer to their general employees and compares them to the design
      components of the two principal retirement programs for federal
      employees. It also describes changes states have considered and made to
      their retirement programs. We prepared the report at our initiative to
      complement our earlier reports on the approaches private sector
      employers were using to provide retirement benefits to their employees
                                                               1
      and the extent to which these approaches were changing. We have
      addressed the report to you because the issues discussed are within your
      Subcommittees’ areas of oversight.

      We defined federal general employees as employees who were covered by
      the Federal Employees’ Retirement System (FERS) and the Civil Service
      Retirement System (CSRS), excluding those who were covered by special
      retirement provisions—notably law enforcement officers, firefighters, air
                                                                        2
      traffic controllers, Members of Congress, and congressional staff. We
      defined state general employees as employees who were not classified as

      1
       Private Pensions: Most Employers That Offer Pensions Use Defined Contribution Plans (GAO/GGD-97-
      1, Oct. 3, 1996). Private Pensions: Plan Features Provided By Employers That Sponsor Only Defined
      Contribution Plans (GAO/GGD-98-23, Dec. 1, 1997).
      2
      FERS is open and available to new federal employees. CSRS has been closed to new employees since
      December 31, 1983.




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                     law enforcement officers, firefighters, legislative staff, or elected or
                     judicial officials. We also excluded teachers in those states in which
                     teachers were covered by different retirement plans than the ones that
                     covered general employees.

                     We used the term “design” to characterize which of four components—
                     defined benefit (DB); defined contribution, with and without an employer
                     contribution (DC); and Social Security—made up a state’s retirement
                              3
                     program. In determining what design component a state had, we further
                     distinguished DC components according to whether they included an
                     employer contribution because FERS and CSRS are different in this
                     respect.

                     Our specific objectives were to determine

                   • how many state retirement programs currently open to general employees
                     include the same design components as FERS and CSRS and what design
                     components the others include; and
                   • what design changes states have made to their retirement programs since
                     the programs were established and what design changes they have
                     recently considered and why.

                     Also, because of continuing congressional interest in how the features of
                     nonfederal retirement programs compare to those of federal programs, the
                     appendixes to this report present information about key eligibility,
                     benefits, and contribution features of the state programs, which we
                     categorized to reflect differences in how the programs were designed (see
                     apps. I through VI).

                     All states used two or more of the four design components, but few of their
Results In Brief     retirement programs had all of the same components as FERS or CSRS.
                     The majority of states35included three components (DB, DC with no
                     employer contribution, and Social Security) and differed by only one
                     component from either FERS or CSRS. The lack of employer contributions
                     to DC plans distinguished these programs from FERS, and the inclusion of
                     Social Security coverage distinguished them from CSRS. In the final
                     analysis, three state programs had the same components as FERS and six
                     had the same components as CSRS. Table 1 shows the design components
                     for each of the 50 states’ retirement programs.
                     3
                      For a DB plan, the employer determines retirement benefit amounts for individual employees using
                     specific formulas that consider certain factors, such as age, years of service, and salary levels. For a
                     DC plan, the employee’s retirement benefits depend on the total of employer and/or employee
                     contributions in the employee’s individual account and the investment experience of those accounts.




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Table 1: Design Components of
Retirement Programs for State General                                              Design components
Employees                                                                          Defined contribution
                                                                                With         With no
                                                                        Defined employer     employer     Social    Number
                                        States                          benefit contribution contribution Security of states
                                        MN, MO, OK                      O       O                         O                3
                                        CO, LA, MA, ME, NV, OH          O                    O                             6
                                        AL, AR, AZ, CA, CT, DE, FL,
                                        GA, HI, IA, ID, IL, KS, KY,
                                        MD, MS, MT, NC, ND, NH,
                                        NJ, NM, NY, OR, PA, RI,
                                        SC, SD, TX, VA, VT, WA,
                                        WI, WV, WY                  O                           O             O               35
                                        IN, TN, UT                  O              O            O             O                3
                                        AK                          O              O            O                              1
                                        MI, NE                                     O            O             O                2

                                        Source: GAO analysis of state retirement data.


                                        Our review showed that all states have in some way changed the design
                                        components of their retirement programs since the programs were
                                        established. Developments in federal law that might enhance employee
                                        benefits prompted most of these changes—notably, the extension of Social
                                        Security eligibility to state employees in the early 1950s and the adoption
                                        of tax provisions in the 1970s allowing state employees to contribute on a
                                        pretax basis to a DC plan. By 1969, 44 states had provided Social Security
                                        coverage to their employees. In 1980, Alaska discontinued its Social
                                        Security coverage. Thus, 43 states now provide Social Security coverage to
                                        their employees. By 1988, all states had a voluntary DC plan available to
                                        their employees.

                                        Officials representing 21 of the 48 state retirement programs with a DB
                                        component told us that their states had recently considered dropping their
                                        DB plan component in favor of a program consisting solely of a DC
                                        component with an employer contribution and Social Security. However,
                                        only two states have no DB plan, and one of these
                                        statesMichiganrecently dropped its DB plan and switched to a DC
                                        plan with an employer contribution for its state-sponsored retirement
                                        benefits. Officials from the 21 states cited reducing government costs,
                                        enhancing portability, and/or lobbying by special interests as the major
                                        reasons for considering such a change. They also cited a number of
                                        reasons for not dropping their DB plans, the most common of which were
                                        that (1) studies showed no need for the change, (2) further study was
                                        needed, (3) labor unions opposed the change, and/or (4) there was lack of
                                        interest or support for the change.




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             Officials representing the other 27 state programs told us that their states
             had never considered dropping their DB component. The most common
             reasons state officials gave for not considering such a change were that (1)
             the DB component provided greater benefits, including survivor and
             disability benefits; and/or (2) they regarded the DB plan as a better way to
             retain employees.

             FERS consists of three parts: a DB component, a DC component with
Background   employer contribution, and Social Security. CSRS consists of two parts: a
             DB component and a DC component with no employer contribution. The
             DC component differs between FERS and CSRS. Under FERS, federal
             agencies automatically contribute an amount equal to 1 percent of salary
             to the Thrift Savings Plan (TSP) for each covered employee whether or not
             the employee contributes. In addition, the employer will contribute $1.00
             for each $1.00 the employee contributes up to 3 percent of salary; and $.50
             for each $1.00 the employee contributes on the next 2 percent of salary, for
             a maximum total employer contribution of 5 percent. FERS employees
             may contribute an additional 5 percent of salary with no employer
             contribution. The DC component in CSRS has no employer contribution;
             however, employees may contribute up to a total of 5 percent of their
             salary to the TSP and up to 10 percent of their salary to a separate
             voluntary contribution account. Except for certain employees who were
             rehired after December 31, 1983, employees in CSRS are not covered by
                                                                 4
             Social Security through their federal employment.

             State retirement programs vary widely—not only in their details but also
             because most jurisdictions have separate programs for special categories
             of employees, such as law enforcement officers, firefighters, teachers, and
                                           5
             elected or judicial officials. Employees who do not fall into one of these
             categories are usually covered by a retirement system for general
             employees. In 1911, Massachusetts became the first state to develop a




             4
              Employees covered under the CSRS-Offset plan are covered by Social Security. The CSRS-Offset plan
             is a version of CSRS established for employees who were rehired after December 31, 1983, following a
             break in CSRS covered service of more than 1 year and who, as of the date of their last separation from
             service, had completed at least 5 years of creditable civilian service.
             5
             Some states have one retirement plan that covers all state and local employees, including teachers,
             public safety workers, and elected officials.




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                                                                              6
retirement program for general service state employees; and by 1947,
                                         7
every state provided retirement benefits.
                                                     8
In addition to Social Security benefits, employers may provide retirement
benefits to their employees using two basic types of design components—
DB and DC. Under a DB plan, employers bear the full responsibility for
providing sufficient funding to guarantee that the benefits promised by the
formulas will be paid. A DC plan differs in that there is no guaranteed
annual benefit amount at retirement. Therefore, the employee bears the
risk of whether the funds available at retirement will provide a desired
level of benefits. Because employers may choose to offer a combination of
these design components, that is—DB, DC with employer contribution, DC
with no employer contribution, and Social Security—retirement programs
can differ not only by the benefits they provide, but also by the design
components they include.

Among the arrangements used by state governments to augment regular
employee retirement plans are three DC plans authorized under the
                                                              9
Internal Revenue Code at sections 401(k), 403(b), and 457(b). These DC
plans are voluntary, supplemental, long-term retirement programs that give
employees an opportunity to defer receipt of income until retirement or
                            10
termination of employment. The key attraction of these plans can be the
potential tax savings for employees. Income tax is generally deferred on

6
 In 1945, the Commonwealth of Massachusetts Legislature revised Chapter 32 of the General Laws to
create a uniform statutory framework governing the rights and benefits available to public employees
and their beneficiaries. That is, Massachusetts consolidated its various retirement plans into one
retirement system.
7
U.S. Congress. House Committee on Post Office and Civil Service. Designing a Retirement System for
Federal Workers Covered by Social Security. Prepared by the Congressional Research Service.
Committee Print 98-17, 98th Congress, 2d Sess., Dec. 1984. Washington. U.S. Government Printing
Office, 1985, p. 54
8
 The Social Security system was established in 1935 to cover certain workers in the private sector.
Congress explicitly excluded state and local government workers, partly because the early objective of
Social Security was first to include employees most in need of coverage. Many state and local workers
were already included in other pension plans, and it was not until Social Security amendments of the
early 1950s that state and local governments were permitted to elect coverage.
9
 The Tax Reform Act of 1986 prohibits state governments from establishing any new 401(k) plans after
May 6, 1986, although existing plans may continue. Federal law generally limits participation in 403(b)
plans to employees of public school systems, colleges, and universities. As a result, most state
government employees have only section 457(b) plans available to augment their regular government
pensions.
10
   The concept of public deferred compensation developed from private letter rulings of the Internal
Revenue Service for individual private sector deferred compensation plans. In 1972, the Internal
Revenue Service issued the first of its private letter rulings holding that tax may be deferred on
employee contributions where a state or local government was the employer.




Page 5                                     GAO/GGD-99-45 Design of State Retirement Programs
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              contributions made to these plans and the associated earnings during an
              employee’s career. Taxes are due when the individual receives benefits
              from the plan, usually after retirement.

              To determine the numbers of state retirement programs open and available
Scope and     to general employees as of July 1, 1998, that included the same design
Methodology   components as FERS and CSRS, and what design components were
              included in the remaining state retirement programs, we obtained
              preliminary information from a database developed by the Public Pension
              Coordinating Council (PPCC) for its report, 1997 Survey of State and Local
                                                             11
              Government Employee Retirement Systems. We also obtained summary
              plan documents (e.g., employee handbooks and information brochures) for
              each of the 50 states and interviewed state retirement officials
              knowledgeable about the programs. We did not review the underlying
              statutes that set forth the specific provisions of state retirement plans. We
              relied on our prior work to identify the design components of FERS and
              CSRS, which we then used to categorize the state retirement plans.

              On the basis of our prior work, we defined federal general employees as
              employees who were covered by FERS and CSRS, excluding those who
              were covered by special retirement provisions—notably law enforcement
              officers, firefighters, air traffic controllers, Members of Congress, and
              congressional staff. We defined state general employees as employees who
              were not classified as law enforcement officers, firefighters, legislative
              staff, or elected or judicial officials. We also excluded teachers in those
              states in which teachers were covered by different retirement plans than
              the ones that covered general employees.

              As shown in table 2, we categorized state retirement plans according to the
              major design components found in FERS and CSRS—specifically DB, DC
              with employer contribution, DC with no employer contribution, and Social
              Security.




              11
               According to PPCC, the information collected for its 1997 survey constitutes the most detailed single
              source of data on state and local government retirement systems in existence at that time. Members of
              PPCC include the Government Finance Officers Association, the National Association of State
              Retirement Administrators, the National Conference on Public Employee Retirement Systems, and the
              National Council on Teacher Retirement.




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Table 2: Design Components of FERS
and CSRS                                                                     Design components
                                                                             Defined contribution
                                     Federal                          With employer With no employer Social
                                     retirement plans Defined benefit contribution    contribution   Security
                                     FERS             O               O                              O
                                     CSRS             O                               O

                                     Source: GAO analysis of Office of Personnel Management data.


                                     On the basis of the four design components shown above, we classified the
                                     states’ design components into six category types as shown in table 3.

Table 3: Categorization of State
Retirement Programs Using FERS and                                         Design components
CSRS Design Components                                                    Defined contribution
                                                                                    With no
                                                                    With employer employer
                                     Category types Defined benefit contribution    contribution                       Social Security
                                     I (FERS-like)  O               O                                                  O
                                     II (CSRS-like) O                               O
                                     III            O                               O                                  O
                                     IV             O               O               O                                  O
                                     V              O               O               O
                                     VI                             O               O                                  O

                                     Source: GAO analysis of state retirement data.


                                     Our approach was designed to provide the most up-to-date information (as
                                     of July 1, 1998) on the current design components and features of state
                                     retirement plans; however, it was not designed to provide information on
                                     some tiers of multitiered and/or closed plans that states also may be
                                                12
                                     operating. We offset this limitation to some extent by describing the
                                     changes that have occurred in the design components of state programs
                                     since the programs were established. We also asked retirement officials in
                                     each state to confirm the accuracy of the information about their programs
                                     used in our report.

                                     12
                                      Some states create more than one level or tier of benefits under a retirement system when they
                                     modify the benefits. Employees hired after a new tier is created become members of the new tier and
                                     are subject to the modified plan provisions. When making major modifications to their retirement
                                     programs, such as changing design components or consolidating several plans, some states close the
                                     established retirement plan to new members and create an entirely new system for new employees. In
                                     addition, states with closed plans have allowed members of the old plan to transfer to the new plan.
                                     Similarly, CSRS employees were allowed to transfer to FERS after it was established. Employees were
                                     provided another opportunity to transfer during an open season held during the latter half of calendar
                                     year 1998.




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                       To describe the changes, if any, that have been made to the design of state
                       retirement programs open and available to state general employees since
                       the programs were established, what design changes states were
                       considering, and the reasons for these changes, we interviewed cognizant
                       state retirement officials. We used this information to determine what
                       design components were previously available to state general employees,
                       as well as those components that would be available if states made the
                       changes they were considering.

                       To provide detailed information on the features of state retirement
                       programs, we also used the database developed by PPCC to obtain specific
                       data regarding eligibility, benefits, and contributions. As a supplement to
                       the database, we reviewed state retirement program summary plan
                       documents and financial reports, and/or we contacted state retirement
                       officials. Plan profiles for each state are presented in appendixes I through
                       VI. The profiles are grouped by type according to their design components
                       and are preceded by summary data we selected to facilitate comparisons
                       with FERS and CSRS.

                       We requested comments on a draft of this report from the Director, Office
                       of Personnel Management (OPM). OPM responded that it had no
                       comments. We did our review from February 1998 to March 1999 in
                       accordance with generally accepted government auditing standards.

                       All of the 50 state retirement programs had two or more of the four design
Few State Retirement   components but few of them had all of the same design components as
Programs Had Exactly   FERS or CSRS. All states had a DC component, but only nine states
the Same Component     contributed to the plan. A defined benefit component was included by 48
                       states and 43 states included Social Security coverage. A majority of states
Mix as FERS or CSRS    included three of the design components, but these were not the same
                       components included in either FERS or CSRS. A total of nine states had
                       exactly the same component mix as FERS or CSRS.

                       Of the nine states like FERS or CSRS, three—Minnesota, Missouri, and
                       Oklahoma—had programs similar in design to FERS. These programs
                       included a DB component, a DC component with an employer
                       contribution, and Social Security. The other six states—Colorado,
                       Louisiana, Maine, Massachusetts, Nevada, and Ohio offered retirement
                       programs with the same design components as CSRS to their general




                       Page 8                          GAO/GGD-99-45 Design of State Retirement Programs
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                                                                                                           13
                         employees. That is, these programs included a DB component and a DC
                         component with no employer contribution.

                         The vast majority—35—of the states had retirement programs that
                         included a DB component, a DC component with no employer
                         contribution, and Social Security. The lack of employer contributions
                         distinguished these programs from FERS, and the inclusion of Social
                         Security coverage distinguished them from CSRS. The remaining six states
                         offered retirement programs that included other combinations of the FERS
                         and CSRS design components. For example, Indiana, Tennessee, and Utah
                         had programs with a DB component, a DC component with employer
                         contribution, a DC component with no employer contribution, and Social
                         Security. Michigan and Nebraska had programs that included a DC
                         component with employer contribution, a DC component with no
                         employer contribution, and Social Security. Alaska had a retirement
                         program with a DB component, a DC component with employer
                         contribution, and a DC component with no employer contribution.

