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Benefit Calculation

How is my Benefit Calculated?

The three systems administered by KPPA in Tier Two are qualified defined benefit plans for members participating prior to January 1, 2014. A defined benefit plan pays benefits based on a formula. 

Final Compensation * Benefit Factor * Years of Service = Annual Benefit

If there is an early retirement penalty, it will also be used in the formula.

Final Compensation

A Tier Two member's Final Compensation, or Salary Average, is determined by dividing the total salary earned (Last 5 or 3-High) by the total months worked, then multiplying by twelve (12). 

Nonhazardous retirement benefits are based upon your last five (5) years' salaries. When Final Compensation is based on the last five salaries, it must include 60 months - the years used must be full (12 month) years. 

Hazardous retirement benefits are based upon your 3 highest salaries. When Final Compensation is based on the 3-High, it must include 36 months - the years used must be full (12 month) years. 

Benefit Factor

Benefit factors are set by statute and vary depending upon the type of service, amount of service, participation date and the retirement date. 

Nonhazardous Member Benefit Factors

  • 1.10% - Service Credit less than or equal to 120 months 

  • 1.30% - Service Credit between 121 and 240 months 

  • 1.50% - Service Credit between 241 and 312 months 

  • 1.75% - Service Credit between 313 and 360 months 

  • 2.00% - Service Credit in excess of 360 months only

Hazardous Member Benefit Factors

  • 1.30% - Service Credit less than or equal to 120 months 

  • 1.50% - Service Credit between 121 and 240 months 

  • 2.25% - Service Credit between 241 and 299 months 

  • 2.50% - Service Credit greater than 300 months

Years of Service

The years of service used in a Tier Two member's calculation include current service, prior service, purchased service, and sick leave service. This applies to all service purchases made by the member or employer with the exception of omitted service, re-contribution of service refunds, and hazardous conversions as well as service credit for free military and purchase of sick leave in excess of 6 months. 

  • Current Service - Service earned by working in a participating position. 

  • Prior Service - Service earned before the establishment of the Retirement Systems (July 1, 1956, for KERS, July 1, 1958, for CERS and SPRS). 

  • Purchased Service - Service purchased by the member to enhance the retirement benefit. 

  • Sick Leave Credit - Accrued sick leave balance at the time of retirement.

What do I Pay and What Does My Employer Contribute?

Members pay a pre-tax 5% rate based on creditable compensation, if nonhazardous; 8% if hazardous duty. Employers pay different rates based on the member's system, and nonhazardous vs. hazardous duty. Additionally, you pay a pre-tax 1% Health Insurance Contribution that is used to fund insurance benefits. 

The employer contributions are paid into the Retirement Allowance Account, and are used for paying monthly benefits. The CERS employer contribution rate is determined by the Board of Trustees, and the KERS and SPRS rates are approved by the General Assembly during the biennial budgeting process. See the current employer contribution rates

Am I Eligible for a Refund of My Account if I Quit My Job?

At the time of termination, you are eligible to either take a refund of your accumulated account balance or begin receiving monthly payments, if eligible for retirement. You can also leave your funds in your account until the time you either become reemployed or are eligible to retire. If you terminate employment and request a refund, you are eligible only for your member contributions and associated interest. Learn more on our Refund of Contributions page.

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