Your Pension: What You Need To Know

As you likely know, as an educator invested in the Maine Public Employee Retirement System (MainePERS) you will receive a pension upon retirement. For the purposes of the Teacher Retirement Plan, only certified professional staff qualify. Other classifications may be covered under a MainePERS Participating Local District (PLD) plan. The Teacher Retirement Plan is designed as a replacement for Social Security, meaning teachers do not pay into Social Security and will not receive a Social Security benefit for time spent teaching. If teachers have also worked in Social Security eligible jobs, pension service will likely impact benefits earned under that system depending on how much creditable time has been worked. The following two pages are designed to educate you on the retirement system, your pension, and help you learn more about how you can save now if retirement is far off or help you prepare if you’re planning to retire in the coming years.

What’s the difference between the Teacher Retirement Plan and a PLD, and how do I know which one I belong to, if any?

Only certified professional staff and Ed Tech II and III qualify for the Teacher Retirement Plan. Other classifications may be covered under MainePERS PLD and may or may not qualify for Social Security depending on the plan design. There is only one Teacher Retirement Plan in the state but there are several different PLDs available. Joining a PLD may be optional, however participation in the Teacher Retirement Plan is mandatory. To know if you belong to a PLD, contact your payroll administrator.

How much do I contribute into my pension?

Those who contribute to the Teacher Pension: Required to pay in 7.65% of each paycheck to fund the pension Interesting fact: those who are eligible for Social Security contribute less each pay period at a rate of 6.2%. The State is responsible for payment into the pension as well at a rate of 2.65% of individual earnings. (This amount will increase to 3.36% July 1, 2015 to keep up with the cost of funding the pension system.)

Those who contribute to a PLD: Contribute a percentage of your earnable compensation to MainePERS, and the contributions earn interest based on a rate set by MainePERS Board of Trustees. The percentage you contribute depends on the service retirement plan your PLD has chosen. (If you don’t know the plan, ask your payroll administrator.) Your employer also contributes an amount to the PLD which is a percentage of your total compensation; the percentages changes each year.

How much will my pension check be when I retire?

Teacher Retirement Plan: It depends. The pension you receive is based on a formula, and will be different for everybody. The formula: Average of the highest 3 years of your salary X 2% X Total number of years worked under the system = Pension/Year For Example: $40,000 X 2% X 35 = $28,000/Year (a portion is taxed, explained below)

In a PLD: This calculation varies depending on which plan your district participates in; contact your payroll administrator for more information.

When I receive my pension check in retirement, will taxes be taken out?

In short, yes, some taxes will be taken out. You are not taxed twice for your contributions; however when you pay into the System you have already paid State taxes on your contribution amounts. In addition, if you made contributions before January 1, 1989 you have already paid Federal taxes. However, you are responsible for the taxes on the amount of money the State contributed to your pension (that’s the 2.65% mentioned above). In addition, you have not paid State or Federal taxes on the interest your contributions earned while you were working, so you will be responsible for that amount as well. Each January, after you retire, MainePERS will send you a 1099-R form to let you know how much in benefits you received in the previous year. The form also indicates how much of your total benefit is subject to state and federal withholdings. This is true for both the Teacher Retirement Plan and a PLD.

I’ve contributed to the pension and I want to be sure I receive all benefits I’ve earned but someone told me I need to be vested in order to get a pension check when I retire. What does that mean?

Being vested means you have met the requirements to receive a monthly benefit at normal retirement age under your plan. In order to be vested, those who began work on or after October 1, 1999, must have five years of creditable public employment. Anyone whose last date of MainePERS contribution was before October 1, 1999, must have 10 years of public employment, contributing to the system, to become vested. This is true for those in the Teacher Retirement Plan and the PLD.

I don’t plan to retire for another 30 years, will there even be any money left to fund the pension?

Yes. Per the Maine Constitution the pension system must be funded. The pension system is nearly 90% funded and one of the best funded plans in the country. In addition, the pension system is required, by law, to be fully funded by 2028. The PLD is funded separately from the state plan.

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