Public employee retirement allowances consist of two parts: an annuity and a pension.
What is an Annuity?
The payroll contributions that have been deducted during the course of a member’s employment are deposited in an annuity savings fund by the member’s retirement board. The interest that accrues on these contributions is also credited to the member’s individual account. That part of the member’s retirement allowance that is based on the total amount in his or her annuity savings account on the date of retirement is the annuity. It generally accounts for approximately 15-20 percent of a retirement allowance.
What is a Pension?
A pension is the difference between the total retirement allowance specified by law and the amount provided by employee contributions.
What Factors Generally Affect the Amount of a Retirement Allowance?
- The member’s age;
- The member’s length of creditable service;
- The member’s average annual rate of regular compensation; and
- The member’s group classification.