Section 60 Pension Reform
About Section 60
Section 60 of the state’s Pension Reform Act of 2011 allows a one-time opportunity for:
- Active ORP participants and those on an approved leave of absence to change their retirement plan coverage from the ORP to the Massachusetts State Employees’ Retirement System (MSERS);
- These ORP participants to purchase service under the MSERS equal to the time they participated in the ORP, and any service in the MSERS immediately prior to ORP enrollment; and
- Current active members of the MSERS who are former ORP participants to purchase service under the MSERS equal to the time they participated in the ORP.
*UPDATED November 17, 2014
1. Retirement Plan Information Packages & Forms
As the Retirement Board inputs service and cost numbers in the S60 database, the Department of Higher Education (DHE) has been mailing Information Packages to participants. Systems and workload issues have kept us running approximately one week behind schedule. However, we anticipate having the process on time in the near future.
Questions about the service and cost numbers on the Statement of Service must be directed to the Retirement Board via firstname.lastname@example.org. Please note that the DHE does not have access to information about the service and cost calculations, and therefore cannot respond to questions about these issues.
Questions about the Information Package in general, or about the Section 60 process should be directed to the DHE via ORP@bhe.mass.edu.
MSERS Enrollment Form: When completing the MSERS Enrollment Form, do not complete Section B. Simply leave Section B blank and return the form to the DHE. The DHE will have the form completed and sent to the Retirement Board. This approach allows the DHE to coordinate some of the “exit” activities for participants leaving the ORP to join the MSERS.
2. Section 60 Forfeiture Notices
The DHE will be mailing Section 60 Forfeiture Notices to the 1,673 participants who did not return a Notice of Interest form. We anticipate mailing the Forfeiture Notices during the next ten days.
3. Active MSERS Members
Active MSERS Members who are eligible to purchase their old ORP time as creditable service under the pension should have received the DHE’s Notice of Eligibility package in July. These employees have until the end of December to submit their Notice of Interest forms.
The DHE has received Notice of Interest forms from many of this group, and anticipates needing much if not all of the 180-day period allotted under the law for the Retirement Board to calculate the amount of available service and related cost. The DHE will mail Statements of Service to these members as soon as possible.
4. TIAA Endorsement – 120 Day Restriction
TIAA has mailed an Endorsement to each participant’s TIAA Certificate. The Endorsement codifies TIAA’s offer to waive the 2.5% surrender charge on lump sum distributions from the TIAA Traditional Account for ORP participants who join the MSERS and retire upon entry in the state pension. The Endorsement refers to TIAA’s standard policy about requesting the distribution within 120 days of one’s termination of employment.
PLEASE NOTE that for those entering the MSERS and retiring, the DHE will coordinate the movement of the TIAA traditional funds on behalf of participants, using their entry to the MSERS as the trigger date to start the 120-day period. This approach has been negotiated with TIAA, allowing all assets in the Traditional Account to be liquidated – freeing more “employee” assets to purchase service with the Retirement Board.
October 29, 2014
Information Package Mailings- Delay
We are sorry to report that we are delayed in mailing Retirement Plan Information Packages this week. The ORP staff is working on only this effort and expects to have packages currently due, mailed this week.
As always, we appreciate your patience with this process.
October 24, 2014
Notice of Interest Deadline - Confirmations
The official deadline for submitting Notices of Interest is Monday, October 27. The ORP staff is preparing for a surge in Notices of Interest at that time. Due to the increase in Notice of Interest form receipts and working to deliver nearly 400 retirement plan information packages next week, please be patient in waiting for our confirmation of receipt of your Notice of Interest form.
Multiple Submissions: Please refrain from sending your Notice of Interest form to the DHE more than once. The effort to record and reply to multiple receipts detracts greatly from the substantial Section 60 work efforts the DHE staff currently face. To ease participant concerns about receipt of their Notice of Interest, the DHE will consider any special circumstances attending a form arriving next week after the official deadline of October 27.
October 21, 2014
TIAA-CREF Customers - Special Mailing
TIAA-CREF is preparing to mail endorsements to each of their ORP customers. The endorsement codifies their offer to waive the 2.5% surrender charge for participants who have money in the TIAA traditional account, change their retirement plan coverage to the MSERS under Section 60 and retire immediately upon entering the MSERS.
