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Kentucky Teachers' Retirement / Optional Retirement Program

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Murray State University

POLICY NUMBER: V B

SUBJECT: KENTUCKY TEACHERS' RETIREMENT SYSTEM (KTRS) / OPTIONAL RETIREMENT PROGRAM (ORP)

APPLIES TO: FACULTY AND QUALIFYING STAFF

EFFECTIVE DATE: January 1, 2014

REVISED FROM: July 1, 2011

1. Eligibility

a. An employee of the University is eligible for membership in the Kentucky Teachers' Retirement System (KTRS) /Optional Retirement Program (ORP) when the position requires (as a condition of employment) certification by the Department of Education or graduation from a four (4) year college or university and the employee possesses either the state Department of Education certification or graduation from a four (4) year college or university. Membership is mandatory for regular employees who work 70% or more of full-time employment and meet the above qualifications.

b. No retirement deductions shall be made for an employee who is employed on a part-time basis of less than 70%; however, active members may make contributions and receive service credit for substitute, part-time or any service other than regular, full-time teaching as provided in the rules and regulations of the Board of Trustees.

c. This plan does not apply to an employee in a University position covered by the Kentucky Employees Retirement System.

2. Social Security

Effective January l, l987, members no longer pay social security tax on their retirement contributions.

3. Type of System

a. KTRS - The system is of the "actuarial reserve, joint contributory" type.

b. ORP - The Optional Retirement Program is a defined contribution plan.

4. Deferred Income Tax Payments

Effective August l, l982, members no longer pay federal and state income tax on their retirement contributions. Payment of federal income tax on retirement contributions made after August l, l982, is deferred until the member retires and would normally have a reduced taxable income or until the member withdraws his account.

5. Administration

a. KTRS - Administration of the system is the responsibility of a board of trustees of nine members. Two of these are ex-officio, serving by reason of their constitutional office. They are the Superintendent of Public Instruction and State Treasurer. The remaining seven trustees are elected by the members of the retirement system for four-year terms. The Board of Trustees appoints an Executive Secretary who is responsible for the administration of the affairs of the Retirement System under policies established by the Board.

b. ORP - The ORP is available to those individuals employed on or after July 1, 1996, who would otherwise be required to participate in theKTRS. The ORP was established as a 403 (b) defined contribution plan under the Internal Revenue Service Code guidelines. Specific rates of contribution are established for both the employee and employer. Although the University contributes to these annuities, the benefits payable to the participants are not the obligation of the Commonwealth of Kentucky or KTRS. The benefits and other rights of ORP are the liability and responsibility of the designated companies to which contributions have been made.

6. Contributions

a. KTRS - The University deducts from the salary each month the proper contribution and forwards it to the Retirement System. It is the responsibility of the retirement system staff to properly credit the account. Annually on June 30, the University makes a detailed report showing the salary contributions and service of each member. When this report is received in the Retirement System Office, the correct amount is credited to each member and interest is added.

b. Optional Retirement Program (ORP) - The University deducts from the salary each month the proper contribution and forwards it to the designated retirement plan. It is the responsibility of the retirement plan staff to properly credit the account. Periodic reports are sent to the participants showing contributions and interest earned.

7. Relation of Contribution, Salary, and Service Credit - KTRS

a. KTRS - Service credit and salary (both of which directly affect the member's rights to retire and his/her annuity payments) are determined on the basis of the contribution made. Contributions of less than full contributions result in a reduction in service credit and salary. If for any reason the member is absent without pay or if his/her salary is reduced for some other reason, he/she should insure that either through the University or by personal check a full contribution of the gross salary is made by December 3l, next following the end of the school term.

b. ORP - Annuity payments are determined by the employee and University contributions plus the return on investments.

8. Definition of Retirement

Murray State provides to its retirees continued access to certain University programs, such as discounts on tickets to Athletics events and tuition waivers.  These programs may change and a current listing is available from Human Resources.

Retirement status, for continued access to these programs, for individuals who participate in ORP will be determined using the criteria for employees who participate in KTRS.

9. Sick Leave Credit / Payment at Point of Retirement for KTRS and ORP participants

a. KTRS participants who (i) fully retire from Murray State University, (ii) meet all the service requirements for an unreduced KTRS annuity, and (iii) have at least five (5) years of full-time service to MSU as a faculty member and/or professional staff member, shall have purchased for them by MSU an amount of service credit equal to the documented number of remaining unused sick days while in a KTRS position, not to exceed 92.5 days (1/2 year), that the eligible members have at the date of retirement.

