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What You Need to Know About Your OP&F Pension
After year of paying into OP&F, Ohio public employees are realizing that it soon be their turn to collect. This century old pension was designed to provide security for state, local, and city employees during and after their working careers.
This summary is designed to help you start thinking about your OP&F pension so you can obtain all the benefits you are entitled to and coordinate OP&F benefits with the rest of your retirement income plan.
Unlike other sources of retirement income, the Ohio Police + Fire pension fund offers a unique combination of benefits.
By the time you come to the end of a long career in the public sector, the amount of OP&F income you will be entitled to is well known. The benefit is based on your age, years of service credit, and your earnings history. While the amount will vary depending on when you choose to retire and the payment plan you choose, the relative accuracy of your retirement income estimate makes it easy for us to build the rest of your retirement income plan around it.
Once you have qualified for OP&F retirement, the amount of income you’ll receive is set. Some members worry that benefits may be cut in the future, but it is highly unlikely that benefits paid to current retirees will be significantly affected by future proposals.
OP&F is one of the few sources of income that can be assured of never running out. At retirement you also have the option to provide a monthly benefit in the event you pass away. OP&F has approximately 27,000 members and over 30,000 retirees and their beneficiaries.
OP&F offers members Survivor Benefits to eligible survivors of a member who, within one year of the member’s resignation, dismissal or leave of absence, dies and still has the funds previously deducted from their salary on deposit with OP&F.
OP&F members cannot receive temporary disability benefits. To receive disability benefits, OP&F members must have a disabling condition(s) that is considered permanent. The three types of disability benefits are permanent and total, partial on-duty, and off-duty.
Eligible survivors of an Ohio Public Safety Officer that are in covered full-time positions and are killed in the line of duty or who die of injuries or diseases incurred in the performance of their official duties. In a line of duty death, the statutory survivor benefit still applies.
You become eligible for OP&F benefits by working in an OP&F full-time covered position.
Any Ohio full-time police officer employed by an Ohio municipality or a full-time fire fighter employed by an Ohio township, municipality, joint fire district, or other political subdivision is eligible for OP&F benefits.
Depending on the benefit type, eligibility is based on time accrued or is immediate.
Retirement Benefits – 25 years of service credit (Unreduced) / 15-24 years (Reduced)
Health Care Benefits – Eligible upon receiving a monthly benefit from OP&F
Survivor Benefits - 1.0 of service credit
Disability Benefits - Immediate (On Duty) / 5.0 years of Service Credit (Off Duty)
Death Benefit Fund - Immediate
Your OP&F benefit is calculated using a formula based on your type of service retirement.
If you have 15 years of service or more as of July 1, 2013, the formula uses the average of the three highest years of allowable earnings for your average annual salary.
If you have less than 15 years of service as of July 1, 2013, the average of the highest 5 years of allowable earnings is used for your average annual salary.
The most common type of service retirement is referred to as normal service retirement.
*You cannot be paid before 25 years has elapsed from your initial full-time hire date with a qualifying employer and the attainment of the minimum retirement age, whichever is the last event to occur. For those whose OP&F membership began on or before July 1, 2013, normal service retirement eligibility is age 48 years with at least 25 years of service. For members hired into an OP&F-covered position after July 1, 2013 normal service retirement age is 52 with at least 25 years of service.
**You must still be a contributing OP&F member on the day you reach age 62.
*For those whose OP&F membership began on or before July 1, 2013, normal service retirement eligibility is age 48 years with at least 25 years of service.
**For members hired into an OP&F-covered position after July 1, 2013, normal service retirement is age 52 with at least 25 years of service.
Reduced Retirement Benefits - If an OP&F member decides to retire before meeting the normal service retirement, they will receive less retirement income per month.
Unreduced Retirement Benefits - If an OP&F member meets the age and service credits for a normal service retirement they will receive an unreduced benefit.
Due to eligibility for full retirement benefits you must understand the reduced and unreduced benefits.
Knowing when to retire and which payment plan to choose is critical to optimizing your lifetime retirement income. This is one area where OP&F members regularly get it wrong.
Let’s use Retiring Ron as an example. Ron is married to Michelle. Ron is retiring from OP&F and Michelle is retiring from OPERS. Both want to retire at the same time.
Ron retired at age 48 and decided to do 8 years in DROP. They decide to retire in June of next year. Ron will be age 56 with 25 years of service credit. Michelle will be age 56 with 32 years of service credit.