The endorsement does not apply to ORP participants who:
- are not eligible for Section 60; or
- choose to remain in the ORP; or
- transfer to the MSERS but do not retire immediately upon entering the state pension.
The endorsement is an important legal document that you should keep with your TIAA Certificate.
August 14, 2014
The DHE and Retirement Board experienced substantive data problems over the past few weeks which have delayed progress in identifying service and the cost to purchase it for ORP participants choosing to enter the MSERS under Section 60.
These problems affected the Full Time Equivalencies (FTEs) in participants’ ORP payroll histories. The FTEs are critical to the calculation of creditable service because MSERS members accrue this service proportionately to their work load.
The FTE issues affected more than half of the 970,000 ORP payroll history records.
Separately, the FTE data problems also delayed testing and implementation of the system that will update each participant’s ORP payroll history records on the Section 60 database (after each pay period ends). This creates further delays in identifying service and calculating cost.
While repairs to the FTE-related problems are nearly completed, the DHE and Retirement Board are using an interim “fix” that allows service research to continue for those participants who reported their intent to retire in the next twelve months.
The two departments remain committed to providing an accurate Statement of Service for use by employees, within the time requirements of Section 60. To that end, the Retirement Board has allocated additional resources to complete the necessary research into each person’s work history.
July 21, 2014
“Source” Record Keeping by Providers
The DHE is working closely with the three Providers to ensure that their records of the “sources” of the funds in each Eligible Participant’s account are correct. This means that we segregate Employee Plan Contributions and the investment gain thereon from other sources of assets (e.g. Employer Plan Contributions; Transfer-In).
There are two situations that require our attention:
1. Transfers into the ORP from the MSERS (noted in our June 3 update below); and
2. Transfers between Providers where the company sending the money did not provide data about the source of funds to the receiving company. These transfers are primarily an issue for participants who individually elected to transfer out of Lincoln to either VALIC or Fidelity. We believe these records at TIAA-CREF are accurate.
Lincoln recently provided this information for the DHE, and we are working to assess the information, organize it and get it to VALIC and Fidelity as quickly as possible.
In the absence of “source” data for incoming funds, investment companies typically record all of the money as “Employer Contribution”, as a default. Hence, many of you may have found a disproportionately high amount of “Employer” funds in your account.
Where current Providers have incorrectly recorded transfers into the Plan, we instruct them to “re-characterize” the original transfer amount (plus investment earnings-to-date) as the correct source.
Example: If a participant transferred $9,000 from the MSERS to the ORP, and their Provider mistakenly recorded the funds as either ORP Employer Contribution or ORP Employee Contribution, we would instruct the company to determine the current value of the $9,000, and re-characterize the total as “Transfer-In” (or “Rollover”).
Final Control: The DHE will ensure that each participant’s records are correct prior to making any transfers to the Retirement Board to purchase service under the MSERS; and any Employer Contributions to the Pension Reserve Fund.
June 3, 2014
1. Provider Notices of Account Activity
Eligible Participants may expect notices of changes to their ORP accounts from their Provider(s) over the next few months. These notices will reflect corrections to the recordkeeping of transfers into the Plan (e.g. original “MSERS to ORP” transfers) and between Providers.
The DHE is currently working with the three ORP Providers to ensure the original “MSERS to ORP” transfers are recorded as either “Transfers In” or “Rollovers”, and not “Employee Contributions”. Each correction will generate a notice of the change from your Provider.
These changes do not affect the amount of money in accounts, but better recognizes the source of the funds. This is especially important when drawing (only) ORP Employee Contributions for remittance to the Retirement Board to purchase Qualifying Service under Section 60.
Participants may voluntarily direct the DHE to also use their “MSERS to ORP” transfers to purchase Qualifying Service.
Any comingling of the original “MSERS to ORP” transfers with regular ORP Employee Contributions does not affect the calculation of cost to purchase Qualifying Service because the Providers' records are not used to determine the cost of purchasing service.
2. Active MSERS Members
The DHE and Retirement Board have identified the population comprised of currently Active MSERS members who are also Inactive ORP participants. The Departments are reviewing the final list to ensure its accuracy.
