TO: Members of the Franklin RegionalRetirementSystem
FROM: Dale Kowacki
DATE: April 23, 2012
RE: Buy Backs of Previous Public Service
Please be advised that Chapter 176 of the Acts of 2011, signed into law by Governor Patrick in November 2011, amends the current interest charged to buy backs by requiring that the interest charge on purchases of service be increased if the purchase is not made within a specific time period.
Prior to the amendment, most purchases of service were made with buy back interest which is currently at 3.9375%. This amendment which took effect on 4/2/2012 provides that service purchases not made within the specific time frame will be subject to the actuarial assumed interest of 7.875%.
Members as of 4/2/2012 will be charged 3.9375% buy back interest only if they complete the entire buy back or enter into an installment agreement by 4/2/2013. Installment agreements cannot exceed 5 years. If the member cannot complete the buy back by 4/2/2013 or defaults on the installment agreement the member will prospectively be charged the 7.875% interest.
If you have any questions concerning this matter or would like to buy back any previous creditable service and take advantage of the lower interest rate, please do not hesitate to contact this office.
Important Consideration: Lost days between jobs: You will lose days (or weeks) of service credit if you are not careful how you plan your transition between jobs.
Most of the retirement systems in Massachusetts are in the habit of marking your “start date” as the day you first work – and paid for – in their system. For example, if your last day of work with us is Friday, and you start your new job in Hampshire County on Monday, you will lose the two days in between. Not a big deal if it is only that one time. However, if you leave one of our units (Orange, for example), and you take your remaining vacation pay in a lump-sum – and wait a few weeks before you start your new job – you will lose those few weeks. The solution? Take your vacation pay regularly (not lump-sum) and have your official resignation date be the day before you start your new job. Also, make sure the person (treasurer/payroll person) at your old job uses the correct date when they report to us what your last day was. A good idea is to keep a copy of your resignation letter/notice – and make sure you use the best date (send us a copy?). One note: there has to be pay associated with the service time (maybe with the exception of the weekend scenario (change jobs mid-week?)(resign the old job as of Monday morning?)). Another note: when the treasurer/payroll person is issuing the checks for your “regular” vacation, don’t let them date them all the same – have them date the checks every two(?) weeks and mail them on those dates. Otherwise, when we see the payroll records, we might consider them as lump-sum payouts and not grant you the service credit.)
What is important here is that you are aware of this snafu. ASK AHEAD-OF-TIME HOW YOUR SYSTEM HANDLES THE GAPS. If these gaps happen every time you switch jobs – they will add up to months (maybe) of lost service credit. You think you’ve worked 20 years and can retire but guess what? You need 2 or 3 more months!
Another thing to watch out for – the retirement system that throws away the extra days. That’s right – if you transfer out of their system after 5 years, 3 months, and 10 days of worked service – your old system might drop the ten days and only give you years and full months! Ask before you leave.