An eligible employee must have a completed KTRS Application for Retirement Benefits in the MSU Human Resources office at least 2 months prior to the eligible employee's intended retirement date.  Additionally, a retiring employee must meet any and all deadline requirements set forth by KTRS to retire by the expected date.  The dollar amount of the MSU purchase of service credit shall be computed by KTRS at or near the time of actual retirement of the employee.  In accordance with the KTRS statutes, unused sick leave may count towards total years of service, but cannot be used to meet the minimum years of service credit for an unreduced annuity.

An MSU faculty or professional staff member is eligible for this benefit only one time and only under one retirement plan option.  Participation in the step-down / early retirement program eliminates / voids eligibility for this benefit.

b. ORP participants who (a) fully retire from Murray State University, (b) have all the same time and service requirements as those faculty/staff members eligible for an unreduced KTRS annuity; AND (c) have at least five (5) years of service to MSU as a faculty member or professional staff member, shall be eligible to receive a lump sum deposit into their ORP account by MSU equal to 8.74% of his/her average of the high three (high five if employment stated after July 1, 2007) years of salary wage (including overtime/overload, salary from grants, summer teaching, etc.) multiplied by the proportion of unused sick leave days that the eligible member has at the date of retirement relative to 92.5 days.  The proportion of sick leave days cannot exceed 100%.

(1) Example payout for a qualified ORP retiree with an average of $50,000 in earnings and 62 days of sick leave: $50,000 x 8.74% x 67.0% (62 / 92.5 = 67.0%) results in a payment of $2,929.

(2) An eligible ORP participant must notify the MSU Human Resources office in writing of his/her desire to retire at least two (2) months prior to the eligible employee's intended retirement date.  The dollar amount of the MSU payment will be computed by MSU benefits staff at or near the time of actual retirement of the employee.

10. Annual Statement of Account

a. KTRS - Each year at some time following the close of the fiscal year, the member will receive an Annual Statement of Account. This will report the salary earned in the preceding year, the service credit earned in that year, the contribution made, the total in the account, and the total service credit. If there is an error in this statement, write the Retirement System Office immediately in order that it may be corrected or the reason for the apparent discrepancy explained.

b. ORP - Participants receive account statements on a frequency determined by the ORP company.

11. Beneficiary Designation

a. KTRS

(1) The member's most important responsibility is to maintain his/her beneficiary designation in a current condition. Failure to do so can cause very serious consequences and possible loss of valuable benefits.

(2) The spouse must be the sole beneficiary to be eligible for survivor benefits. If the member marries after becoming a member, the spouse automatically becomes beneficiary and any previous designation of beneficiary is void. Divorce action shall void any previous designation of beneficiary, and the member's estate automatically becomes the beneficiary. In the event of either marriage or divorce, the member should file a new designation of beneficiary with the Retirement System Office.

(3) If the beneficiary dies, a new beneficiary should be designated. The member may name more than one beneficiary and may designate them as co-beneficiaries or in order of succession. A beneficiary does not have to be a relative, and the member may make a change without notifying the previous beneficiary. The member may name his/her estate as beneficiary. To change the beneficiary, you must request a change of beneficiary form directly from the Retirement System. The law requires that if you have a living spouse and you designate someone else as your beneficiary, the spouse must sign to show that they are aware that they are not the listed beneficiary.

b. ORP

(1) The member's most important responsibility is to maintain his/her beneficiary designation in a current condition. Failure to do so can cause very serious consequences and possible loss of valuable benefits.

(2) If the beneficiary dies, a new beneficiary should be designated. The member may name more than one beneficiary and may designate them as co-beneficiaries or in order of succession. A beneficiary does not have to be a relative, and the member may make a change without notifying the previous beneficiary. The member may name his/her estate as beneficiary. To change the beneficiary, you must request a change of beneficiary form directly from the optional retirement company.

12. Benefit Coverage

a. The pension is a state of Kentucky policy mandated by law and subject to change.

13. Reciprocity - KTRS

The reciprocity regulations of the Kentucky Teachers' Retirement System will be followed.


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