I spend a lot of time traveling the state and I get to hear a lot of great questions from our members. Some of you love to get into the details of your benefit and probably revel in the thought of reading a 1000 word blog on LAGERS’ funding policy; but I’ve found there are an equal number of you who’d rather skip over all those details for just a basic understanding of how your benefit works. We live in a world of information overload, so I am totally sympathetic to those of you out there who just want a quick answer. So this week, instead of looking at one topic in depth, I thought I’d hit briefly on the top five questions I get from members. Don’t see the question you want a quick answer to on my list? Leave a comment and I’ll be happy to respond! Make sure you stay tuned for parts 2 and 3 of this blog which will address top pre-retiree and retiree questions!
Can I contribute more than 4% to increase my LAGERS benefit?
I love getting this question, because it tells me that our members understand the importance of saving for retirement!! Because your LAGERS benefit is based on how long you work and how much you earn, making extra dollar contributions into LAGERS will not increase your benefit. However, you can (and should) supplement your LAGERS benefit by contributing to your employer-sponsored 457 plan or other individual retirement saving account, like an IRA.
Update: Effective August 28, 2020, Missouri state law has been amended to expand employers’ options for the employee contribution election from a 0% or 4% employee contribution amount to a 0%, 2%, 4% or 6% employee contribution amount. When an employer changes this election, it does NOT impact the benefit calculation. Click here to learn more.
I’m considering taking advantage of a pre-tax flexible spending account for medical expenses. Will this impact my LAGERS final average salary?
Flexible spending accounts for health and childcare expense can offer some awesome tax advantages. If your employer offers these benefits, you can take full advantage of them without fear of it negatively impacting your LAGERS final average salary. LAGERS uses your gross monthly wages from your employer, which would include any elective pre-tax deferrals into a flex spending account, or even into a pre-tax retirement account; so save away!!
Is there a cap on how much service you can earn in LAGERS?
Did you know the longest tenured active member in LAGERS has over 54 years of service with a single employer? There is no cap on how much service you can accrue in LAGERS, and the more service you have, the larger your monthly benefit will be when you retire! LAGERS benefits were intentionally designed this way to encourage long-tenured employment. There’s no quick way to ‘get rich’ in LAGERS, but by devoting your entire career to public service, you can earn a modest benefit that reflects all your dedicated years of service.
Can I take a hardship withdraw of my accumulated contributions or borrow against my benefit?
LAGERS does not allow an active member to take a withdrawal on your accumulated contributions while still working in the LAGERS system. Remember that the lifetime benefit that you are earning while you work is not based on an account balance, but rather a formula that will pay a future benefit. LAGERS sets your contributions aside in a trust for the sole purpose of helping to fund this future benefit. You are, however, always guaranteed to receive back what you pay into LAGERS either when you terminate employment prior to retirement age or through a monthly retirement benefit at retirement.
I’m an EMT, what is my retirement age?
EMTs are considered general employees for LAGERS purposes and have a normal retirement age of 60. I get the question all the time about why EMTs don’t have the same retirement age as firefighters. Here’s a quick little history lesson on why: LAGERS statutes were created back in the 1960s, long before Ambulance districts and EMTs widely existed. Back then, medical transportation was often provided by a neighbor or funeral home, and since actual districts were not established until after LAGERS was created, EMTs were not specifically addressed in LAGERS’ statutes. There have been several pieces of legislation filed over the last few legislative sessions looking to give employers the option to cover these folks as firefighters, all of which have been met with resistance at the capitol. LAGERS is currently assessing our strategy on how we will to move forward, but certainly remains mindful that this is something our members continue to ask about. All ambulance districts do currently have the option to elect the Rule of 80, which does provide an unreduced early retirement for some.