Once the list of these eligible participants is complete, the DHE will mail a Notice of Eligibility package to each person. These are forthcoming. Thank you for your patience with this matter.
April 28, 2014
Notice of Interest Form – “Other Service”
When completing the Notice of Interest form, please report whether you have had service with any public employer other than the Commonwealth. This may include employment with a county or municipality here in Massachusetts, or service with another state.
April 23, 2014
Active MSERS Members with ORP Time
The DHE and Retirement Board are currently working to identify those Active MSERS members who are also Inactive ORP participants. This group is eligible to purchase their old ORP time as creditable service under the MSERS.
The two departments are developing a procedure to notify this group of their eligibility to purchase the old ORP time; provide a calculation of the service available for purchase; and the cost to buy the time.
While we are working on this population, we have initiated a procedure for current ORP participants to change their retirement coverage to the MSERS. These procedures are not intended for current MSERS members who can purchase their ORP time.
April 22, 2014
Delayed Delivery – Notices of Eligibility
We are very sorry to report the unexpected delay in mailing the Section 60 “Notice of Eligibility” packages. The printing company reports putting them in the mail on Monday night, April 21, instead of last Tuesday (April 15).
The printer explained that most people will receive their package in the mail either today (April 22) or tomorrow (April 23). Please accept the Department’s sincerest apology for this delay.
April 10, 2014
Section 60 Effective Date – Seminar Schedule
The Department of Higher Education, as the ORP Plan Administrator, along with the Retirement Board and the Mass. Teachers Association, is pleased to report that implementation of Section 60 of the state’s 2011 Pension Reform Act will be effective on Thursday, May 1, 2014. This means that the procedure supporting Eligible Participants’ opportunities to transfer their ORP participation to the Mass. Employees’ Retirement System (MSERS) will be operational and in place.
Notices of Eligibility will be sent to Eligible Participants in mid-April. These Notices will include an overview of the Section 60 Procedures, and a form for participants’ use in requesting a calculation of their Qualifying Service under Section 60 and the cost to purchase that service.
The DHE and Retirement Board have scheduled three Section 60 Seminars during April and early May. Click here to access the schedule.
December 24, 2013
Eligibility for Section 60 coverage:
The DHE reviewed issues relating to maintaining one’s eligibility to change plans under Section 60 between receipt of the favorable ruling and the effective date of the implementation; expanding the statuses, under terms of the Plan, to include Deferred Retirees. Click here for more information about this issue.
Fiscal Year 2014 Retirement Incentive:
After careful review of issues relating to ORP participants initially identified as being eligible to change plans under Section 60 and who elected to participate in the FY 2014 Retirement Incentive, the DHE has concluded that, in the spirit of the Incentive, these ORP participants will be deemed “Retirees”, under terms of the ORP, and therefore not eligible to change plans under Section 60.
The DHE will identify each ORP participant affected by this decision and contact them directly; providing notice of their forfeiture of the opportunity to change plans.
Now that the Commonwealth has received the favorable ruling required under Section 60, the DHE, SRB, and Massachusetts Teachers Association (MTA) are working closely to develop and implement a process for allowing ORP participants to change retirement plan coverage and purchase service under the MSERS.
While current language in Section 60 loosely prescribes a process, the three organizations agree that the current language requires clarification and improvement in order to create a valuable and meaningful experience for affected employees.
The three organizations are preparing an amendment to Section 60 to clarify the current language and establish reasonable time periods during which the process can be completed. The underlying premise of the process is to provide helpful information for employees, ensuring they are well-prepared to make this important decision.
Information About the Two Plans
- State Employees’ Retirement System: Extensive information about the MSERS is available on the Retirement Board’s website . Additionally, the Retirement Board offers an excellent Guide to MSERS Benefits (.PDF).
- Optional Retirement Program: This website includes important information about Choosing a Retirement Plan. Additionally, these pages provide detailed information about the Plan’s features, provisions and the Providers. Click here to return to the ORP main menu.
- The State Board of Retirement is currently conducting a series of general seminars about the MSERS. Visit their website to access the seminar schedule and register to attend.
- Section 60 Educational Seminars: The DHE and Retirement Board have scheduled three Section 60 Seminars during April and early May. Click here to access the schedule.