                         All states have in some way changed the design components of their
All States Made Design   retirement programs since the programs were established. For the most
Changes to Their         part, developments in federal law that might enhance employee benefits
Retirement Programs      prompted these changes—notably, the extension of Social Security
                         eligibility to state employees in the early 1950s and the adoption of tax
Since They Were          provisions beginning in the 1970s allowing state employees to contribute
Established              on a pretax basis to a DC plan.

                         The vast majority, or 44, of the states provided Social Security coverage
                         after it became available to state employees. Of these states, 43 had
                         provided Social Security coverage by the late 1950s; the last state to add
                         Social Security did so in 1969. Alaska discontinued its Social Security
                         coverage in 1980 after state employees elected to add a DC component
                         with employer contribution to the state’s retirement program. Thus, 43
                         states currently provide Social Security coverage to their employees. Six
                         states have never added Social Security coverage to their retirement
                         programs.

                         States began establishing deferred compensation plans—voluntary DC
                         plans—to augment their retirement programs in 1972. By 1978, when
                         Congress passed Public Law 95-600, which created a statutory basis for
                         13
                            Colorado and Ohio have DB programs with some DC characteristics; i.e., the normal retirement
                         benefit is calculated using the higher of a DB formula or a money purchase annuity. A money purchase
                         annuity is a specific type of DC component wherein contributions are stated as a percentage of the
                         employee’s salary. Retirement benefits are equal to the amount in the employee’s individual account.




                         Page 9                                   GAO/GGD-99-45 Design of State Retirement Programs
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                                     Section 457 of the Internal Revenue Code, almost half of the states had a
                                     voluntary DC plan. By 1988, all states had voluntary DC plans available to
                                     state employees. Although most state employers did not contribute to
                                     these plans, as of July 1998, five states did provide an employer
                                     contribution. Table 4 shows the design component changes states have
                                     made since their retirement programs were established.

Table 4: Design Changes Made Since
State Retirement Programs Were                                                                                                  Number
Established                          States                       Design component changes                                     of states
                                     All                          Established a voluntary, supplemental DC plan                       50
                                     All except CO, LA, MA,
                                     ME, NV, OH                   Provided Social Security coverage                                      44
                                     AZ, IA, NC, ND, WY           Established a DB plan and discontinued the DC plan                      5
                                                                  Added an employer contribution to the voluntary,
                                     MN, MO, OK, TN, UT           supplemental DC plan                                                     5
                                     MT, OH, OR, WI               Added a DB component to the DC componenta                                4
                                     AK, CO                       Added a DC component to the DB planb                                     2
                                     MI                           Established a DC plan and discontinued the DB planc                      1
                                     HI                           Discontinued the DC component                                            1
                                     AK                           Discontinued Social Security coverage                                    1

                                     a
                                      When this modification occurred, the design changed to a DB plan with DC characteristics wherein
                                     employees are paid the higher of the DB formula or the amount of contributions in the member’s
                                     account.
                                     b
                                      Alaska provides a benefit based on both the DB formula and the amount in the member’s account.
                                     Colorado pays the higher of the DB formula or the amount in the member’s account.
                                     c
                                      Employees hired prior to April 1997 remain covered under the DB plan unless they chose to transfer
                                     to the DC plan.
                                     Source: GAO analysis of state retirement data.


                                     According to state retirement officials, design component changes under
Recently Considered                  discussion by one or more states during their last legislative sessions
Design Changes to                    included (1) discontinuing the DB plan and establishing a DC plan, (2)
State Retirement                     adding a DC component to the DB plan, (3) adding an employer
                                     contribution to the employee’s voluntary DC plan, and/or (4) adding Social
Programs                             Security coverage.

                                     Of the 48 state retirement programs with a DB component, officials
                                     representing 21 states told us that they had considered dropping their DB
                                     component in favor of a program consisting of a DC component with an
                                     employer contribution and Social Security. As shown in table 5, reducing
                                     government costs, enhancing portability, and/or lobbying by special
                                     interests or group(s) were among the reasons cited for considering such a
                                     change. However, no such change was made by these states during their
                                     last legislative sessions. Only one state had made this change in recent
                                     years. In 1997, Michigan modified its retirement program in this way,




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                                         which Michigan officials said was done largely as a means of reducing
                                         government cost.


Table 5: Reasons Cited by Retirement Officials for Why States Considered Changing to a DC Only Plan




                                         Source: GAO analysis of state retirement data.




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                                         The most common reasons officials cited for their states not making the
                                         change to a DC plan during their past legislative sessions were that (1)
                                         studies done by the states showed there was no need to change, (2) further
                                         study was needed, (3) the state’s labor unions opposed the change, and/or
                                         (4) there was a lack of interest or support. Table 6 shows the reasons state
                                         retirement officials gave for not adopting a DC plan.




Table 6: Reasons Cited by State Retirement Officials for Why the DC Only Plan Under Consideration Was Not Adopted




                                         Page 12                          GAO/GGD-99-45 Design of State Retirement Programs
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a
 A money purchase plan is a specific type of DC component wherein contributions are stated as a
percentage of the employee’s salary. Retirement benefits are equal to the amount in the individual
account of the employee.
Source: GAO analysis of state retirement data.


Officials representing the remaining 27 state retirement programs with a
DB component told us that their states had never considered dropping the
DB component. The most common reasons state officials gave for not
considering the change from a DB to a DC plan were that (1) the DB
component provided greater benefits, including survivor and disability
benefits; (2) they regarded the DB plan as a better way to retain
employees; and/or (3) there was little or no support for the change. Table 7
shows the states that had not considered changing their current retirement
plans to a DC plan and the reasons why a DC plan had not been
considered.




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Table 7: Reasons Cited by State Retirement Officials for Why a DC Only Plan Was Never Considered




                                         Source: GAO analysis of state retirement data.




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We are sending copies of this report to Senator Fred Thompson, Chairman,
and Senator Joseph I. Lieberman, Ranking Minority Member, Senate
Committee on Governmental Affairs; Representative Dan Burton,
Chairman, and Representative Henry A. Waxman, Ranking Minority
Member, House Committee on Government Reform; the Honorable Janice
R. Lachance, Director, OPM; and other interested parties. Copies will also
be made available to others upon request.

Major contributors to this report are listed in appendix VII. Please contact
me on (202) 512-8676 if you have any questions concerning this report.




Michael Brostek
Associate Director
Federal Management and
  Workforce Issues




Page 15                         GAO/GGD-99-45 Design of State Retirement Programs
Contents



Letter                                                                             1


Appendix I                                                                        22

Type I Plans: Selected
Features and Plan
Profiles
Appendix II                                                                       35

Type II Plans: Selected
Features and Plan
Profiles
Appendix III                                                                      53

Type III Plans:
Selected Features and
Plan Profiles
Appendix IV                                                                      131

Type IV Plans:
Selected Features and
Plan Profiles
Appendix V                                                                       141

Type V Plan: Selected
Features and Plan
Profile
Appendix VI                                                                      147

Type VI Plans:
Selected Features and
Plan Profiles


                          Page 16   GAO/GGD-99-45 Design of State Retirement Programs
                        Contents




Appendix VII                                                                                       154

Major Contributors to
This Report
Tables                  Table 1: Design Components of Retirement Programs for                        3
                          State General Employees
                        Table 2: Design Components of FERS and CSRS                                  7
                        Table 3: Categorization of State Retirement Programs                         7
                          Using FERS and CSRS Design Components
                        Table 4: Design Changes Made Since State Retirement                         10
                          Programs Were Established
                        Table 5: Reasons Cited by Retirement Officials for Why                      11
                          States Considered Changing to a DC Only Plan
                        Table 6: Reasons Cited by State Retirement Officials for                    12
                          Why the DC Only Plan Under Consideration Was Not
                          Adopted
                        Table 7: Reasons Cited by State Retirement Officials for                    14
                          Why a DC Only Plan Was Never Considered
                        Table I.1: Selected Features of Type I State Retirement                     24
                          Plans as of July 1, 1998
                        Table I.1: (cont.)                                                          25
                        Table I.2: FERS: Provisions of the Federal Employees’                       26
                          Retirement System
                        Table I.3: Minnesota: Provisions of the Minnesota State                     28
                          Retirement System – General Employees’ Plan
                        Table I.4: Missouri: Provisions of the Missouri State                       30
                          Employees’ Retirement Plan
                        Table I.5: Oklahoma: Provisions of the Oklahoma Public                      32
                          Employees’ Retirement System
                        Table II.1: Selected Features of Type II State Retirement                   36
                          Plans as of July 1, 1998
                        Table II.1: (cont.)                                                         37
                        Table II.2: CSRS: Provisions of the Civil Service                           38
                          Retirement System
                        Table II.3: Colorado: Provisions of the Public Employees’                   40
                          Retirement Association of Colorado
                        Table II.4: Louisiana: Provisions of the Louisiana State                    42
                          Employees’ Retirement System
                        Table II.5: Maine: Provisions of the Maine State                            44
                          Retirement System




                        Page 17                       GAO/GGD-99-45 Design of State Retirement Programs
Contents




Table II.6: Massachusetts: Provisions of the                                  46
  Massachusetts State Employees’ Retirement System
Table II.7: Nevada: Provisions of the Public Employees’                       48
  Retirement System of Nevada General Employees’ Plan
Table II.8: Ohio: Provisions of the Public Employees’                         50
  Retirement System of Ohio
Table III.1: Selected Features of Type III State Retirement                   54
  Plans as of July 1, 1998
Table III.1: (cont.)                                                          55
Table III.2: Selected Features of Type III State Retirement                   56
  Plans as of July 1998
Table III.2: (cont.)                                                          57
Table III.3: Selected Features of Type III State Retirement                   58
  Plans as of July 1 1998
Table III.3: (cont.)                                                          59
Table III.4: Alabama: Provisions of the Employees’                            60
  Retirement Systems of Alabama
Table III.5: Arizona: Provisions of the Arizona State                         62
  Retirement System
Table III.6: Arkansas: Provisions of the Arkansas Public                      64
  Employees’ Retirement System - Noncontributory Plan
Table III.7: California: Provisions of the California Public                  66
  Employees’ Retirement System – Tier II
Table III.8: Connecticut: Provisions of the Connecticut                       68
  State Employees’ Retirement Plan - Tier 2
Table III.9: Delaware: Provisions of the Delaware State                       70
  Employees’ Pension Plan
Table III.10: Florida: Provisions of the Florida Retirement                   72
  System
Table III.11: Georgia: Provisions of the Employees’                           74
  Retirement System of Georgia – General Plan
Table III.12: Hawaii: Provisions of the Hawaii Employees’                     76
  Retirement System - Non-Contributory
Table III.13: Idaho: Provisions of the Public Employees’                      78
  Retirement System of Idaho – General Members
Table III.14: Illinois: Provisions of the Illinois State                      80
  Employees’ Retirement System
Table III.15: Iowa: Provisions of the Iowa Public                             82
  Employees’ Retirement System
Table III.16: Kansas: Provisions of the Kansas Public                         84
  Employees’ Retirement Plan
Table III.17: Kentucky: Provisions of the Kentucky                            86
  Employees’ Retirement System – Non-Hazardous



Page 18                         GAO/GGD-99-45 Design of State Retirement Programs
Contents




Table III.18: Maryland: Provisions of the State Employees’                    88
  Retirement System of Maryland
Table III.19: Mississippi: Provisions of the Public                           90
  Employees’ Retirement System of Mississippi - General
  Plan
Table III.20: Montana: Provisions of the Montana Public                       92
  Employees’ Retirement System
Table III.21: New Hampshire: Provisions of the New                            94
  Hampshire Retirement System – General Plan
Table III.22: New Jersey: Provisions of the Public                            96
  Employees’ Retirement System of New Jersey
Table III.23: New Mexico: Provisions of the Public                            98
  Employees’ Retirement Association of New Mexico
Table III.24: New York: Provisions of the New York State                     100
  & Local Employees’ Retirement System – General Plan
Table III.25: North Carolina: Provisions of the Teachers’                    102
  and State Employees’ Retirement System of North
  Carolina
Table III.26: North Dakota: Provisions of the North                          104
  Dakota Public Employees’ Retirement System -
  General Plan
Table III.27: Oregon: Provisions of the Oregon Public                        106
  Employees’ Retirement System
Table III.28: Pennsylvania: Provisions of the Pennsylvania                   108
  State Employees’ Retirement System
Table III.29: Rhode Island: Provisions of the Rhode Island                   110
  Employees’ Retirement System – State Employees
Table III.30: South Carolina: Provisions of the South                        112
  Carolina Retirement System – General Plan
Table III.31: South Dakota: Provisions of the South                          114
  Dakota Retirement System
Table III.32: Texas: Provisions of the Employees’                            116
  Retirement System of Texas
Table III.33: Vermont: Provisions of the Vermont State                       118
  Retirement System
Table III.34: Virginia: Provisions of the Virginia                           120
  Retirement System
Table III.35: Washington: Provisions of the Washington                       122
  State Public Employees’ Retirement System – Plan II
Table III.36: West Virginia: Provisions of the West Virginia                 124
  Public Employees’ Retirement System
Table III.37: Wisconsin: Provisions of the Wisconsin                         126
  Retirement System



Page 19                         GAO/GGD-99-45 Design of State Retirement Programs
Contents




Table III.38: Wyoming: Provisions of the Wyoming                             128
  Retirement System’s Public Employees’ Pension Plan
Table IV.1: Selected Features of Type IV State Retirement                    132
  Plans as of July 1, 1998
Table IV.1: (cont.)                                                         133
Table IV.2: Indiana: Provisions of the Public Employees’                    134
  Retirement Fund of Indiana
Table IV.3: Tennessee: Provisions of the Tennessee                           136
  Consolidated Retirement System – Group I
Table IV.4: Utah: Provisions of the Utah Public                              138
  Employees’ Non-Contributory Retirement System
Table V.1: Selected Features of the Type V State                             142
  Retirement Plan as of July 1, 1998
Table V.1: (cont.)                                                           143
Table V.2: Alaska: Provisions of the Alaska Public                           144
  Employees’ Retirement System
Table VI.1: Selected Features of Type VI State                               148
  Retirement Plans as of July 1, 1998
Table VI.1: (cont.)                                                          149
Table VI.2: Michigan: Provisions of the Michigan State                       150
  Employees’ Retirement System
Table VI.3: Nebraska: Provisions of the Nebraska State                       152
  Employees’ Retirement System




Abbreviations

CSRS          Civil Service Retirement System
DB            defined benefit
DC            defined contribution
FERS          Federal Employees' Retirement System
OPM           Office of Personnel Management
FAS           final average salary calculation
PPCC          Public Pension Coordinating Council




Page 20                         GAO/GGD-99-45 Design of State Retirement Programs
Page 21   GAO/GGD-99-45 Design of State Retirement Programs
Appendix I

Type I Plans: Selected Features and Plan
Profiles

               Type I plans include three design components: DB, DC with employer
               contribution, and Social Security. These components are similar to the
               components found in the Federal Employees’ Retirement System (FERS).

               The appendix consists of a summary of key features that we selected to
               facilitate comparisons with FERS and an individual profile for each state
               plan we categorized as Type I.




               Page 22                        GAO/GGD-99-45 Design of State Retirement Programs
Appendix I
Type I Plans: Selected Features and Plan Profiles




Page 23                               GAO/GGD-99-45 Design of State Retirement Programs
                                             Appendix I
                                             Type I Plans: Selected Features and Plan Profiles




Table I.1: Selected Features of Type I State Retirement Plans as of July 1, 1998

               Vesting       Minimum age plus service requirement for                  Final average salary
                                                                                                   a
State          period        unreduced, normal retirement benefits                     calculation                               Benefit formula
                                                   b                                                                                            c
FERS           5 years       Minimum retirement age and 30 years of service            Highest 3 years                       1.0% X FAS X years

Minnesota      3 years       Age 65 with 3 years of service if born before             Highest 5 years                        1.7% X FAS X years
                             1943; age 66 with 3 years of service if born in
                             1943 or later
                                                              d
Missouri       5 years       Minimum age of 50 (Rule of 80)                            Highest 3 years                        1.6% X FAS X years
                                                          e
Oklahoma       8 years       No minimum age (Rule of 90)                               Highest 3 of last 10 years             2.0% X FAS X years
                                             a
                                              Some states use months or quarters to calculate final average salaries. For comparison purposes,
                                             we converted these time frames to years. In addition, some states use consecutive service while
                                             others use nonconsecutive service. However, we did not distinguish between these two types of
                                             service.
                                             b
                                              Minimum retirement age (MRA) is the minimum optional retirement age. The FERS MRA is age 55
                                             for employees born before 1948. The MRA increases until it reaches age 57 for employees born after
                                             1969.
                                             c
                                              The benefit formula is 1.0 percent of final average salary calculation (FAS) for each year of service if
                                             under age 62, or age 62 or older with less than 20 years of service. Alternatively, the benefit formula
                                             is 1.1 percent of FAS for each year of service if age 62 or older with 20 years of service.
                                             d
                                             Unreduced annuity at 80 years of combined age and service.
                                             e
                                             Unreduced annuity at 90 years of combined age and service.




