New Employees should carefully review the information in the above link prior to submitting new hire forms, in addition to viewing the Choosing a Retirement Plan video.
All Regular non-exempt employees (other than law enforcement officers) are required to join the Maryland State Modified Teachers/Employees Pension System (MSPS) immediately upon employment. Regular law enforcement officers are required to join the Law Enforcement Officers Pension System (LEOPS). Regular Exempt staff and faculty may elect to join either MSPS or the Optional Retirement Program; an election to join either retirement plan is permanent and irrevocable. Contingent employees are not eligible to join a retirement program, other than Supplemental Retirement.
Review the Pension Plan/Optional Retirement Program Comparison Chart or the Choosing a Retirement Plan Booklet for a general overview of plan differences. Also, please see the following memo regarding state law changes to the Retirement Plan Selection process effective 7/1/2017.
Maryland State Modified Teachers/Employees Pension System (MSPS)
The Maryland State Pension System is a defined benefit plan. This means that a member qualifies for retirement benefits based upon the member’s length of service, and the benefit is pre-determined based on a formula.
The MSPS includes a mandatory 7% pre-tax deduction withheld from each paycheck.
The University contributes a percentage of the employee’s annual salary over 26 pay periods. This percentage fluctuates with each fiscal year. The actual contribution will be reflected on the left hand side of the employee’s pay stub.
The employee becomes vested in the pension system after 5 years of service (10 years if hired on or after 7/1/2011). If employment is terminated prior to the 5 or 10 year period, the member contributions may be refunded, and all service credit will be lost. Should employment terminate after 5 or 10 years service, service and contributions will be held until such time as the faculty/staff member is eligible to retire. Please review the Pension handbook for more information.
MSPS uses two types of service credit in determining benefits. Eligibility Service is required to qualify for most benefits. It is earned at the rate of one full year of eligibility service in each fiscal year that a member works a minimum of 500 hours (excluding overtime). Creditable Service is credit used to calculate the actual dollar amount of any benefit. It is based on the number of months worked and is determined by comparing the normal hours worked during the fiscal year to the standard hours for the member’s position.
The Pension System provides a monthly retirement annuity (the actual amount of benefits is determined using a formula which uses years of service and the employee’s average final salary as prime factors), death benefit (one lump sum of annual salary to designated beneficiary, or accumulated contributions + interest if employed less than 1 year), disability benefits, and compound cost of living adjustments after retirement.
Members of MSPS may apply unused sick leave to additional retirement credit. This unused sick leave is applied only in the event of a direct service retirement. If the employee terminates State service, although they may be vested, unused sick leave will not be applied.
After 25 years, Health Benefits can be continued for the employee, spouse and dependents with full state subsidy. For more information on healthcare subsidies for employees hired prior to 7/1/2011 please review the State of Maryland Benefits Guide.
Law Enforcement Officers Pension System (LEOPS)
LEOPS is a defined benefit plan, like the MSPS. LEOPS is similar to MSPS in most respects (vesting, creditable/eligibility service, sick leave credit, etc.), but the following features are different:
The employee’s contribution is 6% beginning 7/1/2011 and will change to 7% beginning 7/1/2012.
Full retirement benefits are available at either age 50 or upon reaching 25 years of eligibility service. There is no early retirement benefit.
The benefit formula is different for LEOPS than MSPS.
Optional Retirement Program (ORP)
Exempt staff and faculty may elect to join either MSPS or the Optional Retirement Program. The Optional Retirement Program (ORP) is a defined contribution plan.
There are two participating providers in the ORP. They are Teacher’s Insurance Annuity Association (TIAA), and Fidelity.
The ORP plans are defined 403(b) contribution plans. They differ from a defined benefit plan in that the amount of benefits paid at retirement depends upon the amount of accumulated contributions, plus earnings and dividends, in the member’s account at the time the claim is made.
The University contributes 7.25% of the member’s annual salary over a 20 pay cycle. The member may not contribute any additional money.
Contributions to the plans are immediately vested and are transferable among over 4,200 private and public institutions participating across the country.
Premiums to the ORP are invested primarily in mutual funds and employees designate where contributions are made. Percentage allocation changes can be made as many times as desired. Employees also have the option to switch to another participating ORP carrier one time per calendar year.
There is no defined death benefit in the ORP plans. Upon a member’s death, the member’s designated beneficiary inherits the fund amounts. There are also no allowances for COLA or disability with the ORP plans. Accumulated Sick Leave is not factored into retirement benefit amounts.
After 25 years of full-time ORP Service, Health Benefits can be continued for the employee, spouse and dependents with full state subsidy. For more information on healthcare subsidies for employees hired prior to 7/1/2011 please review the State of Maryland Benefits Guide.
Supplemental Retirement Annuity Programs (SRA)
In addition to the State Pension System and the Optional Retirement Plan, all employees (including Contingent) are also entitled to participate in one or more of four supplemental retirement annuity (SRA) plans offered by the University. These plans permit the deferral of income through pre-tax contributions to an established SRA. For information on SRA options, employees can visit the UMBC SRA webpage.