Home | About NCTR | Resources | Meetings | News Room | Member Directory

BY CYNTHIA L. MOORE,
NCTR WASHINGTON COUNSEL, OCTOBER 4, 2000
NCTR ANNUAL CONVENTION
BOSTON MASSACHUSETTS.

            Thirty participants representing NCTR’s Executive Committee and Legislative Committee, as well as government relations staff, devoted much of their discussion to phased retirement, reciprocity/portability, and new ideas.  A list of participants appears below.

Phased Retirement

            Dave Mills, Wisconsin Retirement System, reported on a study on phased retirement that his system will complete by the end of the year.  They are looking not only at retirees returning to work, but also at the possibility of allowing a member just prior to retirement eligibility to reduce his/her hours to part-time.  In the latter case, the question is how to protect the value of the benefit because working part-time would necessarily reduce the member’s final average salary.  Dave also pointed out that employers and taxpayers may have an interest in keeping experienced people in the workforce, if not full-time then at least part-time.  When the study is complete, Dave will share the results with NCTR members.

            The group also discussed an interpretation of the Internal Revenue Code relating to the in-service distribution rule.  Under current law, the rule prohibits an individual from drawing a benefit while still on the job.  A number of attorneys take the position, however, that a retirement system member can draw a full benefit at normal retirement age and continue working without violating the in-service distribution rule.

            Other issues related to phased retirement were subjects of discussion:  first, whether phased  retirement is actuarially neutral; second, how to allow individual to disconnect from work gradually; and third, how to keep retirees with expertise available to re-join the workforce as needed.  No resolution was reached on these matters.

Portability/Reciprocity

            The group then discussed what ideas NCTR should consider on the portability/reciprocity issue in light of the possibility that Congress may pass several portability provisions in the pending tax bill.  The group concentrated on “reciprocity,” a method to transfer a member’s service credit between states in which the retirement system of one state directly pays the value of the member’s benefit to a second state.  In other words, the member does not make an out-of-pocket payment as he/she does when purchasing service credit.  Of particular interest is the funding of the transfers.  Specifically, a year of service in one state may not be equivalent to a year of service in another state because of the difference in funding between the two retirement systems.  The group was undecided about how to resolve this issue.  The group also looked at another form of portability/reciprocity, in which credit is transferred between retirement systems in the same state.  This practice is known as “intrastate portability.”  The group agreed that this type of portability is fairly common.

New Ideas

            The group recommended that NCTR continue to look at the impact of Social Security reform on state and local government retirement systems.  They also recommended that NCTR evaluate the existing minimum distribution rules under Internal Revenue Code Section 401(a)(9).  Finally, they would like NCTR to evaluate congressional actions that encourage or discourage the conversion of defined benefit plans to defined contribution plans.

Legislative Roundtable Luncheon Attendees
October 4, 2000
NCTR Annual Convention, Boston, Massachusetts