WHEN BAD THINGS HAPPEN TO GOOD ESSAA MEMBERS
By Herb Dickson Director
of Organization & Planning, ESSAA
From time to time I hear
about a member who, due to accident or disease, is critically ill and facing
death. Certainly this is tragic, but a greater tragedy would be to not maximize
the benefits available from the Retirement system to your family
To do this, the administrator would file for
either a regular retirement or a disability retirement depending on which he or
she are eligible for. The first example is for an employed Tier 1 person over
the age of 55. You can maximize your estate by retiring and selecting the lump
sum option
The
NYSTRS web site states that:
Please note, the Internal Revenue Service is
considering a regulation eliminating retirement options providing a lump sum
payment to a beneficiary
By selecting a Lump Sum Option, you may name
multiple primary and/or contingent beneficiary(ies) who may be changed at any
time
If you are not eligible for a regular
retirement, you should choose the disability retirement option
The NYSTRS web site
states that:
If you are forced to stop working because of
a serious illness or injury, you and your family will be faced with some
important and sometimes complex decisions. You should call the Retirement
System as soon as possible at 800-348-7298, Ext. 6010. Our staff is available
to guide you through the retirement process and to help you make informed
decisions about your benefits
If You are Critically Ill
The Question:
If you are critically ill, have a life
expectancy of less than one year and meet the disability retirement eligibility
requirements, should you stay on the payroll and be covered by an in-service
death benefit or retire and select an option providing a payment to your
beneficiary?
The Answer:
With few exceptions, you should file for
retirement immediately
By retiring and selecting the appropriate
option for your tier, you will provide a greater payment to your beneficiary
than by staying on payroll
Under Tier 1, the appropriate option to
select is the Declining Reserve Option (4%). Under Tiers 2, 3 & 4, in most
cases you should select the Largest Non- Declining Lump Sum Option. Contact
STRS before making your final decisions
The Difference
Depending on your tier, the disparities between an in-service
death benefit (obtainable by staying on payroll) and an option payment
(available by retiring) can be substantial. Following are some examples of the
difference:
For a Tier 1 member age 50, with 27 years of
service and a salary of $65,000, who stays on payroll and dies in service, the
death benefit is $146,250
If the member retires, selects the “Declining
Reserve Option (4%)” and dies soon into retirement, the payment to the
beneficiary is $416,700
By retiring, the payment to the beneficiary
is increased by $270,450
For a Tier 4 member age 50, with 21 years 6
months of service and a salary of $55,000, who stays on payroll and dies in
service, the death benefit is $165,000. If the member retires, selects the
Largest Non-Declining Lump Sum Option and dies in retirement, the payment to
the beneficiary is $148,000
In addition, the Paragraph 2 death benefit
(see below), paid if death occurs during the first year of retirement, is
$82,500. The total payment is approximately $230,500
By retiring the payment to the beneficiary is
increased by $65,500
Note: In lieu of either benefit, you may receive an accelerated death benefit that would pay you an amount equal to the death benefit payable if you died on the last day of reportable service. To be eligible, you must qualify for a disability retirement benefit (although the service requirement would be waived) and have either a) a terminal illness resulting in a life expectancy of no more than 12 months, or b) a medical condition requiring extraordinary care or treatment. Before making a decision, we strongly urge you to discuss your situation with STRS by calling 800-348-7298, Ext. 6010
For all the years I worked, I kept a
completed and notarized application for retirement on hand. One of my children
had strict instructions that upon hearing of a medical emergency, she was to
drive immediately to the Post Office and mail it before she came to the
hospital Should the emergency pass with
a favorable outcome, the application could always be rescinded
The NYSTRS also
recommends that you prepare a:
Power-of-Attorney
With a power-of-attorney you name an agent to
act on your behalf in a broad range of personal, legal, financial and other
affairs, including STRS matters. Under a durable power-of-attorney, the agent
can act for you even if you become legally incapacitated
Although a durable power-of-attorney is revocable before someone becomes incapacitated, banks or other third parties that are not notified when a power-ofattorney is revoked are generally entitled to rely on their good-faith belief as to the power’s continued validity. In any event, a durable power-of-attorney ends upon death unless revoked earlier.
A durable power-of-attorney may make it
possible to avoid the expense and formality of a court-ordered guardianship
should you subsequently become incompetent. A guardianship, however, affords a
stricter accountability and more stringent controls on conflicts of interest.
The use of a durable power-of-attorney is a
personal decision that should be based upon your particular needs and
objectives. Due to the high degree of control vested in the person named to act
on your behalf by the durable power-of-attorney, only a trusted person should
be named. In any case, because it is a powerful document, the System strongly
recommends that you consult with an attorney before executing a durable power-of-attorney.
This article is meant to increase ESSAA members’ knowledge of the options available to you. I strongly urge you to review this distasteful but possible scenario with your family. Contact the Retirement system and find out what is available to you and take the necessary steps to provide the maximum amounts to your family. While I sincerely hope that this is strictly an academic exercise and a complete waste of your time, you just don’t know