Retirement Program FAQ
What are the ground rules?
1. Is membership mandatory for Massport employees?
Yes. Membership in the Massport Employees’ Retirement System is required by law for all regularly employed employees who work at least 21 hours per week.
2. How are changes made to the retirement plan?
The Massport Employees’ Retirement System is governed by the provisions of M.G.L., Chapter 32, as are most Massachusetts public pension systems. Any changes in the plan must be made through the legislative process.
3. How is my membership date determined?
For most Massport employees, your hire date is your membership date. Technically, it’s the date you first began making contributions from your regular compensation into the retirement system. If you have a period of employment with Massport in which you did not make retirement contributions, you may want to contact the retirement office to inquire about purchasing your prior employment as creditable service.
Contributions…How much and how calculated?
4. How much do members contribute to the retirement system?
The amount each employee is required to contribute to the retirement system is set by statute. If you began employment on or after July 1, 1996, you must contribute nine percent of your regular compensation to the retirement system. If you were hired any time between January 1, 1984 and July 1, 1996 your contribution rate is set at eight percent. Members who joined the system any time between 1975 and 1983 contribute seven percent. Those employees who became members prior to 1975 are contributing five percent.
The law also mandates that for members whose employment commenced on or after January 1, 1979, an additional two percent will be withheld on regular compensation over $30,000. This two percent is in addition to the seven, eight or nine percent that is already being deducted from total regular compensation.
5. Do a member’s contributions to the retirement system earn interest? If so, how is the interest calculated?
Your contributions are placed in an individual annuity savings fund, which earns annual interest at a rate comparable to that of a passbook savings account. The interest rate is determined by the Public Employee Retirement Administration Commission and the Commissioner of Banks. This annual interest rate is independent of that earned on the retirement system’s investments.
6. Does the amount of contributions and interest in a member’s annuity savings fund account affect overall retirement benefits?
No. Your future retirement allowance is not based on your annuity savings account balance. It is instead determined by a formula consisting of your age, service and salary average at date of retirement. The money in your account is used to fund a portion of this allowance but the value of your account balance at retirement is not used in calculating your total retirement allowance.
7. Are employee contributions used to fund the administrative expenses of the
No. Employee contributions are never used to fund administrative expenses. Operating expenses, including fees associated with actuarial and audit services, investment management, consultant and custodial fees, are funded solely through the system’s investment income.
Benefits…How earned and how allocated?
8. What does it mean to be vested?
When you are vested, you have earned the right to a retirement allowance at a later date. You no longer have to remain in service to be eligible to collect it.
9. When does vesting occur?
You must have ten years of creditable service in order to be considered vested. If you transfer creditable service from another retirement system, or if you buy back prior or military service, such service is added to your Massport service to determine whether you are vested.
10. When is retirement an option?*
If your membership date is prior to April 2, 2012 and you are a member classified in Group 1 or Group 2, you are eligible to retire at age 55 or older if you have at least ten years of creditable service. If you are a member classified in Group 4, you are eligible to retire at age 55 or older. If you have 20 years of service, you can retire at any age.
If your membership date is April 2, 2012 or later and your position is classified in Group 1, you are eligible to retire at age 60 or older if you have at least ten years of creditable service. If your position is classified in Group 2 you are eligible to retire at age 55 or older if you have at least ten years of service. Members classified in Group 4 are eligible to retire at age 55 or older. Please note that you must have performed the duties of the Group 2 or Group 4 position for at least 12 months immediately prior to termination or retirement.
If you are a member of Group 4 you are eligible to retire at age 55 with no service requirement. Please see Question 19 for a definition of group classifications.
11. What is the retirement allowance based on? How is it calculated?*
Because our plan is a defined benefit plan, your retirement allowance is determined by a mathematical formula and is not based on the balance in your annuity account at the time of retirement. The factors used to determine your retirement allowance are; your age, creditable service, group classification, and an average of your three highest consecutive years* of regular compensation at date of retirement.
*If your hire date is April 2, 2012 or later, your retirement allowance will be based on a five-year salary average. Please call the retirement office for more information.