                                             Page 24                                     GAO/GGD-99-45 Design of State Retirement Programs
                                          Appendix I
                                          Type I Plans: Selected Features and Plan Profiles




Table I.1: (cont.)
Were cost of living adjustments   Early               Are survivor            Are disability     Are members            Employer contribution
(COLAs) provided in the years     retirement          benefits provided       benefits           required to          rate in 1996 as a percent
1992 to 1996?                     benefits            after retirement?       provided?          contribute?                 of covered payroll
                                      f
Yes, in all 5 years               Yes                 Yes                     Yes                Yes                                       11.4



                                      g                                                               h
Yes, in all 5 years               Yes                 Yes                     Yes                Yes                                           4.2
                                      i
Yes, in all 5 years               Yes                 Yes                     Yes                No                                          10.69
                                      i                                                              j
Yes, in 1 year                    Yes                 Yes                     Yes                Yes                                          11.5
                                          f
                                          The early retirement option is available in certain involuntary separation cases and in cases of
                                          voluntary separations during major reorganizations or reductions in force. No reduction in annuity
                                          applies under these circumstances.
                                              g
                                              Members are allowed to retire early with reduced benefits at age 55 with 3 years of service.
                                          h
                                              Members are required to contribute 4 percent of pay.
                                          i
                                          Members are allowed to retire early with reduced benefits at age 55 with 10 years of service.
                                          j
                                          Members are required to contribute 3 percent of the first $25,000 of pay plus 3.5 percent above
                                          $25,000.
                                          Source: GAO analysis of FERS summary plan description data and state plan features.




                                          Page 25                                      GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix I
                                              Type I Plans: Selected Features and Plan Profiles




Table I.2: FERS: Provisions of the Federal Employees’ Retirement System
General design and features of plan                                     Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            Yes
DC with NO employer contribution                                                No
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1987
Year original plan was established                                              1987


Eligibility
Number of years to vest in DB component                                         5
                                                                                              a
Number of years to vest in employer’s contribution                              Immediately
to DC component
                                                                                                               b
Age and service requirements for normal unreduced                               Minimum retirement age (MRA) with 30 years of
benefits                                                                        service, age 60 with 20 years of service, age 62 with 5
                                                                                                 c
                                                                                years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 Not applicable. This is a federal plan.


Benefits
Annual benefit formula                                                          1.0% X FAS X years of service if under age 62, or age
                                                                                                                               d
                                                                                62 or older with less than 20 years of service
Is there a maximum benefit?                                                     No
                                                                                      e
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 50 with 20 years of service or any age with 25
 retirement                                                                     years of service

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.0%
 1995 COLA                                                                      2.0%
 1994 COLA                                                                      2.0%
 1993 COLA                                                                      2.0%
 1992 COLA                                                                      2.7%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No
                                                                                      f
 Variable rate based on the Consumer Price Index                                Yes




                                              Page 26                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix I
                                                Type I Plans: Selected Features and Plan Profiles




General design and features of plan                                                    Provision provided
Is the COLA based on the “original” or “current”                                       Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                       Yes
Is a “pop-up” provision included in the survivor’s                                     Yes
                 g
benefit options?
Are disability benefits provided?                                                      Yes
Does the plan allow for the purchase of service                                        Yes
        h
credits?


Contributions
Are members required to contribute?                                                    Yes
                                                                                             i
 If so, at what rate of pay?                                                           7.0%
What was the actual employer’s contribution as a                                       11.4%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                         Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                       Not applicable
 1996?
                                                a
                                                 Except for the government’s automatic 1.0 percent contribution and its associated earnings, which
                                                requires 3 years of service.
                                                b
                                                The MRA is age 55 for an individual born before 1948, and gradually increases until it reaches age
                                                57 for employees born after 1969. For example, an individual born in 1950 has a MRA of 55 years
                                                and 6 months.
                                                c
                                                 FERS also has a normal retirement option of MRA with 10 to 29 years of service. However, there is a
                                                reduction of 5 percent for each year under age 62. This option is similar to the early retirement option
                                                available under CSRS.
                                                d
                                                 Members receive 1.1 percent of high 3 for each year of service if age 62 or older with 20 years of
                                                service.
                                                e
                                                 The early retirement option is available in certain involuntary separation cases and in cases of
                                                voluntary separations during major reorganizations or reductions in force. No reduction in annuity
                                                applies under these circumstances.
                                                f
                                                If inflation is under 2.0 percent, same as CPI; if inflation is between 2.0 and 3.0 percent, the COLA is
                                                2.0 percent; if inflation is 3.0 percent or more, the COLA is the CPI minus 1 percent. FERS COLAS
                                                generally do not apply to annuitants who are under age 62.
                                                g
                                                 The “pop-up” provision allows a retiree’s monthly annuity to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                h
                                                 The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit. Under FERS and CSRS, deposits can be made for creditable
                                                service during which no retirement deductions were made.
                                                i
                                                Member’s contribution is the difference between 7 percent of basic pay and the Social Security tax
                                                rate—i.e., 0.8 percent to the DB component and 6.2 percent to Social Security. Employees covered
                                                by FERS will pay an additional 0.25 percent in 1999, another 0.15 percent in 2000, and a final extra
                                                0.1 percent in 2001.
                                                Source: GAO analysis of summary plan description data.




                                                Page 27                                    GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix I
                                              Type I Plans: Selected Features and Plan Profiles




Table I.3: Minnesota: Provisions of the Minnesota State Retirement System – General Employees’ Plan
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            Yes
DC with NO employer contribution                                                No
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1956
Year original plan was established                                              1929


Eligibility
Number of years to vest in DB component                                         3
Number of years to vest in employer’s contribution                              Immediate
to DC component
Age and service requirements for normal unreduced                               Age 65 with 3 years of service if born before 1943; age
benefits                                                                        66 with 3 years of service if born in 1943 or later
Final average salary (FAS) calculation                                          Highest 5 years
Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          1.7% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 3 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      8.03%
 1995 COLA                                                                      6.39%
 1994 COLA                                                                      3.98%
 1993 COLA                                                                      6.01%
 1992 COLA                                                                      4.60%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  Yes
 Variable rate based on the Consumer Price Index                                Yes




                                              Page 28                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix I
                                                Type I Plans: Selected Features and Plan Profiles




General design and features of plan                                                    Provision provided
Is the COLA based on the “original” or “current”                                       Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                       Yes
Is a “pop-up” provision included in the survivor’s                                     Yes
                 a
benefit options?
Are disability benefits provided?                                                      Yes
Does the plan allow for the purchase of service                                        No
        b
credits?


Contributions
Are members required to contribute?                                                    Yes
 If so, at what rate of pay?                                                           4.0%
What was the actual employer’s contribution as a                                       4.2%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                         Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                       Not applicable
 1996?
                                                a
                                                 The “pop-up” provision allows a retiree’s monthly annuity to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                b
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 29                                    GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix I
                                              Type I Plans: Selected Features and Plan Profiles




Table I.4: Missouri: Provisions of the Missouri State Employees’ Retirement Plan
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            Yes
DC with NO employer contribution                                                No
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1957


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Immediate
to DC component
Age and service requirements for normal unreduced                               Rule of 80 at a minimum age of 50 (any combination of
benefits                                                                        age and years of service that add up to 80), age 60 with
                                                                                15 years of service, age 65 with 5 years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state public safety,
                                                                                                                       a
                                                                                legislative, and other state employees

Benefits
Annual benefit formula                                                          1.6% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 10 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      4.0%
 1995 COLA                                                                      4.0%
 1994 COLA                                                                      4.0%
 1993 COLA                                                                      4.0%
 1992 COLA                                                                      4.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No
 Variable rate based on the Consumer Price Index                                Yes




                                              Page 30                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix I
                                                Type I Plans: Selected Features and Plan Profiles




General design and features of plan                                                    Provision provided
Is the COLA based on the “original” or “current”                                       Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                       Yes
Is a “pop-up” provision included in the survivor’s                                     Yes
                 b
benefit options?
Are disability benefits provided?                                                      Yes
Does the plan allow for the purchase of service                                        Yes
        c
credits?


Contributions
Are members required to contribute?                                                    No
 If so, at what rate of pay?                                                           Not applicable
What was the actual employer’s contribution as a                                       10.69%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                         Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                       Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly annuity to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 31                                     GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix I
                                              Type I Plans: Selected Features and Plan Profiles




Table I.5: Oklahoma: Provisions of the Oklahoma Public Employees’ Retirement System
General design and features of plan                                     Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            Yes
DC with NO employer contribution                                                No
Social Security                                                                 Yes


Year Social Security coverage was provided                                      1951
Year original plan was established                                              1964


Eligibility
Number of years to vest in DB component                                         8
Number of years to vest in employer’s contribution                              Immediate
to DC component
Age and service requirements for normal unreduced                               Rule of 90 (any combination of age and years of service
benefits                                                                        that adds up to 90), or age 62 with 6 years of service
Final average salary (FAS) calculation                                          Highest 3 of last 10 years
                                                                                                                                     a
Does plan only include state general employees?                                 No, the plan also includes local general employees


Benefits
Annual benefit formula                                                          2.0% X FAS X years of service
Is there a maximum benefit?                                                     Internal Revenue Code Section 415(b)(10) limits for
                                                                                members who joined after January 1, 1990
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 10 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      0%
 1995 COLA                                                                      0%
 1994 COLA                                                                      2.0%
 1993 COLA                                                                      0%
 1992 COLA                                                                      0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No
 Variable rate based on the Consumer Price Index                                No




                                              Page 32                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix I
                                                Type I Plans: Selected Features and Plan Profiles




General design and features of plan                                                    Provision provided
Is the COLA based on the “original” or “current”                                       Neither
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                       Yes
Is a “pop-up” provision included in the survivor’s                                     Yes
                 b
benefit options?
Are disability benefits provided?                                                      Yes
Does the plan allow for the purchase of service                                        Yes
        c
credits?


Contributions
Are members required to contribute?                                                    Yes
 If so, at what rate of pay?                                                           3% of the first $25,000 of pay plus 3.5% above $25,000
What was the actual employer’s contribution as a                                       11.5%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                         Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                       Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly annuity to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                 The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 33                                    GAO/GGD-99-45 Design of State Retirement Programs
Appendix I
Type I Plans: Selected Features and Plan Profiles




Page 34                               GAO/GGD-99-45 Design of State Retirement Programs
Appendix II

Type II Plans: Selected Features and Plan
Profiles

               Type II plans include two design components: DB and DC with no
               employer contribution. These components are similar to the components
               found in the Civil Service Retirement System (CSRS).

               The appendix consists of a summary of key features that we selected to
               facilitate comparisons with CSRS and an individual profile for each state
               plan we categorized as Type II.




               Page 35                        GAO/GGD-99-45 Design of State Retirement Programs
                                            Appendix II
                                            Type II Plans: Selected Features and Plan Profiles




Table II.1: Selected Features of Type II State Retirement Plans as of July 1, 1998

                 Vesting    Minimum age plus service requirement for                   Final average
                                                                                                          a
State            period     unreduced, normal retirement benefits                      salary calculation                      Benefit formula
                                                                                                                    1.5% X FAS X years (first 5
                                                                                                                  years), 1.75% X FAS X years
                                                                                                                  (next 5 years), 2.0% X FAS X
CSRS             5 years    Age 55 with 30 years of service                            Highest 3 years                     years (years over 10)
                                                                                                                                                   b
Colorado         5 years    Age 50 with 30 years of service                            Highest 3 years                     2.5% X FAS X years
Louisiana        10 years   No minimum age - Any age with 30 years of service          Highest 3 years                      2.5% X FAS X years
                                                            c
Maine            10 years   Age 62 with 10 years of service                            Highest 3 years                     2.0% X FAS X years
                                                                                                                                              d
Massachusetts    10 years   No minimum age - Any age with 20 years of service          Highest 3 years                           Varies by age
Nevada           5 years    No minimum age - Any age with 30 years of service          Highest 3 years                     2.5% X FAS X years
                                                                                                                                              e
Ohio             5 years    No minimum age - Any age with 30 years of service          Highest 3 years                     2.1% X FAS X years
                                            a
                                             Some states use months or quarters to calculate final average salaries. For comparison purposes,
                                            we converted these time frames to years. In addition, some states use consecutive service, and
                                            others use nonconsecutive service. However, we did not distinguish between these two types of
                                            service.
                                            b
                                            A retiring member receives the higher of the DB calculation or a money purchase benefit. The money
                                            purchase benefit equals the value of member contributions, a 50 percent employer match, and
                                            accumulated interest on the contributions.
                                            c
                                             If the member is at least age 62, the vesting period is reduced from 10 years to 1 year as long as that
                                            year of service immediately precedes retirement.
                                            d
                                             The benefit formula varies by age from 0.1% X FAS X years of service at age 41 to 2.5% X FAS X
                                            years of service at age 65.
                                            e
                                            The benefit formula is 2.1% X FAS X years of service for the first 30 years of service and is 2.5% X
                                            FAS X years of service for service greater than 30 years. A retiring member receives the higher of the
                                            DB calculation or a money purchase benefit. The money purchase benefit equals the value of
                                            member contributions and a 100 percent employer match.
                                            Source: GAO analysis of CSRS summary plan description data and state plan features.




                                            Page 36                                    GAO/GGD-99-45 Design of State Retirement Programs
                                            Appendix II
                                            Type II Plans: Selected Features and Plan Profiles




Table II.1: (cont.)
Were cost of living adjustments   Early                 Are survivor            Are disability      Are members           Employer contribution
(COLAs) provided in the years     retirement            benefits provided       benefits            required to         rate in 1996 as a percent
1992 to 1996?                     benefits              after retirement?       provided?           contribute?                of covered payroll


                                        f                                                                 g
Yes, in all 5 years               Yes                   Yes                     Yes                 Yes                                           7.0
                                        h                                                                 i
Yes, in all 5 years               Yes                   Yes                     Yes                 Yes                                          11.6
                                      j                                                                 k
Yes, in 1 year                    Yes                   Yes                     Yes                 Yes                                          12.8
                                      l                                                                m
Yes, in all 5 years               Yes                   Yes                     Yes                 Yes                                         16.13
                                                                                                        n
Yes, in 3 years                   No                    Yes                     Yes                 Yes                                         17.71
                                      o
Yes, in all 5 years               Yes                   Yes                     Yes                 No                                          17.04
                                      p                                                                 q
Yes, in all 5 years               Yes                   Yes                     Yes                 Yes                                         13.31
                                            f
                                            The early retirement option is available in certain involuntary cases and in cases of voluntary
                                            separations during major reorganizations or reductions in force. The annuity is reduced by one-sixth
                                            of 1 percent for each month the employee is under age 55 (2 percent a year).
                                            g
                                            Members are required to contribute 7 percent of pay. Employees covered by CSRS will pay an
                                            additional 0.25 percent in 1999, another 0.15 percent in 2000, and a final extra 0.1 percent in 2001.
                                            h
                                                Members are allowed to retire early with reduced benefits at age 50 with 25 years of service.
                                            i
                                            Members are required to contribute 8 percent of pay.
                                            j
                                            Members are allowed to retire early with reduced benefits at any age with 20 years of service.
                                            k
                                                Members are required to contribute 7.5 percent of pay.
                                            l
                                            Members are allowed to retire early with reduced benefits at any age with 25 years of service.
                                            m
                                                Members are required to contribute 7.65 percent of pay.
                                            n
                                                Members are required to contribute 9 percent of pay.
                                            o
                                                Members are allowed to retire early with reduced benefits at any age with 5 years of service.
                                            p
                                                Members are allowed to retire early with reduced benefits at age 60 with 5 years of service.
                                            q
                                                Members are required to contribute 8.5 percent of pay.
                                            Source: GAO analysis of state plan features.




