Formulas: Restrictions and Variations
Retirement Allowance Restrictions
- 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 or her three-year average annual rate of regular compensation.
Veteran’s Benefit
If you are a veteran, you are entitled to $15 a year 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.
Sample Cases and Calculations
Examples
The following examples are presented to aid your understanding of the formula's usage. Please note that annual allowance figures are rounded off 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.")
Case 1
Case Facts
| • Group:1 | • Retirement Date: December 31, 2004 |
| • Age: 55 | • Creditable Service: 15 years, 6 months |
| • Non-Veteran | • 3-Year Average Annual Rate of Regular Compensation: $42,000.00 |
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| (2004) $44,000.00 | ||
| (2003) $42,000.00 | ||
| (2002) $40,000.00 | ||
| 1.5 ÷ 100 | Subtotal $126,000.00 | |
| .015 X ÷ 3 $42,000.00 X 15.5 | ||
| Total Annual Allowance $9,765.00 | ||
| Monthly Benefit $813.75 | ||
Case 2
Case Facts
| • Group:1 | • Retirement Date: December 31, 2004 |
| • Age: 68 | • Creditable Service: 32 years |
| • Non-Veteran | • 3-Year Average Annual Rate of Regular Compensation: $36,000.00 |
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .025 X $36,000.00 X 32 | ||
| Total Annual Allowance: $28,800.00 | ||
| Monthly Benefit: $2,400.00 |
Case 3
Case Facts
| • Group: 1 | • Retirement Date: December 31, 2004 |
| • Age: 45 | • Creditable Service: 20 years |
| • Non-Veteran | • 3-Year Average Annual Rate of Regular compensation: $30,150.00 |
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .005 X $30,150.00 X 20 | ||
| Total Annual Allowance: $3,015.00 | ||
| Monthly Benefit: $251.25 |
Case 4
Case Facts
| • Group: 1 | • Retirement Date: December 31, 2004 |
| • Age: 55 | • Creditable Service: 20 years |
| • Non-Veteran | • 3-Year Average Annual Rate of Regular Compensation: $31,500.00 |
| • Left public service at age 45 in 1994 |
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .015 X $31,500.00 X 20 | ||
| Total Annual Allowance: $9,450.00 | ||
| Monthly Benefit: $787.50 |
Case 5
Case Facts
| • Group: 2 | • Retirement Date: December 31, 2004 |
| • Age: 55 | • Creditable Service: 15 years |
| • Veteran | • 3-Year Average Annual Rate of Regular Compensation: $35,000.00 |
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .020 X $35,000.00 X 15 | ||
| Because this member is a veteran, he is entitled to $15.00 a year for each of his 15 years of creditable service. | ||
| Total Annual Allowance (Initial Computation): $10,500.00 | ||
| + Veteran's Benefit ($15.00 x 15 years): $225.00 | ||
| Total Annual Allowance: $10,725.00 | ||
| Monthly Benefit: $893.75 |
Case 6
Case Facts
| • Group: 4 | • Retirement Date: December 31, 2004 |
| • Age: 65 | • Creditable Service: 41 years |
| • Veteran | • 3-Year Average Annual Rate of Regular compensation: $58,833.00 |
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .025 X $58,833.00 X 41 | ||
| Statutory provisions limit the allowance to 80% of $58,833.00 = $47,066.40 However, the veteran's credit should be applied |
||
| Total Annual Allowance (Initial Computation): $60,304.08 | ||
| Statutory Limit (80% of $58,833.00): $47,066.40 | ||
| + Veteran's Benefit ($15.00 x 20 year maximum): $300.00 | ||
| Total Annual Allowance: $47, 366.40 | ||
| Monthly Benefit: $3,947.20 |
Case 7
Case Facts
| • Group: 4 | • Retirement Date: December 31, 2004 |
| • Age (at Termination of Service): 43 | • Age (as of Retirement Date): 44 |
| • Creditable Service: 20 years | • Non-Veteran |
| • 3-Year Average Annual Rate of Regular Compensation: $47,000.00 |
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .014 X $47,000.00 X 20 | ||
| 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. | ||
| Total Annual Allowance: $13,160.04 | ||
| Monthly Benefit: $1,096.67 |
Case 8
Case Facts
| • Group: 4 | • Retirement Date: December 31, 2004 |
| • Age (at Termination of Service): 44 | • Age (as of Retirement Date): 45 |
| • Creditable Service: 20 years | • Non-Veteran |
| • 3-Year Average Annual Rate of Regular Compensation: $47,000.00 |
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .005 X $47,000.00 X 20 | ||
| 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. | ||
| Total Annual Allowance: $4,700.04 | ||
| Monthly Benefit: $391.67 |
Case 9
Case Facts
| • Group: 4 | • Retirement Date: December 31, 2004 |
| • Age (at Termination of Service): 44 | • Age (Defers Accepting Allowance):57 |
| • Creditable Service : 20 years | • Non-Veteran |
| • 3-year Average Annual Rate of Regular Compensation: $47,000.00 |
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
| .025 X $47,000.00 X 20 | ||
| 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. | ||
| Total Annual Allowance: $23,499.96 | ||
| Monthly Benefit: $1,958.33 |
Case 10
Case Facts
| • Group: 2 | • Retirement Date: December 31, 2004 |
| • Age: 55 | • Veteran |
| • Creditable Service: 17 years (Public Employee: 15 years + Military Service: 2 years*) | • 3-Year Average Annual Rate of Regular Compensation: $45,000.00 |
| Percent | Average Annual Rate of Regular Compensation (Upon Entry into Public Service) | Years of Military Service |
|---|---|---|
| .10 X $12,000.00 X 2 | ||
| Cost of Purchase: $2,400.00 |
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .02 X $45,000.00 X 17 | ||
| Because this member is a veteran, he is entitled to $15.00 a year for each of his 17 years of creditable service. | ||
| Total Annual Allowance (Initial Computation): $15,300.00 | ||
| + Veteran's Benefit ($15.00 x 17 years): $255.00 | ||
| Total Annual Allowance: $15,555.00 | ||
| Monthly Benefit: $1,296.25 |
- Is the same basic formula applied in every case?
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?
The annual retirement allowance of a Group 3 member (state police officers) is calculated under a different formula. State Police Officers should contact the State Retirement Board for information on the calculation of their retirement allowances.
- Does the law guarantee retirement benefits?
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, except under extremely limited circumstances involving criminal activity or failure to follow post-retirement employment restrictions.
| Date published: | July 1, 2015 |
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