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 five-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.
Sample Case 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, 2027
- Age: 60
- Creditable Service: 15 years, 6 months
- Non-Veteran
- 5-Year Average Annual Rate of Regular Compensation: $42,000.00
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| 2027 $44,000.00 | ||
| 2026 $43,000.00 | ||
| 2025 $42,000.00 | ||
| 2024 $41,000.00 | ||
| 2023 $40,000.00 | ||
| 1.45 ÷ 100 | Subtotal $210,000.00 ÷ 5 | |
| .0145 X | $42,000.00 | X 15.5 |
Total Annual Allowance: $9,439.56
Monthly Benefit: $786.63
Case 2
Case Facts
- Group: 1
- Retirement Date: December 31, 2044
- Age: 68
- Creditable Service: 32 years
- Non-Veteran
- 5-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, 2044
- Age: 62
- Creditable Service: 32 years
- Non-Veteran
- 5-Year Average Annual Rate of Regular Compensation: $30,150.00
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .01875 X | $30,150.00 | X 32 |
- Because this member has over 30 years of service, there are different benefit rates.
Total Annual Allowance: $18,089.88
Monthly Benefit: $1,507.49
Case 4
Case Facts
- Group: 1
- Retirement Date: December 31, 2027
- Age: 55
- Creditable Service: 15 years
- Veteran
- 5-Year Average Annual Rate of Regular Compensation: $35,000.00
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .0145 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): $7,612.56
+ Veteran's Benefit ($15.00 x 15 years): $225.00
Total Annual Allowance: $7,837.56
Monthly Benefit: $653.13
Case 5
Case Facts
- Group: 4
- Retirement Date: December 31, 2053
- Age: 65
- Creditable Service: 41 years
- Veteran
- 5-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): $47,066.44
+ Veteran's Benefit ($15.00 x 41 years, maximum $300): $300.00
Total Annual Allowance: $47,366.40
Monthly Benefit: $3,947.20
Case 6
Case Facts
- Served 10 years in Group 1 and Served 10 years in Group 4
- Retirement Date: December 31, 2032
- Age: 62
- Creditable Service: 20 years
- Non-Veteran
- 5-Year Average Annual Rate of Regular Compensation: $50,000.00
- Because this member served in more than one job group, he will have his benefit prorated based on the time served in each job group.
Group 1
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .0175 X | $50,000.00 | X 10 |
Group 2
| Benefit Rate | Average Annual Rate of Regular Compensation | Years of Creditable Service |
|---|---|---|
| .025 X | $50,000.00 | X 10 |
Total Annual Allowance as Group 1 Member: $8,750.04
Total Annual Allowance as Group 4 Member: $12,500.04
Total Annual Allowance: $21,250.08
Monthly Benefit: $1,770.84
- 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 |
|---|