                                            Page 37                                       GAO/GGD-99-45 Design of State Retirement Programs
                                               Appendix II
                                               Type II Plans: Selected Features and Plan Profiles




Table II.2: CSRS: Provisions of the Civil Service Retirement System
General design and features of plan                                              Provision provided

Design components
Defined benefit (DB)                                                             Yes
Defined contribution (DC) with employer contribution                             No
DC with NO employer contribution                                                 Yes
                                                                                   a
Social Security                                                                  No
                                                                                                a
Year Social Security coverage was provided                                       Not applicable
Year original plan was established                                               1920

Eligibility
Number of years to vest in DB component                                          5
Number of years to vest in employer’s contribution to                            Not applicable, no employer contribution
DC component
Age and service requirements for normal unreduced                                Age 55 with 30 years of service, age 60 with 20 years of
benefits                                                                         service, age 65 with 5 years of service
Final average salary (FAS) calculation                                           Highest 3 years
Does plan only include state general employees?                                  Not applicable. This is a federal plan.

Benefits
Annual benefit formula                                                           1.5% X FAS X first 5 years of service, 1.75% X FAS X
                                                                                 next 5 years of service, 2.0% X FAS X years of service
                                                                                 over 10
                                                                                              b
Is there a maximum benefit?                                                      80% of FAS
                                                                                     c
Are early retirement benefits provided?                                          Yes
Minimum age and years of service for early                                       Age 50 with 20 years of service, any age with 25 years
                                                                                            d
retirement                                                                       of service

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                               Yes
past 5 years?
 1996 COLA                                                                       2.6%
 1995 COLA                                                                       2.8%
 1994 COLA                                                                       2.6%
 1993 COLA                                                                       3.0%
 1992 COLA                                                                       3.7%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                  No
 Fixed rate from year to year                                                    No
 Variable rate based on investment performance                                   No
 Variable rate based on the Consumer Price Index                                 Yes
 Is the COLA based on the “original” or “current”                                Current
 benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                 Yes




                                               Page 38                               GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix II
                                                Type II Plans: Selected Features and Plan Profiles




General design and features of plan                                                     Provision provided
Is a “pop-up” provision included in the survivor’s                                      Yes
                 e
benefit options?
Are disability benefits provided?                                                       Yes
Does the plan allow for the purchase of service                                         Yes
        f
credits?

Contributions
Are members required to contribute?                                                     Yes
                                                                                             g
 If so, at what rate of pay?                                                            7.0%
What was the actual employer’s contribution as a                                        7.0%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                          Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                        Not applicable
 1996?
                                                a
                                                 CSRS-Offset employees are covered by Social Security. These employees were separated from
                                                CSRS covered federal employment for more than a year and returned to a position in which they were
                                                covered by CSRS after 1983. Social Security coverage for CSRS-Offset employees began in 1984.
                                                b
                                                 Excluding credit for unused sick leave. An employee’s full months of unused sick leave accumulated
                                                is included in the total years and months of creditable service but not in determining retirement
                                                eligibility or the high 3.
                                                c
                                                 The early retirement option is available in certain involuntary cases and in cases of voluntary
                                                separations during major reorganizations or reductions in force.
                                                d
                                                    Annuity reduced by one-sixth of 1.0% for each month the employee is under age 55 (2.0% a year).
                                                e
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                f
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit. Under FERS and CSRS, deposits can be made for creditable
                                                service during which no retirement deductions were made.
                                                g
                                                The 7 percent does not include the 1.45 percent contribution to Medicare. Employees covered by
                                                CSRS as well as those covered by FERS will pay an additional 0.25 percent in 1999, another 0.15
                                                percent in 2000, and a final extra 0.1 percent in 2001.
                                                Source: GAO analysis of summary plan description data.




                                                Page 39                                     GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix II
                                              Type II Plans: Selected Features and Plan Profiles




Table II.3: Colorado: Provisions of the Public Employees’ Retirement Association of Colorado
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 No

Year Social Security coverage was provided                                      Not applicable, no Social Security
Year original plan was established                                              1931


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
                 a
to DC component
Age and service requirements for normal unreduced                               Age 50 with 30 years of service, age 60 with 20 years of
benefits                                                                        service, age 65 with 5 years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state public safety and
                                                                                judicial employees; and local general and school
                                                                                                                         b
                                                                                employees (except for Denver schools)

Benefits
                                                                                                                c
Annual benefit formula                                                          2.5% X FAS X years of service
Is there a maximum benefit                                                      100% of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 50 with 25 years of service; age 55 with 20 years;
 retirement                                                                     age 60 with 5 years

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.84%
 1995 COLA                                                                      2.53%
 1994 COLA                                                                      2.82%
 1993 COLA                                                                      2.90%
 1992 COLA                                                                      6.7%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No




                                              Page 40                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix II
                                                Type II Plans: Selected Features and Plan Profiles




General design and features of plan                                                     Provision provided
  Variable rate based on the Consumer Price Index                                       Yes
Is the COLA based on the “original” or “current”                                        Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                        Yes
Is a “pop-up” provision included in the survivor’s                                      Yes
                 d
benefit options?
Are disability benefits provided?                                                       Yes
Does the plan allow for the purchase of service                                         Yes
        e
credits?


Contributions
Are members required to contribute?                                                     Yes
  If so, at what rate of pay?                                                           8.0%
What was the actual employer’s contribution as a                                        11.6%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                          Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                        Not applicable
 1996?
                                                a
                                                    Colorado also provides a money purchase option in which members fully vest at retirement.
                                                b
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                c
                                                A retiring member receives the higher of the DB calculation or a money purchase benefit. The money
                                                purchase benefit equals the value of member contributions, a 50 percent employer match, and
                                                accumulated interest on the contributions.
                                                d
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                e
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 41                                     GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix II
                                              Type II Plans: Selected Features and Plan Profiles




Table II.4: Louisiana: Provisions of the Louisiana State Employees’ Retirement System
General design and features of plan                                        Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 No

Year Social Security coverage was provided                                      Not applicable, no Social Security
Year original plan was established                                              1946


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 55 with 25 years
benefits                                                                        of service, age 60 with 10 years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state public safety,
                                                                                                                    a
                                                                                legislative, and judicial employees

Benefits
Annual benefit formula                                                          2.5% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 100% of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Any age with 20 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.5%
 1995 COLA                                                                      0%
 1994 COLA                                                                      0%
 1993 COLA                                                                      0%
 1992 COLA                                                                      0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  Yes




                                              Page 42                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix II
                                                Type II Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Neither
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    No
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          7.5%
What was the actual employer’s contribution as a                                      12.8%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 43                                   GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix II
                                              Type II Plans: Selected Features and Plan Profiles




Table II.5: Maine: Provisions of the Maine State Retirement System
General design and features of plan                                             Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 No

Year Social Security coverage was provided                                      Not applicable, no Social Security
Year original plan was established                                              1942


Eligibility
                                                                                     a
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution to                           Not applicable, no employer contribution
DC component
                                                                                                                  a
Age and service requirements for normal unreduced                               Age 62 with 10 years of service
benefits
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state teachers and local
                                                                                                    b
                                                                                general employees

Benefits
Annual benefit formula                                                          2.0% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Any age with 25 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.8%
 1995 COLA                                                                      3.1%
 1994 COLA                                                                      2.4%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      3.1%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No




                                              Page 44                                    GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix II
                                                Type II Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    No
                 c
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        d
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          7.65%
What was the actual employer’s contribution as a                                      16.13%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                 A member can retire at age 62 or after, upon meeting one of the following conditions: (1) the member
                                                has 10 years of service on account with the plan whether or not he/she is in plan-covered service at
                                                the age of 62, and he/she has not withdrawn the contributions; or (2) the member has accumulated at
                                                least 1 year of service immediately prior to retirement.
                                                b
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                c
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 45                                   GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix II
                                              Type II Plans: Selected Features and Plan Profiles




Table II.6: Massachusetts: Provisions of the Massachusetts State Employees’ Retirement System
General design and features of plan                                     Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 No

Year Social Security coverage was provided                                      Not applicable, no Social Security
Year original plan was established                                              1946


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 20 years of service, age 55 with 10 years
benefits                                                                        of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes local teachers and state
                                                                                                                                  a
                                                                                hazardous materials and public safety employees

Benefits
Annual benefit formula                                                          Benefit factor varies by age: (0.1% at age 41 to 2.5% at
                                                                                age 65) X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 80% of FAS
Are early retirement benefits provided?                                         No
 Minimum age and years of service for early                                     Not applicable
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      3.0%
 1995 COLA                                                                      0%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      0%
 1992 COLA                                                                      5.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No




                                              Page 46                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix II
                                                Type II Plans: Selected Features and Plan Profiles




General design and features of plan                                                     Provision provided
  Variable rate based on the Consumer Price Index                                       Yes
Is the COLA based on the “original” or “current”                                        Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                        Yes
Is a “pop-up” provision included in the survivor’s                                      Yes
                 b
benefit options?
Are disability benefits provided?                                                       Yes
Does the plan allow for the purchase of service                                         No
        c
credits?


Contributions
Are members required to contribute?                                                     Yes
                                                                                              d
 If so, at what rate of pay?                                                            9.0%
What was the actual employer’s contribution as a                                        17.71%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                          Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                        Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                d
                                                    Members contribute an additional 2 percent of amount of salary over $30,000.
                                                Source: GAO analysis of state plan features.




                                                Page 47                                     GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix II
                                              Type II Plans: Selected Features and Plan Profiles




Table II.7: Nevada: Provisions of the Public Employees’ Retirement System of Nevada General Employees’ Plan
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 No

Year Social Security coverage was provided                                      Not applicable, no Social Security
Year original plan was established                                              1947


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Age 65 with 5 years of service, age 60 with 10 years of
benefits                                                                        service, any age with 30 years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes local general employees and
                                                                                               a
                                                                                local teachers

Benefits
Annual benefit formula                                                          2.5% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 75% of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Any age with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
                                                                                           b
 1996 COLA                                                                      2 – 3.5%
                                                                                         b
 1995 COLA                                                                      2 – 3.5%
                                                                                           b
 1994 COLA                                                                      2 – 3.5%
                                                                                           b
 1993 COLA                                                                      2 – 3.5%
                                                                                         b
 1992 COLA                                                                      2 – 3.5%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
                                                                                      b
 Fixed rate from year to year                                                   Yes
 Variable rate based on investment performance                                  No




                                              Page 48                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix II
                                                Type II Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 c
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        d
credits?


Contributions
Are members required to contribute?                                                   No
 If so, at what rate of pay?                                                          Not applicable
What was the actual employer’s contribution as a                                      17.04%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 Retirees are to receive annual benefit increases ranging from 2 to 5 percent based on the number of
                                                years since retirement. However, increases are limited to the average change in the Consumer Price
                                                Index for the preceding 3 years.
                                                c
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 49                                    GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix II
                                              Type II Plans: Selected Features and Plan Profiles




Table II.8: Ohio: Provisions of the Public Employees’ Retirement System of Ohio
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 No

Year Social Security coverage was provided                                      No applicable, no Social Security
Year original plan was established                                              1933


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 65 with 5 years of
benefits                                                                        service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state legislative and non-
                                                                                certified school employees; and local general, public
                                                                                                                                        a
                                                                                safety, legislative, and non-certified school employees

Benefits
Annual benefit formula                                                          2.1% X FAS X years of service (years 1 – 30) + 2.5% X
                                                                                                                  b
                                                                                FAS X years of service (>30 years)
Is there a maximum benefit?                                                     Yes, the maximum benefit is 100% of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 60 with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      3.0%
 1995 COLA                                                                      3.0%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   Yes




                                              Page 50                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix II
                                                Type II Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Original
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 c
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        d
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          8.5%
What was the actual employer’s contribution as a                                      13.31%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                A retiring member receives the higher of the DB calculation or a money purchase benefit. The money
                                                purchase benefit equals the value of member contributions and a 100-percent employer match.
                                                c
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 51                                   GAO/GGD-99-45 Design of State Retirement Programs
Appendix II
Type II Plans: Selected Features and Plan Profiles




Page 52                               GAO/GGD-99-45 Design of State Retirement Programs
Appendix III

Type III Plans: Selected Features and Plan
Profiles

               Type III plans include three design components: DB, DC with no employer
               contribution, and Social Security.

               The appendix consists of a summary of key features that we selected to
               facilitate comparisons with FERS and CSRS, and an individual profile for
               each state plan we categorized as Type III.




               Page 53                       GAO/GGD-99-45 Design of State Retirement Programs
                                             Appendix III
                                             Type III Plans: Selected Features and Plan Profiles




Table III.1: Selected Features of Type III State Retirement Plans as of July 1, 1998

                   Vesting       Minimum age plus service requirement for              Final average salary
                                                                                                   a
State              period        unreduced, normal retirement benefits                 calculation                     Benefit formula
                                 No minimum age - Any age with 25 years of                                             2.0125% X FAS X
                                                                                                                             b
Alabama            10 years      service                                               Highest 3 of last 10 years      years
                                                              c
Arizona            Immediate     No minimum age (Rule of 80)                           Highest 3 of last 10 years      2.0% X FAS X years
                                 No minimum age - Any age with 30 years of
Arkansas           5 years       service                                               Highest 4 years                 1.7% X FAS X years
California         10 years      Age 65 with 10 years of service                       Highest 1 year                  1.25% X FAS X years
                                                                                                                                          d
Connecticut        5 years       Age 60 with 25 years of service                       Highest 3 years                 1.33% X FAS X years
                                 No minimum age - Any age with 30 years of
Delaware           5 years       service                                               Highest 3 years                 1.67% X FAS X years
                                 No minimum age - Any age with 30 years of
                                                                                                                                                e
Florida            10 years      service                                               Highest 5 years                 1.60% X FAS X years
                                 No minimum age - Any age with 30 years of
Georgia            10 years      service                                               Highest 2 years                 1.70% X FAS X years
Hawaii             10 years      Age 55 with 30 years of service                       Highest 3 years                 1.25% X FAS X years
                                                              f
Idaho              5 years       No minimum age (Rule of 90)                           Highest 3 years, 6 months       1.917% X FAS X years
                                 No minimum age - Any age with 35 years of
Illinois           8 years       service                                               Highest 4 of last 10 years      1.67% X FAS X years
                                                                                                                       60% X (years of
                             g                                   h                                       i                         j
Iowa               4 years       No minimum age (Rule of 88)                           Highest 3 years                 service/30)
                                             a
                                              Some states use months or quarters to calculate final average salaries. For comparison purposes,
                                             we converted these time frames to years. In addition, some states use consecutive service while
                                             others use nonconsecutive service. However, we did not distinguish between these two types of
                                             service.
                                             b
                                             Service retirement benefits are based on a guaranteed minimum or a formula method, with the
                                             member receiving payment under the method that yields the highest monthly benefit.
                                             c
                                                 Unreduced annuity at 80 years of combined age and service.
                                             d
                                              The benefit formula is 1.33% X FAS X years of service for the first 35 years plus 0.5% X (FAS over
                                             $27,300) X years of service for the first 35 years of service plus 1.625% X FAS X years of service for
                                             service greater than 35 years.
                                             e
                                             The benefit formulas are: 1.60% X FAS X years of service at age 62 or 30 years of service; 1.63% X
                                             FAS X years of service at age 63 or 31 years of service; 1.65% X FAS X years of service at age 64 or
                                             32 years of service; 1.68% X FAS X years of service at age 65 or 33 years of service.
                                             f
                                                 Unreduced annuity at 90 years of combined age and service.
                                             g
                                                 Immediate vesting at age 55.
                                             h
                                                 Unreduced annuity at 88 years of combined age and service.
                                             i
                                             If highest average 3-years’ salary exceeded $52,000 in 1998, the plan was to use the average of the
                                             highest 5 years’ salary or $52,000, whichever was larger, to calculate the final average salary.
                                             j
                                             The benefit formula is 60% X (years of service/30) plus 1.0% X FAS X years of service (years 30 to
                                             35).




                                             Page 54                                     GAO/GGD-99-45 Design of State Retirement Programs
                                            Appendix III
                                            Type III Plans: Selected Features and Plan Profiles




Table III.1: (cont.)

