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Formula:
Restrictions and Variations
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RETIREMENT
ALLOWANCE RESTRICTIONS
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Is there a limit on the
amount of a retirement allowance?
- Superannuation
The superannuation retirement allowance of
any member may not exceed 80% of his/her three-year
average annual rate of regular compensation.
- Veteran’s Benefit
If you are a veteran, you are entitled to
$15 a year extra for every year or fraction
thereof of creditable service, up to a maximum
additional benefit of $300.00 per year. Veterans
can still receive this additional veteran’s
benefit even if it causes their superannuation
retirement allowance to exceed 80% of their
average annual rate of regular compensation.
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SAMPLE
CASES AND CALCULATIONS
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- Examples
The following examples are presented to aid
your understanding of the formula’s usage.
Please note that annual allowance figures
are rounded o to be divisible by 12. Also,
all benefits are calculated as though the
member selected Option A. (For a discussion
of options, please see the section of this
guide entitled, “Options for Retirees.”)
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| Case
1 |
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Case Facts
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Group: 1
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Retirement Date: December 31,
2004 |
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Age: 55
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Creditable Service: 15 years,
6 months |
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Non-Veteran
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3-Year Average Annual Rate of
Regular Compensation: $42,000.00 |
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Benefit Rate
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Average
Annual Rate of
Regular Compensation
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Years
of
Creditable Service
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2004
$44,000.00
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2003
$42,000.00
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2002
$40,000.00
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| 1.5
÷ 100 |
Subtotal
$126,000.00
÷3
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.015
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X
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$42,000.00
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X
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15.5
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Total
Annual Allowance
Monthly Benefit |
$9,765.00
$813.75
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Case
2
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Case Facts
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Group: 1
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Retirement Date: December 31,
2004 |
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Age: 68
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Creditable Service: 32 years |
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Non-Veteran
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3-Year Average Annual Rate of
Regular Compensation: $36,000.00 |
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Benefit Rate
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Average
Annual Rate of
Regular Compensation
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Years
of
Creditable Service
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.025
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X
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$36,000.00
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X
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32
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| This
allowance meets, but does not
exceed the 80% maximum. |
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Total
Annual Allowance
Monthly Benefit |
$28,800.00
$2,400.00
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Case
3
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Case Facts
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Group: 1
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Retirement Date: December 31,
2004 |
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Age: 45
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Creditable Service: 20 years |
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Non-Veteran
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3-Year Average Annual Rate of
Regular Compensation: $30,150.00 |
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Benefit Rate
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Average
Annual Rate of
Regular Compensation
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Years
of
Creditable Service
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.005
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X
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$30,150.00
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X
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20
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Total
Annual Allowance
Monthly Benefit |
$3,015.00
$251.25
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Case
4
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Case Facts
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Group: 1
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Retirement Date: December 31,
2004 |
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Age: 55
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Creditable Service: 20 years |
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Non-Veteran
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3-Year Average Annual Rate of
Regular Compensation: $31,500.00 |
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•
Left public service at age
45 in 1994 |
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Benefit Rate
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Average
Annual Rate of
Regular Compensation
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Years
of
Creditable Service
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.015
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X
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$31,500.00
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X
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20
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Total
Annual Allowance
Monthly Benefit |
$9,450.00
$787.50
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Case
5
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Case Facts
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Group: 2
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Retirement Date: December 31,
2004 |
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Age: 55
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Creditable Service: 15 years |
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Veteran
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3-Year Average Annual Rate of
Regular Compensation: $35,000.00 |
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Benefit Rate
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Average
Annual Rate of
Regular Compensation
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Years
of
Creditable Service
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.020
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X
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$35,000.00
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X
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15
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| Because
this member is a veteran, he
is entitled to $15.00 a year
for each of his 15 years of
creditable service. |
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Total
Annual Allowance (Initial Computation)
+ Veteran’s
Benefit ($15.00 x 15 years)
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$10,500.00
$225.00
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Total
Annual Allowance
Monthly Benefit |
$10,725.00
$893.75
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Case
6
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Case Facts
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Group: 4
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Retirement Date: December 31,
2004 |
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Age: 65
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Creditable Service: 41 years |
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Veteran
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3-Year Average Annual Rate of
Regular Compensation: $58,833.00 |
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Benefit Rate
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Average
Annual Rate of
Regular Compensation
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Years
of
Creditable Service
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.025
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X
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$58,833.00
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X
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41