12. Can I purchase creditable service earned in another Massachusetts public retirement system?
If you were a member of another retirement system subject to the provisions of M.G.L., Chapter 32, and you withdrew your retirement funds, it is possible to buy back your prior creditable service. The retirement office will verify your prior service and calculate the amount of your buyback. You must repay the amount withdrawn, plus interest, to the date of repayment. Please note that interest applied to prior service buybacks not initiated within one year of employment will increase by 100%. The current buyback interest rate is 3.8125%. The rate after one year of employment will be 7.625%.
You have several payment options when completing a buyback. You may submit a lump sum payment, contribute through payroll deduction over a period of five years or less, or choose to roll over funds from an IRA, 401(k), 403(b), or 457 plan such as Massport’s deferred compensation plan.
13. Will prior creditable service affect my membership date or contribution rate in
Massport’s retirement system?
If you have retirement contributions from a previous public employer directly transferred to our system, you are entitled to maintain the level of contribution you were paying previously. Under current regulations, if you received a refund of retirement contributions from your previous retirement system and later became a member of Massport’s system, your contribution rate with Massport will be at the new member rate, regardless of what you were paying in your prior system. If you should later purchase your prior creditable service through a buyback, your contribution level will remain at the new member rate and will not be reduced to your previous rate.
14. If I was a temporary employee at Massport, may I apply that time towards my retirement creditable service?
If you were employed by Massport on a temporary basis, prior to becoming regular, full or part time, you may be entitled to purchase this service towards your retirement creditable service. If eligible, you must complete the buyback while you are employed at Massport. Please note that Massport student employment cannot be applied towards a service purchase.
If you had temporary service with another public agency in Massachusetts, you may be entitled to purchase that as well and apply it to your retirement creditable service at Massport. Each person’s situation is different and requires research. Please call the retirement office for more information.
15. How is creditable service achieved?
You earn creditable service towards your retirement allowance for the period during which you are contributing to the retirement system. For most full-time employees, this service time starts accruing the day you begin work and continues until the day you separate from service. However, if there is a period of time when you are off the payroll, you should consult with the retirement office as to how this will affect your total creditable service.
16. What if I work part time?
If you are an employee with periods of both part time and full time service, your part time service will be pro-rated based on actual hours worked. However, if you are a part time employee for your entire career, you are entitled to receive full creditable service for retirement calculation purposes. Also, due to a State Supreme Court decision (Nancy Madden vs. Contributory Retirement Appeal Board); if you worked part time before the MPAERS adopted its Supplementary Regulation on Creditable Service on April 26, 1993, you may be eligible to receive full time credit for that service. If you are someone who may be affected by the Madden decision, please contact the retirement office for more information about how it will impact your total creditable service.
17. Is regular compensation the same as total compensation?
No. Regular compensation is the portion of your salary that is subject to retirement contributions. Overtime, bonus pay, severance pay and any payments made for unused sick time are not considered regular compensation, are not subject to retirement contributions, and cannot be used towards your final average salary for the purpose of determining your retirement allowance.
18. Does the amount of my vacation buyback count as regular compensation?
Yes. Any money you receive from the Authority as payment for a vacation buyback is considered regular compensation and is therefore subject to retirement contributions. This means that at retirement, when your final average salary is calculated, the total amount of vacation buybacks purchased during that three-year period (five-year period if you were hired on or after April 2, 2012) gets added to your final salary total and then averaged. This does not apply to final payments made for accumulated vacation time upon separation from service or retirement.
19. What are the group classifications within the retirement system?
The law determines your group classification based on your position. When you retire, your group number determines which age rate is used in the calculation of your retirement allowance. The board assigns employees to one of four groups as set forth in M.G.L., Chapter 32, Section 3:
- Group 1 - General employees, including clerical, administrative and technical workers, laborers and all others not otherwise classified.Most of Massport’s employees are classified as Group 1.
- Group 2 - Logan gate guards and maritime port officers.
- Group 3 - State Police officers and inspectors.
- Group 4 - Firefighters, licensed electricians, first- and second-class stationary engineers, watch engineers, steam firemen, utility technicians and other supervisors.
If you have periods of service in more than one group classification, new rules apply. Please contact retirement staff for more information.
20. Does my participation in the 457 deferred compensation plan affect my Massport retirement benefit in any way?
No. Your Massport retirement benefit is separate from and not related to participation in the deferred compensation plan. The 457 plan is an optional savings vehicle, which allows you to supplement your retirement savings on a tax-deferred basis. It is strongly recommended that this plan be considered as an additional savings option by members.