Were cost of living adjustments   Early                Are survivor             Are disability      Are members           Employer contribution
(COLAs) provided in the years     retirement           benefits provided        benefits            required to         rate in 1996 as a percent
1992 to 1996?                     benefits             after retirement?        provided?           contribute?                of covered payroll
                                                                                                          k
Yes, in 3 years                   No                   Yes                      Yes                 Yes                                           6.99
                                      l                                                                m
Yes, in 4 years                   Yes                  Yes                      Yes                 Yes                                           3.85
                                        n
Yes, in all 5 years               Yes                  Yes                      Yes                 No                                              10
                                      o
Yes, in all 5 years               Yes                  Yes                      Yes                 No                                            9.89
                                      o                                                                 p
Yes, in all 5 years               Yes                  Yes                      Yes                 Yes                                          14.33
                                        q                                                                 r
Yes, in 3 years                   Yes                  Yes                      Yes                 Yes                                           5.62
                                        s
Yes, in all 5 years               Yes                  Yes                      Yes                 No                                           16.77
                                                                                                          t
Yes, in all 5 years               No                   Yes                      Yes                 Yes                                          13.63
                                      u
Yes, in all 5 years               Yes                  Yes                      Yes                 No                                            7.76
                                      n                                                                 v
Yes, in all 5 years               Yes                  Yes                      Yes                 Yes                                          11.61
                                        w                                                                 x
Yes, in all 5 years               Yes                  Yes                      Yes                 Yes                                            5.1
                                      y                                                                 z
Yes, in 3 years                   Yes                  Yes                      Yes                 Yes                                           5.92
                                            k
                                                Members are required to contribute 5 percent of pay.
                                            l
                                            Members are allowed to retire early with reduced benefits at age 50 with 5 years of service.
                                            m
                                                Members are required to contribute 2.85 percent of pay.
                                            n
                                                Members are allowed to retire early with reduced benefits at age 55 with 5 years of service.
                                            o
                                                Members are allowed to retire early with reduced benefits at age 55 with 10 years of service.
                                            p
                                                Members are required to contribute 2 percent of pay.
                                            q
                                                Members are allowed to retire early with reduced benefits at age 55 with 15 years of service.
                                            r
                                                Members are required to contribute 3 percent of pay.
                                            s
                                                Members are allowed to retire early with reduced benefits at any age with 10 years of service.
                                            t
                                                Members are required to contribute 1.5 percent of pay.
                                            u
                                                Members are allowed to retire early with reduced benefits at age 55 with 20 years of service.
                                            v
                                                Members are required to contribute 6.97 percent of pay.
                                            w
                                                Members are allowed to retire early with reduced benefits at age 55 with 30 years of service.
                                            x
                                                Members are required to contribute 4 percent of pay.
                                            y
                                                Members are allowed to retire early with reduced benefits at age 55 with any years of service.
                                            z
                                                Members are required to contribute 3.7 percent of pay.
                                            Source: GAO analysis of state plan features.




                                            Page 55                                       GAO/GGD-99-45 Design of State Retirement Programs
                                            Appendix III
                                            Type III Plans: Selected Features and Plan Profiles




Table III.2: Selected Features of Type III State Retirement Plans as of July 1998

                  Vesting       Minimum age plus service requirement for                   Final average salary
                                                                                                       a
State             period        unreduced, normal retirement benefits                      calculation                 Benefit formula
                          b                                  c
Kansas            10 years      No minimum age (Rule of 85)                                Highest 3 years             1.75% X FAS X years
Kentucky          4 years       Age 65 with 4 years of service                             Highest 5 years             1.97% X FAS X years
Maryland          5 years       No minimum age - Any age with 30 years of service          Highest 3 years             1.4% X FAS X years
                                                                                                                       1.875% X FAS X
                                                                                                                             d
Mississippi       4 years       No minimum age - Any age with 25 years of service          Highest 4 years             years
                          e                                                                                                                  f
Montana           5 years       No minimum age - Any age with 30 years of service          Highest 3 years             1.786% X FAS X years
                                                                                                                                           g
New Hampshire     10 years      Age 60 with 10 years of service                            Highest 3 years             1.67% X FAS X years
                            h
New Jersey        10 years      Age 60 with any service                                    Highest 3 years             1.67% X FAS X years
New Mexico        5 years       No minimum age - Any age with 25 years of service          Highest 3 years             3.0% X FAS X years
                                                                                                                                           i
New York          10 years      Age 55 with 30 years of service                            Highest 3 years             1.67% X FAS X years
North Carolina    5 years       No minimum age - Any age with 30 years of service          Highest 4 years             1.80% X FAS X years
                                                                                           Highest 3 of last ten
                          b                                     c
North Dakota      5 years       No minimum age (Rule of 85)                                years                       1.77% X FAS X years
                          j                                                                                                                f
Oregon            5 years       No minimum age - Any age with 30 years of service          Highest 3 years             1.67% X FAS X years
                                            a
                                             Some states use months or quarters to calculate final average salaries. For comparison purposes,
                                            we converted these time frames to years. In addition, some states use consecutive service while
                                            others use nonconsecutive service. However, we did not distinguished between these two types of
                                            service.
                                            b
                                                Immediate vesting at age 65.
                                            c
                                                Unreduced annuity at 85 years of combined age and service.
                                            d
                                             The benefit formula is 1.875% X FAS X years of service for the first 25 years plus 2.0% X FAS X
                                            years of service greater than 25 years.
                                            e
                                                Immediate vesting at age 65 while an active member.
                                            f
                                            The normal retirement benefit is calculated using the higher of a DB formula or a money purchase
                                            annuity. A money purchase annuity is a specific type of DC component wherein contributions are
                                            stated as a percentage of the employee’s salary. Retirement benefits are equal to the amount in the
                                            employee’s individual account.
                                            g
                                             The benefit formula is 1.67% X FAS X years of service for ages 60 to 64 or 1.51% X FAS X years of
                                            service for age 65 and older.
                                            h
                                                Immediate vesting at age 60.
                                            i
                                            The benefit formula is1.67% X FAS X years of service for the first 25 years plus 2.0% X FAS X years
                                            of service for the next 5 years plus 1.5% X FAS X years of service for service greater than 30 years.
                                            j
                                             Immediate vesting at age 50 while working in a covered position.




                                            Page 56                                    GAO/GGD-99-45 Design of State Retirement Programs
                                          Appendix III
                                          Type III Plans: Selected Features and Plan Profiles




Table III.2: (cont.)
Were cost of living adjustments   Early               Are survivor             Are disability     Are members           Employer contribution
(COLAs) provided in the years     retirement          benefits provided        benefits           required to         rate in 1996 as a percent
1992 to 1996?                     benefits            after retirement?        provided?          contribute?                of covered payroll
                                      k                                                               l
Yes, in 3 years                   Yes                 Yes                      Yes                Yes                                       3.2
                                      m                                                               n
Yes, in all 5 years               Yes                 Yes                      Yes                Yes                                      8.89
                                      o                                                               p
Yes, in all 5 years               Yes                 Yes                      Yes                Yes                                     13.61
                                                                                                      q
Yes, in all 5 years               No                  Yes                      Yes                Yes                                      9.75
                                      r                                                                 s
Yes, in 3 years                   Yes                 Yes                      Yes                Yes                                           6.7
                                      t                                                               n
Yes, in 3 years                   Yes                 Yes                      Yes                Yes                                          3.14
                                      u                                                               n
Yes, in all 5 years               Yes                 Yes                      Yes                Yes                                          2.13
                                                                                                      v
Yes, in all 5 years               No                  Yes                      Yes                Yes                                         16.59
                                      k                                                               w
Yes, in all 5 years               Yes                 Yes                      Yes                Yes                                           2.2
                                      x                                                               y
Yes, in all 5 years               Yes                 Yes                      Yes                Yes                                          8.15
                                      m                                                                 l
Yes, in 2 years                   Yes                 Yes                      Yes                Yes                                          4.12
                                      z                                                               y
Yes, in all 5 years               Yes                 Yes                      Yes                Yes                                          9.15
                                          k
                                              Members are allowed to retire early with reduced benefits at age 55 with 10 years of service.
                                          l
                                          Members are required to contribute 4 percent of pay.
                                          m
                                              Members are allowed to retire early with reduced benefits at age 55 with 5 years of service.
                                          n
                                              Members are required to contribute 5 percent of pay.
                                          o
                                              Members are allowed to retire early with reduced benefits at age 55 with 15 years of service.
                                          p
                                              Members are required to contribute 2 percent of pay.
                                          q
                                              Members are required to contribute 7.25 percent of pay.
                                          r
                                              Members are allowed to retire early with reduced benefits at age 50 with 5 years of service.
                                          s
                                              Members are required to contribute 6.8 percent of pay.
                                          t
                                              Members are allowed to retire early with reduced benefits at age 50 with 10 years of service.
                                          u
                                              Members are allowed to retire early with reduced benefits at age 55 with 25 years of service.
                                          v
                                              Members are required to contribute 7.42 percent of pay.
                                          w
                                              Members are required to contribute 3 percent of pay.
                                          x
                                              Members are allowed to retire early with reduced benefits at age 50 with 20 years of service.
                                          y
                                              Members are required to contribute 6 percent of pay.
                                          z
                                           Members are allowed to retire early with reduced benefits at age 55 with less than 30 years of
                                          service.
                                          Source: GAO analysis of state plan features.




                                          Page 57                                       GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.3: Selected Features of Type III State Retirement Plans as of July 1 1998

                  Vesting         Minimum age plus service requirement for                 Final average salary
                                                                                                       a
State             period          unreduced, normal retirement benefits                    calculation                      Benefit formula
                                  No minimum age - Any age with 35 years of
                              b
Pennsylvania      10 years        service                                                  Highest 3 years                  2.0% X FAS X years
                                  No minimum age - Any age with 28 years of
                                                                                                                                                    c
Rhode Island      10 years        service                                                  Highest 3 years                  1.7% X FAS X years
                                  No minimum age - Any age with 30 years of
South Carolina    5 years         service                                                  Highest 3 years                  1.82% X FAS X years
                                                                  d                                                                            e
South Dakota      3 years         Age 55 with 30 years of service                          Highest 3 of last 10 years       1.3% X FAS X years
                                                               f
Texas             5 years         No minimum age (Rule of 80)                              Highest 3 years                  2.25% X FAS X years
                                  No minimum age - Any age with 30 years of
                          g
Vermont           5 years         service                                                  Highest 3 years                  1.67% X FAS X years
                                                                                                                                               h
Virginia          5 years         Age 55 with 30 years of service                          Highest 3 years                  1.5% X FAS X years
Washington        5 years         Age 65 with 5 years of service                           Highest 5 years                  2.0% X FAS X years
                                                                  i
West Virginia     5 years         Age 55 with 25 years of service                          Highest 3 of last 10 years       2.0% X FAS X years
                                                                                                                                               j
Wisconsin         Immediate       Age 57 with 30 years of service                          Highest 3 years                  1.6% X FAS X years
                                                               k
Wyoming           4 years         No minimum age (Rule of 85)                              Highest 3 years                  2.0% X FAS X years
                                              a
                                               Some states use months or quarters to calculate final average salaries. For comparison purposes,
                                              we converted these time frames to years. In addition, some states use consecutive service while
                                              others use nonconsecutive service. However, we did not distinguished between these two types of
                                              service.
                                              b
                                                  Vesting after 3 years at age 60.
                                              c
                                              The benefit formula is 1.7% X FAS X years of service for the first 10 years plus 1.9% X FAS X years
                                              of service for the next 10 years plus 3.0% X FAS X years of service for the next 14 years plus 2.0% X
                                              FAS X years of service for years of service greater than 34.
                                              d
                                                  Unreduced annuity at 85 years of combined age and service with minimum age of 55.
                                              e
                                              The benefit formula is 1.475% X FAS X years of service X ½ credited service before July 1, 1998
                                              plus 1.3% X FAS X years of service for all other creditable service. Alternatively, the formula is 2.0%
                                              X FAS X years of service minus primary Social Security benefits.
                                              f
                                                  Unreduced annuity at 80 years of combined age and service with minimum of 10 years service.
                                              g
                                                  Immediate vesting at age 62.
                                              h
                                              The benefit formula is 1.5% X FAS X years of service for the first $13,200 of FAS plus 1.65% X FAS
                                              X years of service for FAS above $13,200. If service exceeds 35 years then the formula is 1.65% X
                                              FAS X years of service.
                                              i
                                              Unreduced annuity at 80 years of combined age and service with minimum age of 55.
                                              j
                                              The normal retirement benefit is calculated using the higher of a DB formula or a money purchase
                                              annuity. A money purchase annuity is a specific type of DC component wherein contributions are
                                              stated as a percentage of the employee’s salary. Retirement benefits are equal to the amount in the
                                              employee’s individual account.
                                              k
                                                  Unreduced annuity at 85 years of combined age and service with minimum of 4 years service.




                                              Page 58                                     GAO/GGD-99-45 Design of State Retirement Programs
                                            Appendix III
                                            Type III Plans: Selected Features and Plan Profiles




Table III.3: (cont.)
Were cost of living adjustments   Early                 Are survivor             Are disability     Are members           Employer contribution
(COLAs) provided in the years     retirement            benefits provided        benefits           required to         rate in 1996 as a percent
1992 to 1996?                     benefits              after retirement?        provided?          contribute?                of covered payroll
                                        l                                                                 m
Yes, in 1 year                    Yes                   Yes                      Yes                Yes                                          7.28
                                                                                                          n
Yes, in all 5 years               No                    Yes                      Yes                Yes                                         11.32
                                        o                                                                 p
Yes, in all 5 years               Yes                   Yes                      Yes                Yes                                          7.55
                                      q                                                                m
Yes, in all 5 years               Yes                   Yes                      Yes                Yes                                           5.5
                                                                                                        p
No, none provided                 No                    Yes                      Yes                Yes                                           6.1
                                        q                                                                 r
Yes, in all 5 years               Yes                   Yes                      Yes                Yes                                           9.6
                                      s                                                                m
Yes, in all 5 years               Yes                   Yes                      Yes                Yes                                          4.75
                                      t                                                                 u
Yes, in all 5 years               Yes                   Yes                      Yes                Yes                                          7.42
                                      v                                                                 w
Yes, in 1 year                    Yes                   Yes                      Yes                Yes                                           9.5
                                      x                                                                 p
Yes, in all 5 years               Yes                   Yes                      Yes                Yes                                           7.1
                                      y                                                                 z
Yes, in all 5 years               Yes                   Yes                      Yes                Yes                                          5.68
                                            l
                                            Members are allowed to retire early with reduced benefits at any age with 10 years of service.
                                            m
                                                Members are required to contribute 5 percent of pay.
                                            n
                                                Members are required to contribute 9.5 percent of pay.
                                            o
                                                Members are allowed to retire early with reduced benefits at age 55 with 25 years of service.
                                            p
                                                Members are required to contribute 6 percent of pay.
                                            q
                                                Members are allowed to retire early with reduced benefits at age 55 with 5 years of service.
                                            r
                                                Members are required to contribute 2.75 percent of pay.
                                            s
                                                Members are allowed to retire early with reduced benefits at age 50 with 10 years of service.
                                            t
                                                Members are allowed to retire early with reduced benefits at age 55 with 20 years of service.
                                            u
                                                Members are required to contribute 5.08 percent of pay.
                                            v
                                                Members are allowed to retire early with reduced benefits at age 55 with 10 years of service.
                                            w
                                                Members are required to contribute 4.5 percent of pay.
                                            x
                                                Members are allowed to retire early with reduced benefits at age 55.
                                            y
                                                Members are allowed to retire early with reduced benefits at age 50 with 4 years of service.
                                            z
                                                Members are required to contribute 5.57 percent of pay.
                                            Source: GAO analysis of state plan features.




                                            Page 59                                       GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.4: Alabama: Provisions of the Employees’ Retirement Systems of Alabama
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1945


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 25 years of service, age 60 with 10 years
benefits                                                                        of service
Final average salary (FAS) calculation                                          Highest 3 years of last 10 years
Does plan only include state general employees?                                 No, the plan also includes state public safety and local
                                                                                                    a
                                                                                general employees

Benefits
                                                                                                                   b
Annual benefit formula                                                          2.0125% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         No
 Minimum age and years of service for early                                     Not applicable
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      4.0%
 1995 COLA                                                                      0%
 1994 COLA                                                                      7.0%
 1993 COLA                                                                      5.0%
 1992 COLA                                                                      0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No




                                              Page 60                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    No
                 c
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        d
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          5.0%
What was the actual employer’s contribution as a                                      6.99%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                Service retirement benefits are based on a guaranteed minimum or a formula method, with the
                                                member receiving payment under the method that yields the highest monthly benefit.
                                                c
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 61                                   GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.5: Arizona: Provisions of the Arizona State Retirement System
General design and features of plan                                             Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1953


Eligibility
Number of years to vest in DB component                                         Immediate
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Rule of 80 (any combination of age and years of service
benefits                                                                        that add up to 80), age 62 with 10 years of service, age
                                                                                65 with any years of service
Final average salary (FAS) calculation                                          Highest 3 years in last 10 years
Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          2.0% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 50 with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.0%
 1995 COLA                                                                      2.5%
 1994 COLA                                                                      1.4%
 1993 COLA                                                                      0%
 1992 COLA                                                                      5.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  Yes




                                              Page 62                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            Yes
         a
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        b
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          2.85%
What was the actual employer’s contribution as a                                      3.85%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                b
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 63                                   GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.6: Arkansas: Provisions of the Arkansas Public Employees’ Retirement System - Noncontributory Plan
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1957


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 65 with 5 years of
benefits                                                                        service
Final average salary (FAS) calculation                                          Highest 4 years
Does plan only include state general employees?                                 No, the plan also includes state legislative employees
                                                                                and local general, public safety, and legislative
                                                                                           a
                                                                                employees

Benefits
Annual benefit formula                                                          1.7% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 100 percent of final pay
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.8%
 1995 COLA                                                                      2.6%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No




                                              Page 64                                GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                      Provision provided
 Variable rate based on investment performance                                           No
  Variable rate based on the Consumer Price Index                                        Yes
Is the COLA based on the “original” or “current”                                         Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                         Yes
                                                                                             c
Is a “pop-up” provision included in the survivor’s                                       Yes
                 b
benefit options?
Are disability benefits provided?                                                        Yes
Does the plan allow for the purchase of service                                          Yes
        d
credits?


