Retirement FAQ

FAQ

 

Is membership mandatory for employees of the member units?

Yes. Membership in the Reading Retirement System is required by law for all employees who work thirty-two and a half (32-1/2) hours a week.  Please contact the Retirement Office to inquire about eligibility to credit and purchase your prior non-contributing employment service.

How much do members contribute to the Retirement System?

The amount each employee is required to contribute to the Reading Retirement System each year is set by statute. If you joined the System on or after July 1, 1996, you must contribute nine (9) percent of your regular compensation. If you joined any time between January 1, 1984 and June 30, 1996, your contribution rate is set at eight (8) percent. Members who joined the system between 1975 and 1983 contribute seven (7) percent. Those employees who became members prior to 1975 are contributing five (5) percent. The law also mandates that for members whose membership commenced on or after January 1, 1979, an additional two (2) percent of regular compensation will be withheld on compensation over $30,000. This two (2) percent is in addition to the seven (7), eight (8) or nine (9) percent standard deduction from your total regular compensation.

Does a member's contribution to the Retirement System earn interest? If so, how is the interest calculated?

Your contributions are placed in an individual annuity savings fund where it earns annual interest at a statutory rate comparable to that of a passbook savings account. The interest rate is determined by the Public Employee Retirement Administration Commission and the Commissioner of Banks. This annual interest rate is independent of that earned on the Retirement System’s investments

Are employee contributions used to fund the administrative expenses of the Retirement System?

NO. Employee contributions are never used to fund administrative expenses. The System’s operating expenses, including all fees associated with actuarial and audit services, investment management, consultant and custodial fees, are funded solely through the system’s investment income.

What does it mean to be vested?

When you are vested, you have earned the right to a retirement allowance at a later date. You no longer have to remain in service to be eligible to collect it.

When does vesting occur?

You must have ten years of creditable service in order to be considered vested. If you transfer creditable service from another retirement system or if you buy back prior service, such service is added to your Reading service to determine whether you are vested.

When is retirement an option?

You are eligible to retire at age 55 or older if you have at least ten years of creditable service. If you have 20 years of service, you can retire at any age.

What is the retirement allowance based on? How is it calculated?

Because the Reading Retirement System is a defined benefit plan, your benefits are determined by a formula and are not affected by the amount of money in your annuity account at the time of retirement. The factors used to determine your benefit are; your age at the time of retirement, your amount of creditable service, your group classification and an average of your three highest consecutive years of regular compensation.

Can I purchase creditable service earned in another Massachusetts public retirement system?

If you were a member of another retirement system subject to the provisions of Chapter 32 of the General Laws, and you withdrew your retirement funds, it is possible to buy back your prior creditable service. The Retirement Office will verify your prior service, then calculate the amount of your buyback. You must repay the amount withdrawn, plus interest to the date of repayment. You may complete a buy back as a lump sum payment or a payment plan up to the number of years you wish to buy back, but not more than five years.

Will prior creditable service affect my membership date or contribution rate in Reading's Retirement System?

If you have retirement contributions from a previous public employer directly transferred to our system, you are entitled to maintain the level of contribution you were paying in your previous employment. If you received a refund of retirement contributions from your previous retirement system and later became a member of the Reading Retirement System, your contribution rate with Reading will be at the new member rate, regardless of what you were paying in the prior system. If you should later purchase your prior creditable service through a buyback, your contribution level will remain at the new member rate and will not be reduced to your previous rate.

If I was a temporary employee, may I apply that time towards my retirement creditable service?

If you were employed on a temporary basis, prior to becoming permanent, you may be entitled to purchase this service towards your retirement creditable service. If you have temporary service with another public agency in Massachusetts, you may be entitled to purchase that as well and apply it to your retirement creditable service in Reading. The rules are very complex and each request will require research and documentation. Please call the Retirement Office for more information.

How is creditable service achieved?

You earn creditable service towards your retirement allowance for the period during which you are contributing to the retirement system. For members of the System who work thirty two and a half (32-1/2) or more hours per week, this service time starts accruing the day you begin work and continues until the day you separate from service. However, if there is a period of time when you are off the payroll, you should consult with the Retirement Office as to how this will affect your amount of creditable service.

Is regular compensation the same as total compensation?

NO. Regular compensation is the portion of your salary that is subject to retirement contributions. Overtime, bonus pay, severance pay, payments made for unused sick time, and certain other payments, are not considered regular compensation, are not subject to retirement and cannot be used towards you three-year average for the purpose of determining your retirement allowance.

What are the group classifications within the Retirement System?

* Group 1 - General employees, including clerical, administrative and technical workers, laborers and all other not otherwise classified. * Group 4 -Firefighters and Police Officers.

Does my participation in the 457 deferred compensation plan affect my Reading retirement benefit in any way?

NO. Your retirement benefit is separate from and not related to participation in the deferred compensation plan. The 457 plan is an optional savings vehicle, which allows you to supplement your retirement savings on a tax-deferred basis. It is strongly recommended that this plan be considered as an option by members.

If I leave my job, what happens to my contribution?

If you leave your job and are not going to work for another governmental unit which comes under the provisions of Chapter 32, you may be eligible to receive a refund of your contributions. If you are leaving to accept a position with a Massachusetts political subdivision subject to Chapter 32, you must transfer your retirement contributions directly to your new retirement system.

If I leave my job and decide to withdraw my contributions will I receive all my interest?

It depends on your length of service. If you leave your job with less than five years of creditable service, you will not receive any interest on your deductions. However, if you have between five and ten years of creditable service, you will receive 50 percent of the interest credited to your account. If you withdraw your funds with at least 10 years of creditable service, you will receive 100 percent of the interest that has accrued.

Is there any time limit after your termination for requesting a refund of your contributions?

NO. You may request a refund of your funds at any time after termination. If you leave your funds on deposit, however, and later seek a refund, your deductions will only earn interest for two years after termination. The prior answer outlines the criteria used to determine your interest eligibility.

Can a member who is vested and who terminates employment still be eligible for a refund?

Any member who terminates employment may be eligible to withdraw retirement funds. If the member is vested and has earned the right to a retirement allowance at a later date, careful consideration should be given to the value of the retirement benefit he or she may be forfeiting in exchange for a refund.

If I terminate my employment and leave my money in the retirement system, can I retire at a later date?

If you are vested and terminate employment, you can choose to “defer” your retirement by leaving your money in the system until you are ready to retire.

Can a member withdraw or borrow money from his or her account in the retirement system with resigning or retiring?

NO. There is no loan provision in this plan. An active member cannot withdraw or borrow any contributions from the fund under any circumstances.

What are the tax consequences if I take a refund of my retirement contributions?

Your contributions and all the interest you receive from your account are subject to federal income tax (with exception of any contributions made prior to January 12, 1988). When processing a refund of retirement contributions, the Retirement Office is required to withhold 20% of the taxable portion of your refund for federal tax. The 20% tax payment is required only if the refund is made directly to the member. To defer tax payments, you must make a direct rollover of your retirement funds to an Individual Retirement Account, (IRA) or another type of retirement account with a financial institution. With a direct rollover, no tax is withheld and the entire taxable portion of your refund is transferred. If you have both taxable and nontaxable contributions, you may accept receipt of the nontaxable portion of your refund without tax consequence and the taxable portion may be rolled over.

If I die before retirement, what happens to my money?

If you are married and die before you retire, your surviving spouse will have the option of collecting a monthly benefit, including a monthly allowance for children under the age of 18 or if a student in an accredited institution until age 22, or receiving a lump sum payment of your contributions. Contact the Retirement Office for more information.