Under certain conditions, the law limits the amount of earnings used in calculating FAS for retirement purposes. Ohio retirement law requires salary limits to protect the fiscal integrity of the system. The contribution rate is set, based on the assumption of a steady level of earnings growth for each individual member. When a member’s level of increase during the two highest years of earnings goes above those assumptions, the lifetime benefit for the member is not fully funded by the contributions. If the percentage increase in compensation in the highest two years exceeds the highest percentage increase during any of the three years immediately preceding the earlier of the two highest years of earnings, the excess is not included when calculating the FAS. The limit may affect either or both of the two highest years. Compensation for a partial year may also be limited. In many cases, at least a portion of the earnings for additional duties is included in a member’s FAS, resulting in a higher FAS than if the member had not received the increase or performed the additional work. Member contributions on any earnings not used in determining FAS are used to calculate a monthly annuity that is included in the regular pension benefit.
Required minimum distribution Federal tax law requires you to take a minimum distribution from your retirement plan by April 1 of the year that follows the latter of the year in which you reach age 73 or the calendar year in which you stop working in an Ohio public position. Failure to begin benefit payments by such date may subject you or your heirs to a federal tax penalty of 50% on the income that you should have taken. If you do not apply for your monthly benefit payments or an account withdrawal by the required beginning date, monthly benefit payments will automatically be made to you, beginning with a retirement effective date of Jan. 1 of the year following the year you reach age 73.
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