State of Alaska PERS/TRS Defined Contribution Retirement Plan
Fi n a nci a l footnot es
Sp r ing 2 015
A retirement planning newsletter brought to you by Empower Retirement and Alas ka Division of Retirement and Benef its
In This Issue
The Health
Reimbursement
Arrangement
Account
Empower
Retirement
What’s the Right
Age to Save For
Retirement?
New, Easy-to-Use
Calculators
Available Online
A Rung at a Time
The Health Reimbursement Arrangement
Account and the PERS/TRS Defined
Contribution Retirement Plan
As a member of the PERS Tier IV or TRS Tier III Defined
Contribution Retirement (DCR) Plan, you have certain benefits
other than the financial contributions you and your employer
make to the DCR Plan. These benefits include a Health
Reimbursement Arrangement (HRA).
HRA basics: What is it, who contributes and who is eligible?
What is the HRA?
The HRA is a medical expense account to which your employer
contributes while you are employed. The money in this
account may then be used to reimburse all or a portion of your
out-of-pocket qualified medical expenses when you are eligible
for benefits. Reimbursement includes health care insurance
premiums not paid by your Plan.
Who contributes to the HRA?
Your employer contributes 3% of the annual average employee
group compensation for the PERS and TRS to your account
(not individual compensation). You, as an employee, make no
contributions to the HRA.
Who is eligible for the HRA?
• A member who has retired directly from the Plan is eligible
for the HRA.
• A member who has terminated employment, has Medicare
eligibility, and has 10 years of service can apply for
reimbursement from the HRA. The member does not have
to retire directly from the Plan.
Empower
Retirement
Notice something
different in this
newsletter? The
recordkeeper for the
State of Alaska Plans,
Great-West Financial®,
has a new name —
Empower Retirement!
Empower’s goal is to
help you replace — for
life — the income you
earned while working,
and the new name
reflects a commitment
to empowering you
to take charge of your
own retirement.
There is no change to
how your account is
serviced, and there is
nothing you need to
do. You can continue
to rely on Empower
to provide superior
service, innovation
and a focused vision
of a better retirement.
PERS and TRS
Continued on Page 3
Re tire … In th e Spirit o f Ala s ka
Defined Contribution
Retirement Plan
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What’s the Right Age to Save for Retirement?
Let’s face it: People of every age and circumstance face
financial challenges. When you’re just starting out in a
career, you may have trouble stretching your paycheck
to fit a new, independent life. For example:
• New parents may worry about their ability to save for
a family home or future college expenses.
• People in midcareer may be funding college for their
kids and caring for their aging parents.
• Folks who are approaching retirement want to save as
much as they can for the day their paychecks end.
With so many demands on your finances, it can be
tough to find the money to save for the future.
So when is the best time to start saving for retirement?
Right now! That’s because no matter your age and
stage in life, there will always be competing demands
on your money. So, don’t wait — you have choices
about how to spend your income right now. Make
them positive and with an eye on your future, and
your choices in retirement will open up, too.
Mom probably told you to always carry a quarter for
the phone (or to carry a cellphone, depending on your
age). She didn’t expect you to get into an accident, but
she wanted to be sure you were prepared just in case.
Stashing some money in your retirement account is
like that. By saving now, you are more prepared for
your life after work.
Lots of people today plan to work well into what
their parents thought were the retirement years. But
what happens if your health changes, or if your job
is outsourced? By saving today, you may have more
choices tomorrow.
Here are a few ideas designed to help you save,
whatever stage of life you’re in:
• Keep your wallet healthy. Set up a budget and
spend less than you make. Make a plan for your
income and expenses so you don’t spend absentmindedly.
• Get control of your debt. If you have debt, make
a concerted effort to pay it off as soon as possible.
The money you’re paying toward a credit card bill
each month is reducing the amount you can save for
retirement. Hold a garage sale, sell your collectibles,
or break open your piggy bank and pay off those
debts. Then you will have more funds available for
smart (i.e., cash) purchases and your savings efforts.
• Review your options. Is one cable TV or cellphone
provider cheaper than another one? Can you insure
your home and car for less money than you are
currently paying? It pays to shop.
• Commit together. Get the family involved in your
savings efforts. Tell the kids that by controlling your
family finances, you are less likely to live with them
in your golden years!
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The Health Reimbursement Arrangement Account (continued)
• A member who leaves covered employment before
Medicare eligibility and who has less than 10
years of service loses any right to the HRA, with
one exception:
• A former member who re-employs in covered
employment will have the HRA account restored
to the amount at termination. In addition, the
account will receive a cost-of-living adjustment
based on the Anchorage area consumer price
index from the date of termination to the date
of re-employment. The member must return to
covered employment by December 31 of the year
the member turns age 65.
Other notable aspects of the HRA
• A former member who re-employs in covered
employment will have his or her years of service
restored toward medical eligibility.
• An eligible retired member can use the HRA even if
not participating in the DCR Medical Plan.
How does reimbursement work?
