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PUBLIC SCHOOL EMPLOYES' RETIREMENT BOARD

Actuarial Tables and Computational Procedures

[27 Pa.B. 3726]

   The act of December 20, 1995, P. L. 689, No. 77 (Act 1995-77), amended subsections 8502(h) and (j) of the Public School Employes' Retirement Code, 25 Pa.C.S. § 8101--8535, to require the Board to publish in the Pennsylvania Bulletin the actuarial tables and computational procedures used by the System in calculating annuities and other benefits. The Board adopted the following actuarial tables and computational procedures by resolution at its June 27, 1997 meeting. Accordingly, these actuarial tables and computational procedures are being published as Annex A within 30 days of their adoption as required by Act 1995-77.

JAMES A. PERRY,   
Secretary

   The following material provides general information, examples and actuarial tables for computing an estimated retirement benefit from the Public School Employes' Retirement System (PSERS).

General Information

   A key component in the computation of a PSERS' retirement benefit is the final average salary. PSERS' retirement code defines final average salary as the highest compensation received as an active member for any three nonoverlapping periods of 12 consecutive months. Compensation for part-time service is annualized on the basis of the fractional portion of the school year for which credit is received. This period is frequently the most recent 3-year period.

   Years of credited service are the number of years of school or creditable nonschool service for which eligible contributions have been made or for which salary deductions or other payment arrangements have been made.

   Accumulated deductions are the total of a member's contributions (including contributions for purchase of service) and interest.

   Actuarial tables which provide the factors to compute certain retirement benefits follow. It should be noted that gender distinctions are shown on various tables because certain retirement benefits are computed differently for males and females for credited service before July 1, 1983. The factors were determined actuarially based on the life expectancies for both males and females. The portion of the benefit for credited service earned prior to July 1, 1983 is computed using gender-distinct factors for males and females. The portion of the benefit for credited service on or after July 1, 1983 is computed using gender-neutral factors (both males and females use the more favorable factor which is most often the female factor).

Retirement Benefit Calculation Examples

The following data will be used for all option calculations, unless otherwise noted.

Final Average Salary	--	$30,000
Years of Credited Service	--	30 years
Member Sex and Age	--	Female, Age 60
Beneficiary Sex and Age	--	Male, Age 60
Accumulated Deductions	--	$38,000

Maximum Option

   The Maximum Option is a single life annuity and will provide the highest monthly amount to the member. If you die and have not received in retirement benefits your accumulated deductions, the total value protected remaining will be paid in a lump sum to your designated beneficiary.

Formula:
Final Average Salary	X	2%	X	Years of Credited Service	=	Maximum Option Annual Benefit
Accumulated Deductions					=	Total Value Protected
Example:
$30,000	X	.02	X	30	=	$18,000 ($1,500 monthly)
Total Value Protected					=	$38,000

Option 1

Option 1 provides a reduced lifetime annuity to the member with a guaranteed total payment equal to the present value of the maximum option single life annuity. If at the time of your death you have not received in retirement benefits an amount equal to the total value protected, the unpaid balance will be paid to your designated beneficiary.

Formula:
Final Average Salary	X	2%	X	Years of Credited Service	X	Reducing Factor for Option 1*	=	Option 1 Annual Benefit
Maximum Single Life Annuity	X	Present Value of $1 Annuity**					=	Total Value Protected
Example:
$30,000	X	.02	X	30	X	.8671*	=	$15,607 ($1,300 monthly)
$18,000	X	13.924**					=	$250,632

* From Table 2
** From Table 1

Note:  To compute the retirement benefit for male members selecting Option 1, a combination of Male Tables (for years of credited service prior to 7/1/83) and Female Tables (for years of credited service on or after 7/1/83 will be used. To compute the retirement benefit for female members, Female Tables will be used for all years of credited service.

Option 2

Option 2 is a joint and 100% survivor annuity with a reduced monthly benefit payable during the lifetime of the member. After the member's death, the same amount is payable for the designed beneficiary's lifetime. Under this Option there is no Total Value Protected.