Our retirement analysis of Ron and Michelle’s plan is that they made a VERY costly mistake. They chose the wrong payment plan.
They have more money as survivors than they do while they’re alive. This irrevocable decision cost them $185,760 in lost income.
Ron and Michelle have more monthly income while they’re both alive. They maximized their income by making better decisions when taking their pension and which payment plans to choose. As survivors, they have nearly the same amount as in their original decision.
The DROP offered by OP&F is an optional benefit that allows eligible police officers and fire fighters to accumulate their pension payments in a DROP account while they are still employed and receiving a salary.
A portion of your employee contributions will also be credited to DROP.
The percentage of employee contributions credited to DROP is as follows:
• Years 1-3: 50% • Years 4-5: 75%• Years 6-8: 100%
(Employee member contribution rate is currently 12.25%)
OP&F will also credit interest to your DROP balance each month. The variable interest rate is equal to the 10-year U.S Treasury Note rate for the last business day of each quarter, with a 2.5% minimum and a cap of 5.0%. The DROP interest credited to your account compounds yearly.
The DROP amount is a pre-tax amount which is fully taxable unless a rollover to an IRA is completed. Understanding your own personal financial situation, and knowing what the impact will be is crucial before selecting a joint survivor annuity when entering DROP. Selecting a joint survivor annuity is the most misunderstood benefit. If not analyzed properly, it tends to be very costly. Don’t take DROP to buy an expensive annuity!
Your OP&F retirement benefit will impact your personal Social Security benefit. Other retirement income, such as distributions from 403(b), 401(k), 457(b) plans and IRA’s do not affect Social Security benefits.
Since Ohio is a non-Social Security state, members of the Ohio public pensions do not contribute to Social Security while working in a public covered position. There are two circumstances in which OP&F members could receive less Social Security.
The Windfall Elimination Provision (WEP) - Passed by Congress in 1983, retirees who are eligible for both Social Security and an Ohio public pension may not receive their full Social Security benefit. The most common occurrence is when an OP&F member qualifies for Social Security with 10 years or 40 credits but has a career pension. The amount needed currently for one credit is approximately $1,500. You can earn a maximum of four credits per year.
Let’s review Retiring Ron’s Social Security. He qualifies with the minimum 40 credits. His Social Security statement shows that he would receive $349 per month at age 67 (Full
Retirement Age, FRA). Ron’s reduction will be 40-50%. His Social Security payment after the WEP will be approximately $175 per month.
However, Michelle is not eligible with 38 credits. She will need two more credits to qualify for a monthly benefit. Since Michelle will wait to draw her pension at age 66, she decided to work eight hours per week at a bookstore. Michelle earned approximately $4,160 for the year. She qualified for 2 additional credits. She now meets the minimum 40 credits.
The Government Pension Offset (GPO) - If your spouse will receive a Social Security benefit, you are eligible for a spousal benefit. The GPO does not impact your spouse’s personal benefit. If two-thirds of your monthly OP&F Ohio benefit is greater than one-half of your spousal Social Security benefit, your spousal benefit is offset.
You will pay federal and state income tax on your retirement benefit. You may also owe a school district income tax depending on where you live. No city or local tax is due.
There are two ways to apply.
1. Online: www.OP-F.org – for access to the service retirement application.
2. In person: 140 E. Town St., Columbus, OH 43215
Have the following information ready when you make your application
*A Notary is required IF you leave a spouse less than a 50% Joint and Survivor Annuity. This form will need to be mailed to OP&F.
OP&F members are required to wait two calendar months from their retirement date to return to public work.
However, retired members can return to work in the private sector the next day without impacting their benefit.
If you return to a public position within the two-month waiting period, members will forfeit their retirement check (current month only).
Reemployed retirees have a second account with the retirement system in which the position is required to pay into. The second account will accumulate the members contributions and interest. This account is available when the member stops working.
Disability Benefits – Members who are unable to perform his or her most recent job duties. The condition must be expected to last at least 12 months.
Plan of Payment – You will have the option to receive a Single life or Joint Life annuity at retirement. This is an irrevocable decision and should be taken seriously. You can protect a beneficiary for your full monthly payment, half your payment or any percentage you would like.
Reemployed Retiree – After you retire you are eligible to return to public employment after two.
Three Creeks Capital Management
778 Northwest Blvd.
Columbus, OH 43212