Contributions
Are members required to contribute?                                                      No
 If so, at what rate of pay?                                                             Not applicable
What was the actual employer’s contribution as a                                         10%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                           Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                         Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                    Applicable only when beneficiary is a spouse.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.7: California: Provisions of the California Public Employees’ Retirement System – Tier II
General design and features of plan                                           Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1956
Year original plan was established                                              1931


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Age 65 with 10 years of service
benefits
Final average salary (FAS) calculation                                          Highest 1 year

Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          1.25% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 10 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.0%
 1995 COLA                                                                      2.0%
 1994 COLA                                                                      2.0%
 1993 COLA                                                                      2.0%
 1992 COLA                                                                      2.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   Yes
 Variable rate based on investment performance                                  No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Original
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 a
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        b
credits?


Contributions
Are members required to contribute?                                                   No
 If so, at what rate of pay?                                                          Not applicable
What was the actual employer’s contribution as a                                      9.89%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                b
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.8: Connecticut: Provisions of the Connecticut State Employees’ Retirement Plan - Tier 2
General design and features of plan                                        Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1956
Year original plan was established                                              1939


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Age 60 with 25 years of service
benefits
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          1.33% X FAS X the first 35 years of service (salary less
                                                                                than $27,300) + 0.5% X FAS X the first 35 years of
                                                                                service (salary above $27,300) + 1.625% X FAS X
                                                                                years of service (for service greater than 35 years)
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 10 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      3.0%
 1995 COLA                                                                      3.0%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    No
                 a
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        b
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          2.0%
What was the actual employer’s contribution as a                                      14.33%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                b
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.9: Delaware: Provisions of the Delaware State Employees’ Pension Plan
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1953
Year original plan was established                                              1945


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 60 with 15 years
benefits                                                                        of service, age 62 with 5 years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state teachers, higher
                                                                                                                      a
                                                                                education, and legislative employees

Benefits
Annual benefit formula                                                          1.67% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 15 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.0%
 1995 COLA                                                                      2.0%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      0%
 1992 COLA                                                                      0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            No
          b
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          3.0%
What was the actual employer’s contribution as a                                      5.62%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.10: Florida: Provisions of the Florida Retirement System
General design and features of plan                                             Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1927


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 62 with 10 years
benefits                                                                        of service
Final average salary (FAS) calculation                                          Highest 5 years
Does plan only include state general employees?                                 No, the plan also includes state and local public safety
                                                                                employees, elected and state and local judicial officials,
                                                                                senior level management, local general, school district
                                                                                                                                    a
                                                                                employees, and state higher education employees

Benefits
Annual benefit formula                                                          1.60% X FAS X years of service at age 62 or 30 years
                                                                                of service
                                                                                1.63% X FAS X years of service at age 63 or 31 years
                                                                                of service
                                                                                1.65% X FAS X years of service at age 64 or 32 years
                                                                                of service
                                                                                1.68% X FAS X years of service at age 65 or 33 years
                                                                                of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 100 percent of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Any age with 10 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      3.0%
 1995 COLA                                                                      3.0%
 1994 COLA                                                                      3.0%




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                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 1993 COLA                                                                            3.0%
 1992 COLA                                                                            3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                       No
 Fixed rate from year to year                                                         Yes
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    No
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   No
 If so, at what rate of pay?                                                          Not applicable
What was the actual employer’s contribution as a                                      16.77%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.11: Georgia: Provisions of the Employees’ Retirement System of Georgia – General Plan
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1952
Year original plan was established                                              1949


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 60 with 10 years
benefits                                                                        of service
Final average salary (FAS) calculation                                          Highest 2 years
Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          1.70% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 90 percent of FAS
Are early retirement benefits provided?                                         No
 Minimum age and years of service for early                                     Not applicable
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      3.0%
 1995 COLA                                                                      3.0%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No
 Variable rate based on the Consumer Price Index                                No




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                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 a
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        b
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          1.5%
What was the actual employer’s contribution as a                                      13.63%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                b
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.12: Hawaii: Provisions of the Hawaii Employees’ Retirement System - Non-Contributory
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1956
Year original plan was established                                              1925


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
 to DC component
Age and service requirements for normal unreduced                               Age 55 with 30 years of service, age 62 with 10 years of
benefits                                                                        service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state public safety
                                                                                           a
                                                                                employees

Benefits
Annual benefit formula                                                          1.25% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 100 percent of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 20 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.5%
 1995 COLA                                                                      2.5%
 1994 COLA                                                                      2.5%
 1993 COLA                                                                      2.5%
 1992 COLA                                                                      2.5%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   Yes
 Variable rate based on investment performance                                  No




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                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Original
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    No
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   No
 If so, at what rate of pay?                                                          Not applicable
What was the actual employer’s contribution as a                                      7.76%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.13: Idaho: Provisions of the Public Employees’ Retirement System of Idaho – General Members
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1956
Year original plan was established                                              1963


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Rule of 90 (any combination of age and service that add
benefits                                                                        up to 90), age 65 with 5 years of service
Final average salary (FAS) calculation                                          Highest 3 years, 6 months
Does plan only include state general employees?                                 No, the plan also includes local teachers, state higher
                                                                                education, state non-certified school, and local general
                                                                                            a
                                                                                employees

Benefits
Annual benefit formula                                                          1.917% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is the Internal Revenue Code
                                                                                section 415 limit
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.6%
 1995 COLA                                                                      2.9%
 1994 COLA                                                                      2.8%
 1993 COLA                                                                      3.1%
 1992 COLA                                                                      3.8%
How the post-retirement is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   Yes




                                              Page 78                               GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        Yes
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            Yes
          b
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       No
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          6.97%
What was the actual employer’s contribution as a                                      11.61%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 79                                   GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.14: Illinois: Provisions of the Illinois State Employees’ Retirement System
General design and features of plan                                            Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1969
Year original plan was established                                              1944


Eligibility
Number of years to vest in DB component                                         8
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 35 years of service, age 60 with 8 years of
benefits                                                                        service
Final average salary (FAS) calculation                                          Highest 4 of last 10 years
Does plan only include state general employees?                                 No, the plan also includes state public safety, and other
                                                                                                 a
                                                                                state employees

Benefits
Annual benefit formula                                                          1.67% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 75 percent of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 30 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      3.0%
 1995 COLA                                                                      3.0%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   Yes
 Variable rate based on investment performance                                  No




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                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            No
          b
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          4.0%
What was the actual employer’s contribution as a                                      5.1%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different than those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 81                                   GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.15: Iowa: Provisions of the Iowa Public Employees’ Retirement System
General design and features of plan                                        Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1953
Year original plan was established                                              1953


Eligibility
                                                                                    a
Number of years to vest in DB component                                         4
Number of years to vest in employer’s contribution to                           Not applicable, no employer contribution
DC component
Age and service requirements for normal unreduced                               Rule of 88 (any combination of age and service that add
benefits                                                                        up to 88 years), age 62 with 20 years of service, age 65
                                                                                with any years of service
                                                                                                b
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state teachers in higher
                                                                                education and legislative employees; local general
                                                                                employees, local teachers, local higher education
                                                                                                                            c
                                                                                teachers, and local public safety officials

Benefits
Annual benefit formula                                                          60% X (years of service/30) X FAS + 1.0% X FAS X
                                                                                years of service (years 30 to 35)
Is there a maximum benefit?                                                     Yes, the maximum benefit is 65% of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with any years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      1.9%
 1995 COLA                                                                      1.56%
 1994 COLA                                                                      3.39%
 1993 COLA                                                                      0%
 1992 COLA                                                                      0%
How the post-retirement COLA is determined:




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Ad hoc at the discretion of the governing body                                       No
 Fixed rate from year to year                                                         No
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            No
         d
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        e
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          3.7%
What was the actual employer’s contribution as a                                      5.92%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                    Immediate vesting at age 55.
                                                b
                                                 In 1998, if the member’s highest average 3-years’ salary was over $52,000, the average highest 5-
                                                years’ salary, or $52,000—whichever was larger—was used to calculate the final average salary.
                                                c
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                d
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                e
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.16: Kansas: Provisions of the Kansas Public Employees’ Retirement Plan
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1962


Eligibility
                                                                                     a
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Rule of 85 (any combination of age and years of service
benefits                                                                        that add up to 85), age 62 with 10 years of service, age
                                                                                65 with any years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state legislative employees
                                                                                                                             b
                                                                                and local teachers and general employees

Benefits
Annual benefit formula                                                          1.75% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 10 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      0%
 1995 COLA                                                                      0%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      14.5%
 1992 COLA                                                                      3.6%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 c
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        d
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          4.0%
What was the actual employer’s contribution as a                                      3.2%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        No
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      79.5%
 1996?
                                                a
                                                    Immediate vesting at age 65.
                                                b
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                c
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.17: Kentucky: Provisions of the Kentucky Employees’ Retirement System – Non-Hazardous
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1956


Eligibility
Number of years to vest in DB component                                         4
Number of years to vest in employer’s contribution to                           Not applicable, no employer contribution
DC component
Age and service requirements for normal unreduced                               Age 65 with 4 years of service
benefits
Final average salary (FAS) calculation                                          Highest 5 years
Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          1.97% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.8%
 1995 COLA                                                                      2.11%
 1994 COLA                                                                      2.11%
 1993 COLA                                                                      1.0%
 1992 COLA                                                                      1.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No
 Variable rate based on the Consumer Price Index                                Yes




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    No
                 a
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        b
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          5.0%
What was the actual employer’s contribution as a                                      8.89%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        No
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      92%
 1996?
                                                a
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                b
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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Table III.18: Maryland: Provisions of the State Employees’ Retirement System of Maryland
General design and features of plan                                        Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      Not available
Year original plan was established                                              1941


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 62 with 5 years of
benefits                                                                        service, age 63 with 4 years of service, age 64 with 3
                                                                                years of service, age 65 or older with 2 years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state teachers, state public
                                                                                safety, state judicial, state other, local general and local
                                                                                                           a
                                                                                public safety employees

Benefits
Annual benefit formula                                                          1.4% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 15 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.81%
 1995 COLA                                                                      2.61%
 1994 COLA                                                                      2.95%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          2.0%
What was the actual employer’s contribution as a                                      13.61%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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Table III.19: Mississippi: Provisions of the Public Employees’ Retirement System of Mississippi - General Plan
General design and features of plan                                         Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1952


Eligibility
Number of years to vest in DB component                                         4
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 25 years of service, age 60 with 4 years of
benefits                                                                        service
Final average salary (FAS) calculation                                          Highest 4 years
Does plan only include state general employees?                                 No, the plan also includes state teachers; state higher
                                                                                education; county and city employees; state non-
                                                                                certified school; state legislative, and other state
                                                                                            a
                                                                                employees

Benefits
Annual benefit formula                                                          1.875% X FAS X years of service (years 1 – 25) + 2.0%
                                                                                X FAS X years of service greater than 25 years
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         No
 Minimum age and years of service for early                                     Not applicable
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      4.0%
 1995 COLA                                                                      4.0%
 1994 COLA                                                                      2.5%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      2.75%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No




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General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        Yes
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Original
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          7.25%
What was the actual employer’s contribution as a                                      9.75%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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Table III.20: Montana: Provisions of the Montana Public Employees’ Retirement System
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1955
Year original plan was established                                              1945


Eligibility
                                                                                    a
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 60 with 5 years of
benefits                                                                        service, age 65 while in service with no service
                                                                                requirement
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes school district, local general
                                                                                                                        b
                                                                                and state higher education employees

Benefits
                                                                                                                   c
Annual benefit formula                                                          1.786% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 100 percent of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 50 with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      0%
 1995 COLA                                                                      0%
 1994 COLA                                                                      5.0%
 1993 COLA                                                                      1.42%
 1992 COLA                                                                      1.3%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                    Provision provided
 Variable rate based on investment performance                                         Yes
  Variable rate based on the Consumer Price Index                                      No
Is the COLA based on the “original” or “current”                                       Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                       Yes
Is a “pop-up” provision included in the survivor’s benefit                             No
         d
options?
Are disability benefits provided?                                                      Yes
Does the plan allow for the purchase of service                                        Yes
        e
credits?


Contributions
Are members required to contribute?                                                    Yes
 If so, at what rate of pay?                                                           6.8%
What was the actual employer’s contribution as a                                       6.7%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                         Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                       Not applicable
 1996?
                                                a
                                                    Immediate vesting at age 65 while an active member.
                                                b
                                                The provisions for other groups of employees may be different from those shown for state general
                                                employees.
                                                c
                                                 The normal retirement benefit is calculated using the higher of a DB formula or a money purchase
                                                annuity. A money purchase annuity is a specific type of DC component wherein contributions are
                                                stated as a percentage of the employee’s salary. Retirement benefits are equal to the amount in the
                                                employee’s individual account.
                                                d
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                e
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.21: New Hampshire: Provisions of the New Hampshire Retirement System – General Plan
General design and features of plan                                     Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1955
Year original plan was established                                              1945


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Age 60 with any years of service (10 years required to
benefits                                                                        vest)
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          1.67% X FAS X years of service (ages 60 to 64) or
                                                                                1.51% X FAS X years of service (age 65 and older)
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 50 with 10 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      0%
 1995 COLA                                                                      2.0%
 1994 COLA                                                                      2.5%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  Yes




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General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            Yes
         a
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        b
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          5.0%
What was the actual employer’s contribution as a                                      3.14%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                b
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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Table III.22: New Jersey: Provisions of the Public Employees’ Retirement System of New Jersey
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1921


Eligibility
                                                                                     a
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Age 60 with any years of service
benefits
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state legislative and local
                                                                                                    b
                                                                                general employees

Benefits
Annual benefit formula                                                          1.67% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 25 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      1.98%
 1995 COLA                                                                      1.5%
 1994 COLA                                                                      1.62%
 1993 COLA                                                                      1.62%
 1992 COLA                                                                      1.74%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No




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General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Original
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            No
         c
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        d
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          5.0%
What was the actual employer’s contribution as a                                      2.13%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                    Immediate vesting at age 60.
                                                b
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                c
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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Table III.23: New Mexico: Provisions of the Public Employees’ Retirement Association of New Mexico
General design and features of plan                                       Provision provided

Design Components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1956
Year original plan was established                                              1947


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 25 years of service, age 60 with 20 years
benefits                                                                        of service, age 61 with 17 years of service, age 62 with
                                                                                14 years of service, age 63 with 11 years of service,
                                                                                age 64 with 8 years of service, age 65 with 5 years of
                                                                                service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes volunteer fire fighters,
                                                                                                                            a
                                                                                magistrates, and local general employees

Benefits
Annual benefit formula                                                          3.0% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 80 percent of FAS
Are early retirement benefits provided?                                         No
 Minimum age and years of service for early                                     Not applicable
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      3.0%
 1995 COLA                                                                      3.0%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Fixed rate from year to year                                                         Yes
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            Yes
          b
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          7.42%
What was the actual employer’s contribution as a                                      16.59%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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Table III.24: New York: Provisions of the New York State & Local Employees’ Retirement System – General Plan
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1921


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
 to DC component
Age and service requirements for normal unreduced                               Age 55 with 30 years of service, age 62 with 10 years of
benefits                                                                        service, age 70 with 5 years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes local general and local non-
                                                                                                           a
                                                                                certified school employees