Portability issues…What happens upon departure?
21. If I leave my job at Massport, what happens to my contributions?
If you leave your job at Massport and are not going to work for another governmental agency under the provisions of M.G.L., Chapter 32, you may be eligible to receive a refund of your contributions. If you are leaving to accept a position with a Massachusetts political subdivision subject to M.G.L., Chapter 32, you must transfer your retirement contributions directly to your new retirement system.
22. If I leave Massport and decide to take a refund of my contributions, how much
interest will I receive?
The amount of interest you will receive depends on your length of service and the nature
of your separation from service.
If you have less than 10 years of creditable service and voluntarily resign, you will receive three percent interest on your contributions for each year.
If you have 10 or more years of creditable service and voluntarily resign you will receive 100 percent of the accrued “regular interest” for each year. Regular interest is determined annually by the Public Employee Retirement Administration Commission (PERAC) and the Commissioner of Banks and is comparable to that of a passbook savings account. The regular interest rate for 2014 was set at 0.1%. Please note that if you have more than 10 years of creditable service you are vested and potentially eligible for a future retirement allowance. You should carefully consider any decision to withdraw your funds.
If you are involuntarily terminated, in most cases, you will receive 100 percent of the accrued regular interest for each year regardless of your length of service. If you have over 10 years of creditable service you could be eligible to receive a future retirement allowance. Contact retirement staff to discuss your options.
23. Is there any time limit after terminating service to request a refund of contributions?
No. You may request a refund of your funds at any time after termination. If you leave your funds on deposit, however, and later seek a refund, your deductions will only earn interest for two years after termination. The previous question outlines the criteria used to determine which interest rate will apply.
24. Can a member who is vested and leaves their job at Massport still be eligible for a refund?
Any member who leaves their job may be eligible to withdraw their retirement funds. If the member is vested and has earned the right to a retirement allowance at a later date, careful consideration should be given to the value of the retirement benefit he or she may be forfeiting in exchange for a refund.
25. If I leave my job at Massport and leave my money in the retirement system, can I retire at a later date?
If you are vested and leave your job at Massport, you can choose to “defer” your retirement by leaving your money in the system until you are ready to retire.
26. Can a member withdraw or borrow money from his or her account in the retirement system without resigning or retiring?
No. There is no loan provision in this plan. An active member cannot withdraw or borrow money from their annuity savings fund account under any circumstances.
27. What are the tax consequences if I take a refund of my retirement contributions?
Your contributions and all of the interest you receive from your account are subject to federal income tax (with the exception of any contributions made prior to January 12, 1988 which were already taxed). When processing a refund of retirement contributions, the retirement office is required to withhold 20% of the taxable portion of your refund for federal tax. This 20% tax payment is required only if the refund is made directly to you. If you are younger than 59½, you may also be subject to an additional 10% IRS early withdrawal penalty.
To defer taxation, you must make a direct rollover of your retirement funds to an Individual Retirement Account (IRA) or another type of retirement account with a financial institution. With a direct rollover no tax is withheld and the entire taxable portion of your refund is transferred. If you have both taxable and nontaxable contributions, you may accept receipt of the nontaxable portion of your refund with no tax consequence and the taxable portion may be rolled over.
28. If I die before retirement, what happens to the funds in my account?
If you are married and die before you retire, in most cases, your surviving spouse will have the option of collecting a monthly benefit or receiving a lump sum payment of your contributions. If you are single, the person you designated on your retirement beneficiary form would be eligible to receive a lump sum payment of your contributions. However, you may want to consider designating an “Option D” beneficiary that would allow you to provide a lifetime benefit for a child, parent, sibling, or former spouse who has not remarried, in the event that you die prior to retirement. Please contact the retirement office for more information.
29. Where can I get more information about the retirement plan at Massport?
If you have questions about the plan you should contact the retirement staff. To obtain a copy of either the Massachusetts Public Employee Retirement Guide, the Guide to Disability Retirement for Public Employees, or the Guide to Survivor Benefits for Public Employees please contact the retirement office at (617) 568-3951 or access the guides online at http://www.mass.gov/perac/forms-pubs/retirement-guides/.