The Missouri State Employees Retirement System is sending letters this month to about 17,500 former Missouri government employees, letting them know they may be eligible to take a one-time buyout of their future retirement money.
"The lump-sum buyout amount will be 60 percent of the present value of the member's future normal retirement annuity," MOSERS explained in its news release last week. "The present value is the amount required, as of October 1, 2017, to fund their future benefit payments" if they remain in the retirement system.
The buyout is voluntary.
Current state employees and current retirees aren't eligible.
Also, anyone employed by the state after June 30, 2017, in any position covered by MOSERS or MPERS - the retirement system for Highway Patrol and Transportation Department employees - are not eligible for the buyout.
Likewise, people who have reached the normal retirement age and become eligible to receive a normal retirement annuity from MOSERS before Dec. 1, 2017 - which includes all current retirees - aren't eligible.
In addition to the letter, information about the program is available on an online "Pension Buyout Program Resource Center," a page on MOSERS' website at www.mosers.org/buyout.
"We want to provide members with tools and information to make the choice that is best for them," the retirement system said in last week's news release.
Candace Albers Smith, MOSERS' communications manager and public information officer, said: "We want former state employees to take a look at the lump-sum offer, consider consulting with a financial advisor and tax advisor and make the decision that is in their best financial interest."
Not all former employees are eligible, even if they meet other qualifications.
Among those are people who are subject to a "Division of Benefit Order," or DBO, that was issued by a court during a divorce proceeding.
The web page includes a link to a list of reasons why eligibility could be denied.
And the program isn't for everyone, Smith said.
"The lump-sum buyout might make sense if someone has financial needs right now that are greater than what their needs will be in retirement," she explained, "(or) if they are covered by another retirement plan but can't access that money now."
The lump-sum payout also might "make sense for someone who doesn't anticipate living until retirement or for very long in retirement," Smith said.
For years, she noted, employees could leave state government for other jobs but had no access to the retirement funds the state had created in their names.
"From 1973 through 2010, MOSERS was a non-contributory defined benefit plan," Smith said. "Since 2011, new state employees contribute 4 percent of their pay to the retirement system.
"Our experience has been that about one-third of those (2011 plan employees) who leave request a refund of their member contributions.
"In a similar way, the buyout program offers former state employees a choice."
But that choice comes with some possible tax complications.
"You may take the lump-sum buyout payment as a cash payment, as a rollover to a qualified retirement plan, or as a combination cash and rollover distribution," former state employees are told on the MOSERS web page. "Any distribution not directly rolled over to a qualified retirement plan will be reported as taxable income in the year of payment.
"MOSERS is required to withhold 20 percent of the taxable portion of a cash distribution for federal income tax purposes - (and) if you are younger than age 59, an additional 10 percent early distribution federal tax penalty may apply."
Those problems are avoided if someone takes the buyout and defers "taxes and IRS penalties by rolling over the full lump-sum into another qualified retirement plan," Smith said. "Once it is rolled over, they (or potentially their beneficiaries) own those assets - which can then grow in value."
Lawmakers and Gov. Eric Greitens authorized the buyout program earlier this year.
"The projected savings from the MOSERS buyout program are approximately $100 million in net plan liability," Smith said last week.
"A potential benefit to MOSERS is that we could save time and money with fewer members to keep track of and to provide with ongoing correspondence such as benefit statements and newsletters until they retire in about 14 years."
Smith said the letters to the former employees are being sent in three waves, with the first batch mailed before Labor Day "to members who live out of state and to those with more complicated service histories."
The second group of letters will be mailed Sept. 18 to approximately 7,000 former state employees in the Central Missouri and Springfield areas.
The final wave is set to be mailed Sept. 25 to approximately 7,000 former state employees in St. Louis, Kansas City and the remaining areas of the state.
"If they believe they are eligible but don't receive a letter by the end of September," Smith said, "we encourage them to contact our office at 800-239-5150 or 573-644-1200 to update their mailing address."
And there's a significant deadline for any former employee who wants to get the buyout - MOSERS must have received the former employees' notarized application no later than Nov. 30.
"It is to a person's advantage to get their application in sooner rather than later so we can verify that we have all the information needed," Smith said. "We will begin issuing payments after Nov. 30, 2017."
Some people, including State Treasurer Eric Schmitt, have called MOSERS a troubled or struggling pension system.
Smith said those terms really don't apply to MOSERS - as long as lawmakers pay for the state's contributions to the retirement fund every year.
"States that don't fund their pension system are struggling," she said. "States like Missouri, in which the governor and the Legislature have demonstrated a commitment to appropriating the full amount needed each year to pay promised benefits to retirees, are on solid financial footing."
She said state government's commitment to MOSERS "has been consistent throughout the past 60 years - and was there this year as they fully funded the amount needed for Fiscal Year 2018."
Smith said last week: "Unlike in some other states, every year the state of Missouri has appropriated to MOSERS 100 percent of the employer contribution recommended by the system's actuary.
"In turn, MOSERS pays 100 percent of the promised benefits due to members."