Formula:
Final Average Salary	X	2%	X	Years of Credited Service	X	Reducing Factor for Option 2*	=	Option 2 Annual Member Benefit
Option 2 Annual Member Benefit	X	100%					=	Option 2 Annual Beneficiary Benefit
Example:
$30,000	X	.02	X	30	X	.8581*	=	$15,445 to Member ($1,287 monthly)
$15,445	X	100%					=	$15,445 to Beneficiary ($1,287 monthly)

*From Table 8

Note:  To compute a retirement benefit under Option 2, the appropriate ages and gender-based factor from Tables 5, 6, 7 and 8 based upon the specific genders of the member and beneficiary are used for credited service earned before 7/1/83. To compute the portion of the retirement benefit for credited service on or after 7/1/83, the appropriate ages and the higher factor from Tables 5, 6, 7 and 8 are used (most often the female with a male beneficiary factor).

Option 3

Option 3 is a joint and 50% survivor annuity with a reduced amount payable during the lifetime of the member. After the member's death, one-half of the annuity is payable for the designated beneficiary's lifetime. Under this Option there is no Total Value Protected.

Formula:
Final Average Salary	X	2%	X	Years of Credited Service	X	Reducing Factor for Option 3*	=	Option 3 Annual Member Benefit
Option 3 Annual Member Benefit	X	50%					=	Option 3 Annual Beneficiary Benefit
Example:
$30,000	X	.02	X	30	X	.9236*	=	$16,624 to Member ($1,385 monthly)
$16,624	X	50%					=	$8,312 to Beneficiary ($692 monthly)

*From Table 12

Note:  To compute a retirement benefit under Option 3, the appropriate ages and gender-based factor from Tables 9, 10, 11 and 12 based upon the specific genders of the member and beneficiary are used for credited service earned before 7/1/83. To compute the portion of the retirement benefit for credited service on or after 7/1/83, the appropriate ages and the higher factor from Tables 9, 10, 11 and 12 are used (most often the female with a male beneficiary factor).

Option 4--Special Option

Special Option provides for some other payment plan that may better fit your needs. This option is subject to the approval of the Retirement Board and all computations are made by the consulting actuary

Example:

     Member receives reduced benefit.

     Beneficiary receives 75% of member's reduced benefit.

     All computations will be made by the actuary.

Option 4--withdrawal of contributions & interest

A portion of the benefit, limited to an amount equal to the member's accumulated deductions, may be withdrawn as a lump sum. The present value of the maximum single life annuity less the portion withdrawn will be paid in the form of a single life annuity, an annuity with a guaranteed total payment, or a joint and survivor annuity. This option may be selected in addition to Options 1, 2, 3 and 4 (Special).

Formula:
Final Average Salary	X	2%	X	Years of Credited Service	=	Maximum Single Life Annuity (MSLA)
Lump Sum Payment at Retirement	÷	Present Value of $1 Annuity			=	Reduction in Annuity
Maximum Single Life Annuity	-	Reduction in Annuity			=	Reduced Single Life Annuity (RSLA)
Reduced Single Life Annuity	X	Reducing Factor for Option 1			=	Option 1 Benefit
Reduced Single Life Annuity	X	Reducing Factor for Option 2			=	Option 2 Member and Beneficiary Benefit
Reduced Single Life Annuity	X	Reducing Factor for Option 3			=	Option 3 Member Benefit (50% to Beneficiary)
Example:
$30,000	X	.02	X	30	=	$18,000 (MSLA)
$38,000	÷	13.924*			=	$2,729
$18,000	-	$2,729			=	15,271 (RSLA) ($1,272 monthly)
$15,271	X	.8671**			=	$13,241 (Option 1) ($1,103 monthly)
$15,271	X	.8581***			=	$13,104 (Option 2) ($1,092 monthly, $1,092 monthly to beneficiary)
$15,271	X	.9236****			=	14,104 (Option 3) ($1,175 monthly, $587 monthly to beneficiary)

*  From Table 1 (Gender-distinct factors are used to calculate the reduction in annuity due to partial lump sum withdrawal of pre July 1, 1983 accumulated deductions. The higher, gender-neutral (usually female) factors are used to calculate the reduction in benefit due to partial lump sum withdrawal of post July 1, 1983 accumulated deductions).

