401k Retirement Formula Conversion Information
Calculate Your Retirement Formula
On Wednesday, August 29, 2007, the Board of Trustees of the Teachers and State Employees Retirement System and the Local Governmental Employees Retirement System had a special called meeting.
The meeting was called pursuant to the provisions of SB 580, which as reported to you in the August 15th legislative update allows for an optional conversion of the balance of your 401k funds to your regular retirement system upon retirement.
The Board approved the new factor tables recommended by the N.C. Retirement Division staff that will be used to convert 401k plan funds in order to increase monthly retirement benefits from your respective Retirement System. The approved tables are effective September 1, 2007.
As previously advised, SB 580 gives you the voluntary option of converting your 401k funds at the time of your retirement. This would allow you to have an increased retirement benefit, immediate payout at retirement (where as 401k funds are not available without penalty until age 59 ½ ) and would qualify your total combined retirement benefit for regular COLA increases as passed by the General Assembly. As you know, 401k funds do not qualify for such increases. For additional information, refer to the August 15, 2007 PBA legislative update. (www.ncpba.org click on “legislative)
To better illustrate what the new benefit means to you, please refer to the formula below.
Current Retirement Formula
State: Final Compensation Income x 1.82% x years of service
Local: Final Compensation Income x 1.85% x years of service
Plus Separation Allowance, if applicable
Plus 401k fund available at age 59 ½ without penalty
New Option
State: Final Compensation Income x 1.82% x years of service + 401k Conversion Funds
Local: Final Compensation Income x 1.85% x years of service + 401k Conversion Funds
Plus Separation Allowance, if applicable
401k Conversion fund formula table – Passed by Board of Trustees
(At age of retirement with 30 Years of Service)
45 – 20.207*
46 – 19.891
47 – 19.574
48 – 19.181
49 – 18.852
50 – 18.522
51 – 18.192
52 – 17.762
53 – 17.422
54 – 17.085
55 – 16.750
56 – 16.282
* Calculated life expectancy at age of retirement
Sample Formula
State: 50,000 x 1.82% x 30 yrs. = 27,300 per year
Local: 50,000 x 1.85% x 30 yrs.= 27,750 per year
401k Contribution
Total 401k contributions and earnings at time of retirement divided by single life factor (from table by age) = annual benefit
Sample Conversion
401k contributions and earnings at time of retirement Total 150,000 divided by 18.192 (age 51) = 8,245.38 per year
Sample Separation Allowance
Final Salary 50,000 x .85% x 30yrs = 12,750
Sample Final Retirement Income
State: Regular Retirement (27,300) + separation allowance (12, 750) + 401K conversion (8,245.38) = 48, 295.38
Local: Regular Retirement (27,750) + separation allowance (12, 750) + 401K conversion (8,245.38) = 48, 745.38
This provides a final retirement income of 96.6 percent of final compensation for state retirees and 97.5 percent of final compensation for local retirees.
Remember that both retirement options are available to you upon retirement.
Please call the PBA office if you have any questions.
North Carolina Division
