Rollovers & MO Deferred Comp

When I began employment with the State I did a 401k rollover of my previous employer. How does this effect my retirement and Backdrop ? Is it already in the "benefit estimate." ?

 A 401(k) rollover has no impact on retirement eligibility or monthly or BackDROP lump-sum payment amounts. The rollover is not shown on the “MSEP 2000 Benefit Estimate” from MOSERS. See below for more details.

First, it is important to clarify where your rollover funds are kept. As a state employee, you have both a defined-benefit pension with MOSERS and a supplemental defined contribution account with MO Deferred Comp. If you had retirement funds from a previous employer, it was rolled over into MO Deferred Comp.

The Defined Benefit (DB) Plan (MOSERS)
The DB plan is non-contributory for members employed before January 1, 2011. As such a member, you do not pay money toward your DB plan. Your employer pays the necessary contributions to MOSERS while you are actively employed so that you may receive a future monthly retirement benefit and potential survivor benefits. Since you do not pay contributions, you are not eligible to withdraw funds from the retirement system. You do not have a separate account, rather the state’s annual contribution toward your benefit is pooled with investment returns and employee contributions (from members first employed on or after 1/1/2011) to fund the retirement system. Once you are vested with MOSERS, even if you leave state employment, you will be eligible for a lifetime monthly benefit once you meet the age and all other legal requirements and retire under a MOSERS defined benefit pension plan.

The Defined Contribution (DC) Plan (MO Deferred Comp)
The MO Deferred Comp Plan is a voluntary governmental 457(b) plan designed to help employees save additional income to supplement their defined benefit pension and Social Security benefits in retirement. The deferred comp plan provides a convenient way to save extra money for retirement through payroll deduction. Unlike pension and Social Security benefits, YOU have control over how much you save in this plan throughout your career, how your dollars are invested, and how you will withdraw those savings in retirement. While voluntary, many employees find this plan crucial for accumulating additional savings that can add another layer of financial security in retirement.

Once you leave state employment, you can keep your money in deferred comp, even if you're retired or simply working outside state employment. Furthermore, you are not required to start withdrawing your savings until you reach age 70½. Keeping your money with MO Deferred Comp is a smart way to maintain access to all of the great features you enjoyed while you were working. Once retired, the deferred compensation plan provides a variety of manual and automatic payment options to help you access your hard-earned savings.

BackDROP Options
When you retire with MOSERS, you will be asked if you want to elect BackDROP* (if eligible), and, if so, how you want to receive that distribution: cash option, rollover option, or combination cash and rollover option. State employees eligible to receive a lump-sum BackDROP payment get this payment in addition to a lifetime monthly benefit payment and can choose to roll the lump sum into the MO Deferred Comp Plan at retirement. This option is available to all state of Missouri employees, even if they have never participated in the deferred compensation plan. Doing so is an attractive choice for many because it allows employees to consolidate the lump-sum payment with their existing retirement savings. This makes managing their savings in retirement easier and grants them continued access to the Plan’s low fees and custom investment solutions. Another popular reason to roll the lump-sum payment into the deferred compensation plan is that it allows employees to defer taxes on the payment until those assets are distributed in retirement. We suggest you speak to a tax professional or financial advisor for advice specific to your situation and to discuss all of your options at retirement.

On your MOSERS defined benefit plan “MSEP 2000 Benefit Estimate”, if you are eligible for BackDROP, your benefit payment amounts and options at retirement will be shown, both with and without BackDROP. We encourage you to discuss your options with a MOSERS benefit counselor, and use our online Comparison Calculator to see which option might be most advantageous to you over the long-term. This short Comparison Calculator video provides an overview of how the calculator can be helpful in comparing various benefit payment options. MOSERS benefit counselors are available by phone at (800) 827-1063 or you may make an appointment to meet with a counselor in person.

*BackDROP is available only to general state employees who are members of MSEP & MSEP 2000 and who work at least two years beyond normal retirement eligibility