**  From Table 2

***  From Table 8

****  From Table 12

Vested Benefits

If you leave service anytime after completing 10 years of credited service and before you become eligible for normal retirement benefits, and do not wish to retire at that time, it will be necessary for you to complete an application to vest. Once your application is received by the Retirement System you are then automatically covered by the death benefit provisions. Approximately 1 year after the receipt of your application, the Retirement System will notify you of the accumulated deductions credited to your account, the total number of years of service, and maximum single life annuity available to you when you reach retirement age. As a vestee, normal retirement age is:

  when you reach age 62 if you have fewer than 30 years of credited service, or

  when you reach age 60 if you have 30 or more years of credited service.

Approximately 90 days prior to your eligibility for a monthly benefit as a vestee, you should contact PSERS and request an estimate under all the various options available and the necessary application for you to complete. This application must be returned to the Retirement System no later than 90 days after your eligibility date. As a vestee, it will be necessary for you to keep your mailing address current.

Formula:

  Same as prior illustrations under Options Maximum, 1, 2, 3 and 4

Example:

  See prior illustrations.

Early Retirement
(withdrawal allowance)

After 10 years of credited service, you may apply for an early (withdrawal) retirement benefit. This benefit will be based on your age to the nearest year and month when you apply, the number of years of service, and actuarial reduction factor applicable to your age.

Formula:
Final Average Salary	X	2%	X	Years of Credited Service	X	Early Retirement Factor (From Table 3 or 4)	=	Annual Reduced Early Retirement Benefit
Example:
Male, age 49 with 10 years of service (earned after 7/1/83) and normal retirement age of 62.
$30,000	X	.02	X	10	X	.462186*	=	$2,773 ($231 monthly)

*From Table 4 (higher of the factors from Table 3 and 4 for post 7/1/83 service)

Early Retirement
(3% formula)

Minimum Requirement--25 years of service and 55 years of age

If you have attained age 55 and have 25 or more years of credited service, you may retire with an annuity reduced by a percentage. The percentage is determined by multiplying the number of months between the effective date of retirement and the date on which you would be eligible for a normal retirement by 1/4% (3% per year).

Formula:
3%	X	Number of Years Below Normal Retirement Age					=	Early Retirement Reduction
100%	-	Early Retirement Reduction					=	Early Retirement Factor
Final Average Salary	X	2%	X	Years of Credited Service	X	Early Retirement Factor	=	Early Retirement Annual Benefit
Examples:
A.  Member age 55 with 25 years of service. Normal Retirement Age 60 (5 year reduction).
3%	X	5 years					=	15% Reduction
100%	-	15%					=	85% Early Retirement Factor
$30,000	X	.02	X	25	X	85%	=	$12,750 ($1,062 monthly)
B.  Member age 57 with 27 years of service. Normal Retirement Age 60 (3 year reduction).
3%	X	3 years					=	9% Reduction
100%	-	9%					=	91% Early Retirement Factor
$30,000	X	.02	X	27	X	91%	=	$14,742 ($1,228 monthly)
C.  Member age 56 with 33 years of service. Normal Retirement Age 58 (with 35 years of service) (2 year reduction).
3%	X	2 years					=	6% Reduction
100%	-	6%					=	94% Early Retirement Factor
$30,000	X	.02	X	33	X	94%	=	$18,612 ($1,551 monthly)
D.  Member age 55 with 29 years of service. Normal Retirement Age 60 (5 year reduction).
3%	X	5 years					=	15% Reduction
100%	-	15%					=	85% Early Retirement Factor
$30,000	X	.02	X	29	X	85%	=	$14,790 ($1,232 monthly)
E.  Member age 61 with 27 years of service. Normal Retirement Age 62 (1 year reduction).
3%	X	1 year					=	3% Reduction
100%	-	3%					=	97% Early Retirement Factor
$30,000	X	.02	X	27	X	97%	=	$15,714 ($1,309 monthly)

ACTUARIAL TABLES

*  Table 1

   Present Value of $1 Annuity is an actuarial factor used to determine the amount of reserve needed to fund the member's retirement benefit.