Benefits
Annual benefit formula                                                          1.67% X FAS X years of service (years 1 – 25) plus
                                                                                2.0% X FAS X years of service (years 25 – 30) plus
                                                                                1.5% X FAS X years of service (> 30 years)
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 10 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
                                                                                       b
 1996 COLA                                                                      3.77%
                                                                                     b
 1995 COLA                                                                      2.63%
                                                                                       b
 1994 COLA                                                                      3.06%
                                                                                       b
 1993 COLA                                                                      3.54%
                                                                                     b
 1992 COLA                                                                      4.20%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Original
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 c
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        d
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          3.0%
What was the actual employer’s contribution as a                                      2.2%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        No
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      55.9%
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The COLAs shown for 1992 through 1996 represent the average of the COLAs paid during those
                                                years.
                                                c
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.25: North Carolina: Provisions of the Teachers’ and State Employees’ Retirement System of North Carolina
General design and features of plan                                        Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1941


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 60 with 25 years
benefits                                                                        of service, age 65 with 5 years of service
Final average salary (FAS) calculation                                          Highest 4 years
Does plan only include state general employees?                                 No, the plan also includes state teachers and state
                                                                                                         a
                                                                                public safety employees

Benefits
Annual benefit formula                                                          1.80% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 50 with 20 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      4.4%
 1995 COLA                                                                      2.0%
 1994 COLA                                                                      3.5%
 1993 COLA                                                                      1.6%
 1992 COLA                                                                      1.6%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          6.0%
What was the actual employer’s contribution as a                                      8.15%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.26: North Dakota: Provisions of the North Dakota Public Employees’ Retirement System - General Plan
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1955
Year original plan was established                                              1965


Eligibility
                                                                                    a
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Rule of 85 (any combination of age and years of service
benefits                                                                        that add up to 85), age 65 with any years of service
Final average salary (FAS) calculation                                          Highest 3 of last 10 years
Does plan only include state general employees?                                 No, the plan also includes state judicial and other
                                                                                           b
                                                                                employees

Benefits
Annual benefit formula                                                          1.77% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      0%
 1995 COLA                                                                      0%
 1994 COLA                                                                      1.0%
 1993 COLA                                                                      2.0%
 1992 COLA                                                                      0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 c
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        d
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          4.0%
What was the actual employer’s contribution as a                                      4.12%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                    Immediate vesting at age 65.
                                                b
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                c
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.27: Oregon: Provisions of the Oregon Public Employees’ Retirement System
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1953
Year original plan was established                                              1945


Eligibility
                                                                                    a
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 60 with any
benefits                                                                        service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state teachers, state higher
                                                                                education, state public safety, state legislative, state
                                                                                                                       b
                                                                                judicial and local general employees

Benefits
                                                                                                                  c
Annual benefit formula                                                          1.67% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with less than 30 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.0%
 1995 COLA                                                                      2.0%
 1994 COLA                                                                      2.0%
 1993 COLA                                                                      2.0%
 1992 COLA                                                                      2.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   Yes
 Variable rate based on investment performance                                  No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            Yes
         d
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        e
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          6.0%
What was the actual employer’s contribution as a                                      9.15%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially:                                       Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                    Immediate vesting at age 50.
                                                b
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                c
                                                 The normal retirement benefit is calculated using the higher of a DB formula or a money purchase
                                                annuity. A money purchase annuity is a specific type of DC component wherein contributions are
                                                stated as a percentage of the employee’s salary. Retirement benefits are equal to the amount in the
                                                employee’s individual account.
                                                d
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                e
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.28: Pennsylvania: Provisions of the Pennsylvania State Employees’ Retirement System
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1956
Year original plan was established                                              1923


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 35 years of service, age 60 with three
benefits                                                                        years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state public safety,
                                                                                                                    a
                                                                                legislative, and judicial employees

Benefits
Annual benefit formula                                                          2.0% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 100 percent of FAS for
                                                                                employees who became members before March of
                                                                                1974
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Any age with 10 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      0%
 1995 COLA                                                                      0%
 1994 COLA                                                                      6.48%
 1993 COLA                                                                      0%
 1992 COLA                                                                      0%
How the post-retirement is determined:


 Ad hoc at the discretion of the governing body                                 Yes




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Fixed rate from year to year                                                         No
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            No
          b
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          5.0%
What was the actual employer’s contribution as a                                      7.28%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.29: Rhode Island: Provisions of the Rhode Island Employees’ Retirement System – State Employees
General design and features of plan                                        Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1956
Year original plan was established                                              1936


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 28 years of service, age 60 with 10 years
benefits                                                                        of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          1.7% X FAS X years of service (years 1 – 10) plus 1.9%
                                                                                (years 11 – 20) plus 3.0% X FAS X years of service
                                                                                (years 21 – 34) + 2.0% X FAS X years of service (for
                                                                                service greater than 34 years)
Is there a maximum benefit?                                                     Yes, the maximum benefit is 80 percent of FAS
Are early retirement benefits provided?                                         No
 Minimum age and years of service for early                                     Not applicable
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      3.0%
 1995 COLA                                                                      3.0%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   Yes




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                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 a
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        b
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          9.5%
What was the actual employer’s contribution as a                                      11.32%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                b
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.30: South Carolina: Provisions of the South Carolina Retirement System – General Plan
General design and features of plan                                         Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1954
Year original plan was established                                              1945


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 65 with 5 years of
benefits                                                                        service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state higher education
                                                                                employees and local teachers and local general
                                                                                           a
                                                                                employees

Benefits
Annual benefit formula                                                          1.82% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 25 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.5%
 1995 COLA                                                                      2.7%
 1994 COLA                                                                      2.7%
 1993 COLA                                                                      2.7%
 1992 COLA                                                                      4.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No




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                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          6.0%
What was the actual employer’s contribution as a                                      7.55%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.31: South Dakota: Provisions of the South Dakota Retirement System
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1974


Eligibility
Number of years to vest in DB component                                         3
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Rule of 85 at age 55 (any combination of age and
benefits                                                                        service that add up to 85 starting at age 55), age 65
                                                                                with 5 years of service
Final average salary (FAS) calculation                                          Highest 3 of last 10 years
Does plan only include state general employees?                                 No, the plan also includes local teachers and state
                                                                                higher education, state non-certified school, state and
                                                                                local public safety, state judicial, and local general
                                                                                            a
                                                                                employees

Benefits
Annual benefit formula                                                          1.475% X FAS X years of service X ½ of credited
                                                                                service before July 1, 1998 + 1.3% X FAS X years of
                                                                                service for all other creditable service. Or, 2.0% X FAS
                                                                                X years of service minus primary Social Security benefit
Is there a maximum benefit?                                                     Yes, the maximum benefit is the Internal Revenue Code
                                                                                Section 415 limit
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      3.1%
 1995 COLA                                                                      3.1%
 1994 COLA                                                                      3.1%
 1993 COLA                                                                      3.1%




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                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 1992 COLA                                                                            3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                       No
 Fixed rate from year to year                                                         Yes
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            No
          b
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          5.0%
What was the actual employer’s contribution as a                                      5.5%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.32: Texas: Provisions of the Employees’ Retirement System of Texas
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1955
Year original plan was established                                              1947


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Rule of 80 (any combination of age and years of service
benefits                                                                        that add up to 80), age 60 with 10 years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          2.25% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 100 percent of FAS
Are early retirement benefits provided?                                         No
 Minimum age and years of service for early                                     Not applicable
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              No
past 5 years?
 1996 COLA                                                                      0%
 1995 COLA                                                                      0%
 1994 COLA                                                                      0%
 1993 COLA                                                                      0%
 1992 COLA                                                                      0%
How the post-retirement COLA is determined:

 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No
 Variable rate based on the Consumer Price Index                                No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
Is the COLA based on the “original” or “current”                                      Neither
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            Yes
         a
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        b
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          6.0%
What was the actual employer’s contribution as a                                      6.1%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                b
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.33: Vermont: Provisions of the Vermont State Retirement System
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1944


Eligibility
                                                                                    a
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 62 with any years
benefits                                                                        of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          1.67% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 50 percent of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      1.5%
 1995 COLA                                                                      1.3%
 1994 COLA                                                                      1.5%
 1993 COLA                                                                      1.6%
 1992 COLA                                                                      2.4%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No
 Variable rate based on the Consumer Price Index                                Yes




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            Yes
          b
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          2.75%
What was the actual employer’s contribution as a                                      9.6%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                    Immediate vesting at age 62.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Type III Plans: Selected Features and Plan Profiles




Table III.34: Virginia: Provisions of the Virginia Retirement System
General design and features of plan                                             Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1952
Year original plan was established                                              1942


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Age 55 with 30 years of service, age 65 with 5 years of
benefits                                                                        service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state public safety, state
                                                                                legislative, and state judicial employees, and local
                                                                                                                        a
                                                                                teachers and local general employees

Benefits
Annual benefit formula                                                          1.5% X FAS X years of service (first $13,200) + 1.65%
                                                                                X FAS X years of service (FAS above $13,200). Years
                                                                                35 and above: 1.65% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is the Internal Revenue Code
                                                                                Section 415 limit
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 50 with 10 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.8%
 1995 COLA                                                                      2.65%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      3.6%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No




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                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Fixed rate from year to year                                                         No
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          5.0%
What was the actual employer’s contribution as a                                      4.75%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        No
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      89.47%
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.35: Washington: Provisions of the Washington State Public Employees’ Retirement System – Plan II
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1957
Year original plan was established                                              1949


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Age 65 with 5 years of service
benefits
Final average salary (FAS) calculation                                          Highest 5 years
Does plan only include state general employees?                                 No, the plan also includes state higher education and
                                                                                                                                    a
                                                                                local higher education and local general employees

Benefits
Annual benefit formula                                                          2.0% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 20 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      3.0%
 1995 COLA                                                                      3.0%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No




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                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          5.08%
What was the actual employer’s contribution as a                                      7.42%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.36: West Virginia: Provisions of the West Virginia Public Employees’ Retirement System
General design and features of plan                                         Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1961


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Rule of 80 with a minimum age of 55 (any combination
benefits                                                                        of age and years of service that add up to 80 with a
                                                                                minimum age of 55), age 60 with 5 years of service
Final average salary (FAS) calculation                                          Highest 3 of last 10 years
                                                                                                                                    a
Does plan only include state general employees?                                 No, the plan also includes local general employees


Benefits
Annual benefit formula                                                          2.0% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 10 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      COLA was based on dollars per year of service with
                                                                                retirees with longer service periods receiving greater
                                                                                benefits
 1995 COLA                                                                      0%
 1994 COLA                                                                      0%
 1993 COLA                                                                      0%
 1992 COLA                                                                      0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No




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                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Neither
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            No
          b
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          4.5%
What was the actual employer’s contribution as a                                      9.5%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.37: Wisconsin: Provisions of the Wisconsin Retirement System
General design and features of plan                                             Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1943


Eligibility
Number of years to vest in DB component                                         Immediately
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Age 57 with 30 years of service, age 65 with any years
benefits                                                                        of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state teachers and state
                                                                                higher education, state public safety, state legislative,
                                                                                and judicial employees, other state; and local teachers,
                                                                                local higher education, local public safety, local
                                                                                                                          a
                                                                                legislative, and local general employees

Benefits
                                                                                                                b
Annual benefit formula                                                          1.6% X FAS X years of service
Is there a maximum benefit?                                                     Yes, the maximum benefit is 65 percent of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with any years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      6.6%
 1995 COLA                                                                      5.6%
 1994 COLA                                                                      2.8%
 1993 COLA                                                                      4.9%
 1992 COLA                                                                      4.4%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No




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                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Fixed rate from year to year                                                         No
 Variable rate based on investment performance                                        Yes
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            Yes
         c
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        d
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          6.0%
What was the actual employer’s contribution as a                                      7.1%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The normal retirement benefit is calculated using the higher of a DB formula or a money purchase
                                                annuity. A money purchase annuity is a specific type of DC component wherein contributions are
                                                stated as a percentage of the employee’s salary. Retirement benefits are equal to the amount in the
                                                employee’s individual account.
                                                c
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix III
                                              Type III Plans: Selected Features and Plan Profiles




Table III.38: Wyoming: Provisions of the Wyoming Retirement System’s Public Employees’ Pension Plan
General design and features of plan                                    Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            No
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1953
Year original plan was established                                              1949


Eligibility
Number of years to vest in DB component                                         4
Number of years to vest in employer’s contribution                              Not applicable, no employer contribution
to DC component
Age and service requirements for normal unreduced                               Rule of 85 (any combination of age and service that add
benefits                                                                        up to 85), age 60 with 4 years of service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes state higher education
                                                                                employees, local teachers, local public safety, and local
                                                                                                    a
                                                                                general employees

Benefits
Annual benefit formula                                                          2.0% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 50 with 4 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past five years?
 1996 COLA                                                                      1.0%
 1995 COLA                                                                      1.0%
 1994 COLA                                                                      1.0%
 1993 COLA                                                                      1.0%
 1992 COLA                                                                      1.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   Yes
 Variable rate based on investment performance                                  No




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                                                Appendix III
                                                Type III Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     No
Is the COLA based on the “original” or “current”                                      Original
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          5.57%
What was the actual employer’s contribution as a                                      5.68%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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Appendix III
Type III Plans: Selected Features and Plan Profiles




Page 130                              GAO/GGD-99-45 Design of State Retirement Programs
Appendix IV

Type IV Plans: Selected Features and Plan
Profiles

               Type IV plans include four design components: DB, DC with employer
               contribution, DC without employer contribution, and Social Security.

               The appendix consists of a summary of key features that we selected to
               facilitate comparisons with FERS and CSRS, and an individual profile for
               each state plan we categorized as Type IV.




               Page 131                      GAO/GGD-99-45 Design of State Retirement Programs
                                            Appendix IV
                                            Type IV Plans: Selected Features and Plan Profiles




Table IV.1: Selected Features of Type IV State Retirement Plans as of July 1, 1998
                  Vesting     Minimum age plus service requirement for             Final average salary
                                                                                               a
State             period      unreduced, normal retirement benefits                calculation                        Benefit formula
                                                             b
Indiana           10 years    Age 55 with 30 years of service                      Highest 5 years                    1.1% X FAS X years
Tennessee         5 years     No minimum age - Any age with 30 years of service    Highest 5 years                    1.5% X FAS X years of
                                                                                                                      service X 1.05 plus
                                                                                                                      0.25% X (FAS minus
                                                                                                                      Social Security
                                                                                                                      integration level) X
                                                                                                                                              c
                                                                                                                      years of service X 1.05.
Utah             4 years      No minimum age - Any age with 30 years of service           Highest 3 years             2.0% X FAS X years
                                            a
                                             Some states use months or quarters to calculate final average salaries. For comparison purposes,
                                            we converted these time frames to years. In addition, some states use consecutive service while
                                            others use nonconsecutive service. However, we did not distinguish between these two types of
                                            service.
                                            b
                                                Unreduced annuity at 85 years of combined age and service with a minimum age of 55.
                                            c
                                            The Social Security integration level is an average of Social Security wage bases. It allows the
                                            benefit formula to provide a slightly higher benefit rate on a portion of the FAS.




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                                            Appendix IV
                                            Type IV Plans: Selected Features and Plan Profiles




Table IV.1: (cont.)
Were cost of living adjustments   Early                Are survivor             Are disability      Are members        Employer contribution
(COLAs) provided in the years     retirement           benefits provided        benefits            required to        rate in 1996 as a percent
1992 to 1996?                     benefits             after retirement?        provided?           contribute?        of covered payroll
                                      d                                                                 e
Yes, in 3 years                   Yes                  Yes                      Yes                 Yes                5.9
                                      f
Yes, in all 5 years               Yes                  Yes                      Yes                 No                 7.3




                                        g
Yes, in all 5 years               Yes                  Yes                      Yes                 No                 12.51
                                            d
                                                Members are allowed to retire early with reduced benefits at age 50 with 15 years of service.
                                            e
                                                Members are required to contribute 3 percent of pay.
                                            f
                                            Members are allowed to retire early with reduced benefits at age 55 with 5 years of service.
                                            g
                                            Members are allowed to retire early with reduced benefits at any age with 25 years of service, age 62
                                            with 10 years or age 60 with 20 years.
                                            Source: GAO analysis of state plan features.




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                                              Appendix IV
                                              Type IV Plans: Selected Features and Plan Profiles




Table IV.2: Indiana: Provisions of the Public Employees’ Retirement Fund of Indiana
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            Yes
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1954
Year original plan was established                                              1945


Eligibility
Number of years to vest in DB component                                         10
Number of years to vest in employer’s contribution                              Immediate
to DC component
Age and service requirements for normal unreduced                               Rule of 85 (any combination of age and years of service
benefits                                                                        that add up to 85 starting at age 55), age 60 with 15
                                                                                years of service, age 65 with 10 years of service
                                                                                                a
Final average salary (FAS) calculation                                          Highest 5 years
Does plan only include state general employees?                                 No, the plan also includes local teachers and general
                                                                                           b
                                                                                employees

Benefits
Annual benefit formula                                                          1.1% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 50 with 15 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      1.5%
 1995 COLA                                                                      1.5%
 1994 COLA                                                                      1.0%
 1993 COLA                                                                      0%
 1992 COLA                                                                      0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Yes
 Fixed rate from year to year                                                   No




                                              Page 134                               GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix IV
                                                Type IV Plans: Selected Features and Plan Profiles




General design and features of plan                                                       Provision provided
 Variable rate based on investment performance                                            No
  Variable rate based on the Consumer Price Index                                         No
Is the COLA based on the “original” or “current”                                          Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                          Yes
Is a “pop-up” provision included in the survivor’s benefit                                No
         c
options?
Are disability benefits provided?                                                         Yes
Does the plan allow for the purchase of service                                           Yes
        d
credits?