You, as the member, may request reimbursement
for eligible medical expenses (as defined in 26 USC
§213(d)) from the HRA account; however, the account
balance cannot be cashed out as a lump-sum payment.
Expenses can be reimbursed for you, your spouse and/
or your dependent children, as follows:
• If you have died, your surviving spouse is eligible to
file for reimbursement.
• If you and your surviving spouse have both died,
your dependent child can file for reimbursement.
• If all eligible persons die before the account is
exhausted, the remaining balance reverts to the fund.
• Contributions to the HRA are exempt from city,
state and federal taxes.
How can the HRA be used?
The HRA account can be used to:
• Reimburse members for qualified medical expenses.
• Reimburse members for prescription medication,
but not over-the-counter drugs.
• Reimburse members for insurance premium payments.
Are there any other requirements or restrictions?
• The member is responsible for substantiating
expenses with receipts and filing for reimbursement
with the claims administrator.
• Rights to benefits under the HRA are not subject to
attachment or garnishment but may be assigned by
a qualified domestic relations order (QDRO) in the
event of a divorce or dissolution of marriage.
The detailed medical plan document for retirees
under the DCR Plan, including certain aspects of the
HRA, is still under development for approval by the
Commissioner of Administration.
For more detailed information about the HRA, please
refer to the DCR Plan’s Frequently Asked Questions
page on the Division’s Website at http://doa.alaska.gov/
drb/dcrp/faqs/index.html.
New, Easy-to-Use Calculators
Available Online
Wondering how much to contribute to your
retirement account or how different contribution
amounts will affect your paycheck? You can find
out quickly and easily by accessing the new suite of
online calculators on www.akdrb.com.
Each of these new calculators is designed to help
you develop a plan for reaching your financial
goals through a quick, intuitive process to get the
information you need. Using the latest technology,
the new calculators work well from any device.
You can learn about overcoming the cost of debt,
protecting your assets, or projecting your retirement
income at work or on the go.
To use these new tools, simply log in to your account
online and select the Financial Planning Tools icon.1
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A Rung at a Time: Climb the ladder toward retirement goals by increasing contributions
You make a variety of decisions every day. Beyond what
to wear and what’s for dinner, you can make important
decisions today about your retirement plan. First, and
most important, is whether or not to join. That’s a
slam dunk because joining a plan gives you financial
advantages that nonparticipants simply do not have. For
example:
• You can likely reduce your income tax bill.
• You have access to a wide variety of investments,
often at better pricing than is available to individual
investors.
• You may enjoy the ease and convenience of automatic
payroll deductions, giving you a predictable, regular
way to save and potentially leading to greater
retirement savings.
So, congratulations on contributing to a State of Alaska
Defined Contribution Plan! You’ve taken that first and
most important step.
While you’re contributing a set amount toward your
retirement, it may not be enough to meet your future
needs. Some experts now say that most people should
be setting aside 15% of their pay toward retirement —
if they start saving by age 35.2 Currently, PERS Tier
IV participants are contributing 13%, and TRS Tier III
participants are contributing 13%—so you may already
be reaching or exceeding that goal, which is good news
and a great basis on which to build. Think of the road to
retirement as a ladder: Rung by rung you can reach the
top. Don’t stop when you’re just above the ground.
If the first rung on the ladder is joining the Plan, the
second is to contribute in other ways. Though you’re set
in this contribution amount, perhaps you’re eligible for
an additional retirement plan through your employer. If
not, maybe you can contribute to a personal retirement
account. Consider adding to this account regularly and
possibly increasing your rate at the same time you receive
a pay increase. Even a small, incremental increase in your
contributions every year can really add up! You may still
get to enjoy a little more spending money in your budget,
but you’ll be satisfied knowing that your retirement
savings are increasing at a faster rate at the same time.
And the third rung? Don’t forget about any retirement
money you may have in a former employer’s plan.
Explore your options for that money. Did you know
you may be able to roll it into the plan you’re in now?3
Before you do, you should consider any potential fees
and/or limitation of investment options and talk to your
plan administrator about your options. But remember,
it can be easier to have all of your retirement money in
one place; that way, keeping track is a snap.
Contacts/Account Maintenance
Alaska Division of Retirement and Benefits
From Juneau
Website
Empower Retirement Anchorage Office
Account information online
KeyTalk® — account inquiries and maintenance
1-800-821-2251
1-907-465-4460
www.doa.alaska.gov/drb
1-907-276-1500
www.akdrb.com1
1-800-232-08591
1 Access to KeyTalk and/or any Website may be limited or unavailable during periods of peak demand, market volatility, systems upgrades/maintenance or other reasons.
2 Source: http://www.cbsnews.com/news/how-much-to-save-for-retirement/
3 You are encouraged to discuss rolling money from one account to another with your financial advisor/planner, considering any potential fees and/or limitation of investment options.
This newsletter does not constitute investment or financial planning advice. Please consult with your financial planner, attorney and/or tax advisor as needed.
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