*  Table 2

   Service Option 1 Reducing Factors are used to reduce the member's monthly benefit in order to provide a higher death benefit.

*  Tables 3 and 4

   Early Retirement Factors--Men and Women are used to reduce the monthly benefit because normal retirement qualifications are not met.

*  Table 5-8

   Factors for Obtaining Annuities and Pensions Under Option 2 are used to determine the reduction to be able to provide a lifetime benefit for both the member and the beneficiary. Factors consider both the member's age and sex and the beneficiary's age and sex. Option 2 guarantees the beneficiary the same monthly benefit for life after the member's death.

*  Tables 9-12

   Factors For Obtaining Annuities and Pensions Under Option 3 are used to determine the reduction to be able to provide a lifetime benefit for both the member and the beneficiary. Factors consider both the member's age and sex and the beneficiary's age and sex. Option 3 guarantees the beneficiary an amount equal to 50% of the member's monthly benefit for life after the member's death.

Table 1
PRESENT VALUE OF $1 ANNUITY

Age	Men	Women	Age	Men	Women	Age	Men	Women
30	20.304	21.220	45	16.851	18.250	60	12.099	13.924
31	20.116	21.061	46	16.571	18.004	61	11.751	13.593
32	19.923	20.898	47	16.285	17.751	62	11.401	13.258
33	19.723	20.729	48	15.993	17.492	63	11.050	12.919
34	19.518	20.554	49	15.695	17.227	64	10.697	12.577
35	19.307	20.374	50	15.392	16.956	65	10.345	12.232
36	19.089	20.189	51	15.083	16.678	66	9.992	11.885
37	18.865	19.997	52	14.769	16.395	67	9.641	11.535
38	18.636	19.800	53	14.450	16.105	68	9.290	11.184
39	18.399	19.597	54	14.126	15.810	69	8.942	10.832
40	18.157	19.388	55	13.798	15.509	70	8.596	10.479
41	17.908	19.173	56	13.465	15.202	71	8.253	10.127
42	17.653	18.952	57	13.129	14.890	72	7.913	9.775
43	17.392	18.724	58	12.788	14.573	73	7.578	9.424
44	17.124	18.490	59	12.445	14.251	74	7.247	9.075

Table 2
SERVICE OPTION 1 REDUCING FACTORS

Age	Men	Women	Age	Men	Women	Age	Men	Women
30	0.9377	0.9428	45	0.9078	0.9221	60	0.8338	0.8671
31	0.9366	0.9420	46	0.9045	0.9198	61	0.8265	0.8616
32	0.9354	0.9411	47	0.9010	0.9173	62	0.8190	0.8559
33	0.9339	0.9403	48	0.8974	0.9147	63	0.8114	0.8495
34	0.9325	0.9392	49	0.8935	0.9119	64	0.8033	0.8431
35	0.9310	0.9382	50	0.8894	0.9090	65	0.7948	0.8364
36	0.9293	0.9371	51	0.8850	0.9058	66	0.7861	0.8294
37	0.9274	0.9358	52	0.8804	0.9024	67	0.7772	0.8219
38	0.9256	0.9345	53	0.8757	0.8988	68	0.7677	0.8143
39	0.9234	0.9331	54	0.8704	0.8950	69	0.7582	0.8065
40	0.9213	0.9315	55	0.8650	0.8910	70	0.7486	0.7980
41	0.9189	0.9299	56	0.8594	0.8867	71	0.7381	0.7894
42	0.9164	0.9282	57	0.8535	0.8822	72	0.7276	0.7808
43	0.9137	0.9263	58	0.8471	0.8775	73	0.7173	0.7714
44	0.9108	0.9242	59	0.8405	0.8725	74	0.7060	0.7618

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