Contributions
Are members required to contribute?                                                       Yes
 If so, at what rate of pay?                                                              3.0%
What was the actual employer’s contribution as a                                          5.9%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                            Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                          Not applicable
 1996?
                                                a
                                                    Indiana calculates final average salaries using the highest five groups of four consecutive quarters.
                                                b
                                                The provisions for other employee groups may be different than those shown for state general
                                                employees.
                                                c
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




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                                              Appendix IV
                                              Type IV Plans: Selected Features and Plan Profiles




Table IV.3: Tennessee: Provisions of the Tennessee Consolidated Retirement System – Group I
General design and features of plan                                     Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            Yes
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1947


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Immediate
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 60 with 5 years of
benefits                                                                        service
Final average salary (FAS) calculation                                          Highest 5 years
Does plan only include state general employees?                                 No, the plan also includes state teachers and higher
                                                                                                                                   a
                                                                                education employees and local general employees

Benefits
Annual benefit formula                                                          (1.50% X FAS X years of service X 1.05) plus .25% X
                                                                                (FAS minus Social Security integration level) X years of
                                                                                               b
                                                                                service X 1.05
Is there a maximum benefit?                                                     Yes, the maximum benefit is 78.75 percent of FAS
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.5%
 1995 COLA                                                                      2.7%
 1994 COLA                                                                      2.7%
 1993 COLA                                                                      2.7%
 1992 COLA                                                                      3.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No




                                              Page 136                               GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix IV
                                                Type IV Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            Yes
         c
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        d
credits?


Contributions
Are members required to contribute?                                                   No
 If so, at what rate of pay?                                                          Not applicable
What was the actual employer’s contribution as a                                      7.3%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                The Social Security integration level is an average of Social Security wage bases. It allows the
                                                benefit formula to provide a slightly higher benefit rate on a portion of the FAS.
                                                c
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                d
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 137                                   GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix IV
                                              Type IV Plans: Selected Features and Plan Profiles




Table IV.4: Utah: Provisions of the Utah Public Employees’ Non-Contributory Retirement System
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            Yes
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1949


Eligibility
Number of years to vest in DB component                                         4
Number of years to vest in employer’s contribution                              Immediate
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 65 with 4 years of
benefits                                                                        service
Final average salary (FAS) calculation                                          Highest 3 years
                                                                                                                                     a
Does plan only include state general employees?                                 No, the plan also includes local general employees


Benefits
Annual benefit formula                                                          2.0% X FAS X years of service
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Any age with 25 years of service, age 62 with 10 years,
 retirement                                                                     age 60 with 20 years

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      2.8%
 1995 COLA                                                                      2.6%
 1994 COLA                                                                      3.0%
 1993 COLA                                                                      3.0%
 1992 COLA                                                                      4.0%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No
 Variable rate based on investment performance                                  No
 Variable rate based on the Consumer Price Index                                Yes




                                              Page 138                               GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix IV
                                                Type IV Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
Is the COLA based on the “original” or “current”                                      Original
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    Yes
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   No
 If so, at what rate of pay?                                                          Not applicable
What was the actual employer’s contribution as a                                      12.51%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 139                                   GAO/GGD-99-45 Design of State Retirement Programs
Appendix IV
Type IV Plans: Selected Features and Plan Profiles




Page 140                              GAO/GGD-99-45 Design of State Retirement Programs
Appendix V

Type V Plan: Selected Features and Plan
Profile

               The Type V plan includes three design components: DB, DC with employer
               contribution, and DC without employer contribution.

               The appendix consists of a summary of key features that we selected to
               facilitate comparisons with FERS and CSRS, and the state plan’s profile.




               Page 141                       GAO/GGD-99-45 Design of State Retirement Programs
                                           Appendix V
                                           Type V Plan: Selected Features and Plan Profile




Table V.1: Selected Features of the Type V State Retirement Plan as of July 1, 1998

                 Vesting      Minimum age plus service requirement for                Final average salary
                                                                                                  a
State            period       unreduced, normal retirement benefits                   calculation                     Benefit formula
Alaska           5 years      No minimum age with 30 years of service                 Highest 3 years                 2.0% X FAS X years
                                                                                                                      of service for the first
                                                                                                                      10 years plus 2.25%
                                                                                                                      X FAS X years of
                                                                                                                      service for the next 10
                                                                                                                      years plus 2.5% X
                                                                                                                      FAS X years of
                                                                                                                      service for service
                                                                                                                      greater than 20 years.
                                           a
                                            Some states use months or quarters to calculate final average salaries. For comparison purposes,
                                           we converted these time frames to years. In addition, some states use consecutive service, and
                                           others use nonconsecutive service. However, we did not distinguish between these two types of
                                           service.




                                           Page 142                                 GAO/GGD-99-45 Design of State Retirement Programs
                                           Appendix V
                                           Type V Plan: Selected Features and Plan Profile




Table V.1: (cont.)
Were cost of living adjustments   Early               Are survivor             Are disability      Are members        Employer contribution
(COLAs) provided in the years     retirement          benefits provided        benefits            required to        rate in 1996 as a percent
1992 to 1996?                     benefits            after retirement?        provided?           contribute?        of covered payroll
                                      b                                                                c
Yes, in all 5 years               Yes                 Yes                      Yes                 Yes                14.08
                                           b
                                               Members are allowed to retire early with reduced benefits at age 55 with 5 years of service.
                                           c
                                               Members are required to contribute 6.75 percent of pay.
                                           Source: GAO analysis of state plan features.




                                           Page 143                                      GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix V
                                              Type V Plan: Selected Features and Plan Profile




Table V.2: Alaska: Provisions of the Alaska Public Employees’ Retirement System
General design and features of plan                                       Provision provided

Design components
Defined benefit (DB)                                                            Yes
Defined contribution (DC) with employer contribution                            Yes
DC with NO employer contribution                                                Yes
Social Security                                                                 No

Year Social Security coverage was provided                                      Not applicable, no Social Security
Year original plan was established                                              1961


Eligibility
Number of years to vest in DB component                                         5
Number of years to vest in employer’s contribution                              Immediate
to DC component
Age and service requirements for normal unreduced                               Any age with 30 years of service, age 60 with 5 years of
benefits                                                                        service
Final average salary (FAS) calculation                                          Highest 3 years
Does plan only include state general employees?                                 No, the plan also includes local general employees and
                                                                                                                           a
                                                                                local police and fire department employees

Benefits
Annual benefit formula                                                          2.0% X FAS X years of service (the first 10 years) +
                                                                                2.25% X FAS X years of service (years 11 – 20) + 2.5%
                                                                                X FAS X years of service (> 20 years)
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         Yes
 Minimum age and years of service for early                                     Age 55 with 5 years of service
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              Yes
past 5 years?
 1996 COLA                                                                      1.35%
 1995 COLA                                                                      1.1%
 1994 COLA                                                                      2.03%
 1993 COLA                                                                      2.77%
 1992 COLA                                                                      2.68%
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 No
 Fixed rate from year to year                                                   No




                                              Page 144                               GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix V
                                                Type V Plan: Selected Features and Plan Profile




General design and features of plan                                                   Provision provided
 Variable rate based on investment performance                                        No
  Variable rate based on the Consumer Price Index                                     Yes
Is the COLA based on the “original” or “current”                                      Current
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s benefit                            No
          b
options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
 If so, at what rate of pay?                                                          6.75%
What was the actual employer’s contribution as a                                      14.08%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Yes
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                The provisions for other employee groups may be different from those shown for state general
                                                employees.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                Source: GAO analysis of state plan features.




                                                Page 145                                  GAO/GGD-99-45 Design of State Retirement Programs
Appendix V
Type V Plan: Selected Features and Plan Profile




Page 146                              GAO/GGD-99-45 Design of State Retirement Programs
Appendix VI

Type VI Plans: Selected Features and Plan
Profiles

               Type VI plans include three design components: DC with employer
               contribution, DC without employer contribution, and Social Security.

               The appendix consists of a summary of key features that we selected to
               facilitate comparisons with FERS and CSRS, and an individual profile for
               each state plan we categorized as Type VI.




               Page 147                      GAO/GGD-99-45 Design of State Retirement Programs
                                           Appendix VI
                                           Type VI Plans: Selected Features and Plan Profiles




Table VI.1: Selected Features of Type VI State Retirement Plans as of July 1, 1998
                 Vesting     Minimum age plus service requirement for             Final average salary
State            period      unreduced, normal retirement benefits                calculation             Benefit formula
Michigan         4 years     Age 55 with 4 years of service                       Not applicable          Not applicable
                         a                                   a
Nebraska         5 years     Age 55 with any years of service                     Not applicable          Not applicable
                                           a
                                            Vesting is immediate at age 55.




                                           Page 148                              GAO/GGD-99-45 Design of State Retirement Programs
                                       Appendix VI
                                       Type VI Plans: Selected Features and Plan Profiles




Table VI.1: (cont.)
Were cost of living adjusments   Early          Are survivor            Are disability     Are members        Employer contribution
(COLAs) provided in the years    retirement     benefits provided       benefits           required to        rate in 1996 as a percent
1992 to 1996?                    benefits       after retirement?       provided?          contribute?        of covered payroll
                                                                                                                             b
Not applicable                   No             Yes                     Yes                 No                Not applicable
                                                                                               c
Not applicable                   No             Yes                     Yes                Yes                6.0
                                       b
                                        The employer contribution rate is not applicable in 1996 because the current plan was signed into law
                                       in December 1996 and became open to new members after March 31, 1997. Under the current plan,
                                       the employer automatically contributes 4 percent of salary, regardless of employee contributions. The
                                       employer also matches contributions dollar for dollar on the first 3 percent the employee contributes.
                                       c
                                       Members are required to contribute 3.6 percent of pay. After member contributes $864 during the
                                       plan year, the member contribution rate rises to 4.8 percent of pay.
                                       Source: GAO analysis of state plan features.




                                       Page 149                                  GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix VI
                                              Type VI Plans: Selected Features and Plan Profiles




Table VI.2: Michigan: Provisions of the Michigan State Employees’ Retirement System
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            No
Defined contribution (DC) with employer contribution                            Yes
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1955
Year original plan was established                                              1943


Eligibility
Number of years to vest in DB component                                         Not applicable, no DB component
Number of years to vest in employer’s contribution                              4 years
to DC component
Age and service requirements for normal unreduced                               Age 55 with 4 years of service
benefits
Final average salary (FAS) calculation                                          Not applicable, no DB component
Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          Not applicable, no DB component
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         No
 Minimum age and years of service for early                                     Not applicable
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              No, COLAs are not applicable to DC plans
past 5 years?
 1996 COLA                                                                      Not applicable
 1995 COLA                                                                      Not applicable
 1994 COLA                                                                      Not applicable
 1993 COLA                                                                      Not applicable
 1992 COLA                                                                      Not applicable
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Not applicable
 Fixed rate from year to year                                                   Not applicable
 Variable rate based on investment performance                                  Not applicable
 Variable rate based on the Consumer Price Index                                Not applicable




                                              Page 150                               GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix VI
                                                Type VI Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
Is the COLA based on the “original” or “current”                                      Not applicable
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    No
                 a
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       Yes
        b
credits?


Contributions
Are members required to contribute?                                                   No
 If so, at what rate of pay?                                                          Not applicable
                                                                                                     c
What was the actual employer’s contribution as a                                      Not applicable
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Not applicable
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable
 1996?
                                                a
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                b
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                c
                                                 The employer contribution rate is not applicable in 1996 because the current plan was signed into law
                                                in December 1996 and became open to new members after March 31, 1997. Under the current plan,
                                                the employer automatically contributes 4 percent of salary, regardless of employee contributions. The
                                                employer also matches contributions dollar for dollar on the first 3 percent the employee contributes.
                                                Source: GAO analysis of state plan features.




                                                Page 151                                   GAO/GGD-99-45 Design of State Retirement Programs
                                              Appendix VI
                                              Type VI Plans: Selected Features and Plan Profiles




Table VI.3: Nebraska: Provisions of the Nebraska State Employees’ Retirement System
General design and features of plan                                      Provision provided

Design components
Defined benefit (DB)                                                            No
Defined contribution (DC) with employer contribution                            Yes
DC with NO employer contribution                                                Yes
Social Security                                                                 Yes

Year Social Security coverage was provided                                      1951
Year original plan was established                                              1964


Eligibility
Number of years to vest in DB component                                         Not applicable, no DB component
                                                                                    a
Number of years to vest in employer’s contribution                              5
to DC component
                                                                                                                  a
Age and service requirements for normal unreduced                               Age 55 with any years of service
benefits
Final average salary (FAS) calculation                                          Not applicable, no DB component

Does plan only include state general employees?                                 Yes


Benefits
Annual benefit formula                                                          Not applicable, no DB component
Is there a maximum benefit?                                                     No
Are early retirement benefits provided?                                         No
 Minimum age and years of service for early                                     Not applicable
 retirement

Cost of living adjustments (COLAs)
Has the plan provided post-retirement COLAs in the                              No, COLAs are not applicable to DC plans
past 5 years?
 1996 COLA                                                                      Not applicable
 1995 COLA                                                                      Not applicable
 1994 COLA                                                                      Not applicable
 1993 COLA                                                                      Not applicable
 1992 COLA                                                                      Not applicable
How the post-retirement COLA is determined:
 Ad hoc at the discretion of the governing body                                 Not applicable
 Fixed rate from year to year                                                   Not applicable
 Variable rate based on investment performance                                  Not applicable




                                              Page 152                                  GAO/GGD-99-45 Design of State Retirement Programs
                                                Appendix VI
                                                Type VI Plans: Selected Features and Plan Profiles




General design and features of plan                                                   Provision provided
  Variable rate based on the Consumer Price Index                                     Not applicable
Is the COLA based on the “original” or “current”                                      Not applicable
benefit?

Supplemental/auxiliary benefits
Are survivor benefits provided after retirement?                                      Yes
Is a “pop-up” provision included in the survivor’s                                    No
                 b
benefit options?
Are disability benefits provided?                                                     Yes
Does the plan allow for the purchase of service                                       No
        c
credits?


Contributions
Are members required to contribute?                                                   Yes
                                                                                             d
 If so, at what rate of pay?                                                          3.6%
What was the actual employer’s contribution as a                                      6.0%
percent of covered payroll in 1996?
 Was 100 percent of the employer’s actuarially                                        Not applicable to a DC plan
 required contribution actually contributed in 1996?
 If no, what percent was actually contributed in                                      Not applicable to a DC plan
 1996?
                                                a
                                                    Vesting is immediate at age 55.
                                                b
                                                 The “pop-up” provision allows a retiree’s monthly payment to be restored to 100 percent of his or her
                                                standard annuity if the beneficiary predeceases the retiree.
                                                c
                                                The purchase of service credit allows plan members to buy credit for years in which they did not
                                                otherwise earn a pension benefit.
                                                d
                                                After a member contributes $864 during the plan year, the member contribution rate rises to 4.8
                                                percent of pay.
                                                Source: GAO analysis of state plan features.




                                                Page 153                                  GAO/GGD-99-45 Design of State Retirement Programs
Appendix VII

Major Contributors to This Report


                        Larry H. Endy, Assistant Director,
General Government      Federal Management and Workforce
Division, Washington,   Issues
D.C.
                        Margaret T. Wrightson, the Division’s Associate Director of Tax Policy and
                        Administration and Ernestine Burt-Sanders, Issue Area Assistant, also
                        contributed to this report.

                        Linda J. Libician, Assistant Director
Dallas Field Office     Tyra J. DiPalma, Evaluator-in-Charge
                        Cleofas Zapata, Senior Evaluator
                        James W. Turkett, Technical Advisor
                        Jeffrey P. Kaser, Evaluator




                        Page 154                       GAO/GGD-99-45 Design of State Retirement Programs
Page 155   GAO/GGD-99-45 Design of State Retirement Programs
Page 156   GAO/GGD-99-45 Design of State Retirement Programs
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