## Understanding the Benefit Formula

The central question most folks have about their retirement system is – “how much will I get when I retire?” The answers vary widely between members, but one thing is the same for all: the unreduced benefits for a qualified APERS member are calculated using the following formula.

#### Service x FAC x The Multiplier = Yearly Benefit

Note: Calculating the equation accurately requires specific information and familiarity with the rules and laws governing various situations. Yearly benefits may be further modified by payout options members choose at retirement. Fortunately, members can now run personalized benefit estimates quickly and securely online any time in the Members Self Service portal. See "Doing a Benefit Estimate" at the end of the article for more information.

All benefit calculations for APERS retirees employ the three factors used in the formula above (reduced benefits for early retirement and other more complex circumstances might involve additional factors). Each of the factors is described in more detail below.

#### Service

In the formula, this refers to the total of all actual service, enhanced service, and purchased service credited to your retirement account. (For information types of service, refer to the Contributory Handbook or Non-Contributory Handbook on our Publications page ~ http://apers.org/publications.)

#### Final Average Compensation (FAC)

Your FAC is the average of your three highest fiscal year's earnings (not necessarily the last three years that you worked). So to figure your FAC, determine which three years you earned the most, add the earnings for those years together, and divide the sum by three.

Consider this example of a simple FAC calculation, using the salary history of a fictional member, Jane Doe:

 \$32,000 (her highest fiscal year earnings) + \$30,000 (her 2nd highest) + \$28,000 (her 3rd highest) = \$90,000 (find the sum)

\$90,000 ÷ 3 (find the average)
= \$30,000  (Jane Doe’s FAC)

To calculate an estimate of Jane Doe’s annual retirement benefits, she will plug this dollar figure into the formula.

#### The Multiplier

The multiplier is a constant (fixed number) whose value is set by state law (last changed in 2007). For a particular member, the multiplier (or multipliers) used to calculate benefit payments will depend on:

• when the member joined the system,
• over what period service was earned, and
• under which plan or plans.

Below is a chart of the multipliers that could apply to current members, though not to members of the Original Contributory Plan. Also note that the chart does not cover the Temporary (Annuity) Multiplier which applies under certain conditions for limited time periods.

Presently, about 80% of APERS members are in the New Contributory Plan, approximately 20% are in the Non-Contributory Plan, and less than 1% remain in the Original Contributory Plan.

#### Doing a Benefit Estimate

APERS has made it simple for members to generate their own retirement benefit estimates, plugging in a variety of different numbers (like age and service) to compare different retirement scenarios. Members can log in to the MSS portal on our website (log-in top of screen), then on the Home Screen (under ‘Quick Links’), pick on “Estimate Benefits.” This will launch a wizard that will guide you from there. Call us weekdays 7:30 a.m. to 4:30 p.m. at (501) 682-7800 or (800) 682-7377 with any questions about how your benefits are calculated, or how to perform functions inside the MSS portal.

APERS Blog published January 17, 2020.

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APERS is hosting online retirement seminars.