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| Statutory
provisions limit the allowance
to 80% of $58,833.00 = $47,066.40. |
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Total
Annual Allowance (Initial Computation)
Statutory
Limit (80% of $58,833.00)
+ Veteran’s Benefit ($15.00
x 20 year maximum)
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$60,304.08
$47,066.40
$300.00
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| However,
the veteran’s credit should
be applied. |
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Total
Annual Allowance
Monthly Benefit |
$47,366.40
$3,947.20
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Case
7
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Case Facts
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Group: 4
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Retirement Date: December 31,
2004 |
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Age (at Termination of
Service): 43
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Age (as of Retirement Date):
44 |
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• Creditable
Service: 20 years
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• Non-Veteran |
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• Highest
3-Year Average Annual Rate
of Regular Compensation: $47,000.00
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Benefit Rate
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Average
Annual Rate of
Regular Compensation
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Years
of
Creditable Service
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.014
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X
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$47,000.00
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X
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20
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| Since
the Group 4 member terminated
service prior to his 45th birthday
and his retirement allowance
became effective prior to his
45th birthday, his allowance
is calculated using the benefit
rate for a Group 4 member. |
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Total
Annual Allowance
Monthly Benefit |
$13,160.04
$1,096.67
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Case
8
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Case Facts
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Group: 4
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Retirement Date: December 31,
2004 |
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Age (at Termination of
Service): 44
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Age (as of Retirement Date):
45 |
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• Creditable
Service: 20 years
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• Non-Veteran |
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• Highest
3-Year Average Annual Rate
of Regular Compensation: $47,000.00
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Benefit Rate
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Average
Annual Rate of
Regular Compensation
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Years
of
Creditable Service
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.005
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X
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$47,000.00
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X
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20
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| Since
the Group 4 member terminated
service prior to his 45th birthday
but his retirement allowance
became effective after his 45th
birthday, his allowance is calculated
using the benefit rate for a
Group 1 member. |
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Total
Annual Allowance
Monthly Benefit |
$4,700.04
$391.67
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Case
9
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Case Facts
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Group: 4
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Retirement Date: December 31,
2004 |
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Age (at Termination of
Service): 44
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Age (Defers Accepting Allowance):
57 |
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• Creditable
Service: 20 years
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• Non-Veteran |
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• Highest
3-Year Average Annual Rate
of Regular Compensation: $47,000.00
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Benefit Rate
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Average
Annual Rate of
Regular Compensation
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Years
of
Creditable Service
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.025
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X
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$47,000.00
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X
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20
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| Since
the Group 4 member terminated
service prior to his 45th birthday
but he deferred accepting his
retirement allowance until age
57, his allowance is calculated
using the benefit rate for a
Group 4 member. |
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Total
Annual Allowance
Monthly Benefit |
$23,499.96
$1,958.33
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Case
10
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Case Facts
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Group: 2
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Retirement Date: December 31,
2004 |
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Age: 55
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Veteran |
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Creditable Service: 17 years
(Public Employee: 15 years
+ Military Service: 2 years*)
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3-Year Average
Annual Rate of Regular Compensation:
$45,000.00 |
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*
Calculation for Veterans’
Purchase of Creditable Service
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Percent
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Average
Annual Rate
of Regular Compensation
(Upon Entry into
Public Service)
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Years
of
Military Service
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0.10
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X
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$12,000.00
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X
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2
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Cost
of Purchase
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$2,400.00
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Benefit Rate
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Average
Annual Rate of
Regular Compensation
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Years
of
Creditable Service
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.020
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X
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$45,000.00
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X
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17
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| Because
this member is a veteran, he
is entitled to $15.00 a year
for each of his 17 years of
creditable service. |
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Total
Annual Allowance (Initial Computation)
+ Veteran’s
Benefit ($15.00 x 17 years) |
$15,300.00
$255.00
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Total
Annual Allowance
Monthly Benefit |
$15,555.00
$1,296.25
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Is
the same basic formula applied in
every case?
- Basic Formula
The formula, as outlined above,
applies in most cases and gives
members an approximate figure
for estimation purposes. The retirement
law does include particular provisions
for certain employees with unique
circumstances who may be entitled
to different benefits.
How is the
allowance of a Group 3 member calculated?
- Allowances
for Group 3 Members
The annual retirement allowance
of a Group 3 member will be equal
to 60% of the average annual rate
of regular compensation received
during the twelve month period
immediately preceding the effective
date of his/her retirement. The
total amount of the allowance
will be increased by one twelfth
of three percent for each full
month of creditable service in
excess of twenty years service
earned prior to the last day of
the month in which the member
will attain the age of 55, not
to exceed 75% of the average annual
rate of regular compensation received
during the twelve month period
immediately preceding the effective
date of his/her retirement.
Does the law guarantee retirement
benefits?
- The Commonwealth’s
Contractual Obligation
The payment of superannuation
retirement allowances is considered
to be a contractual obligation
of the Commonwealth and its governmental
subdivisions to retirement system
members. Superannuation retirement
allowances paid to members cannot
be decreased or terminated during
the member’s lifetime.
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