The South Dakota Retirement System (SDRS) for government employees depends on a design to offer a basis for the economic future of more than 75,000 of its members and their kin. It aims to offer its members the prospects of having financial security in retirement or due to any disability or death, by offering an excellent, fitting and a fair level of benefits. Overall, its goal is to give lifetime income substitute together with personal retirement savings and Primary Social Security to fulfill the needs of expenses after retiring to up to a minimum of 85 percent of last pay of members who contribute all through their career.
The South Dakota Retirement System (SDRS) has laid a foundation for taking care of the future of several thousand member employees and their families. Its main objective is to allow these members to gain financial security when they retire. This is done with the help of the SDRS Trust Fund which is generated by contributions that are made by both the employees as well as the employers.
The members of the South Dakota Retirement System are:
- Legislative Employees of the South Dakota State.
- Teachers and Administrative Employees of the South Dakota Public School Districts.
- Faculty and Administration of the South Dakota Board of Regents.
- Municipal Employees of the State.
- County Employees of the State.
Over four hundred government units along with their employees are contributing to the SDRS Trust Fund so that it can be used for the sole benefit of the employee members and their families or beneficiaries.
The authority that governs the South Dakota Retirement System is its Board of Trustees. The Board is made up of fourteen representatives who are elected from the participating groups along with a representative of the South Dakota Investment Council.
The assets that are held in the Trust for the purpose of pension benefits are close to eight billion dollars. The benefit amount that has been paid out to the employee members is close to four hundred million dollars. The ratio of the fund is well above ninety three per cent and the investment return is at 1.91%.
Features of the Plan for the Legislative Employees of the South Dakota State
- Contributions – The employee and the employer share the contribution cost of the pension benefits and this done in terms of salary percentage. This contribution goes into the retirement system trust fund. Every year, the whole contribution will be equivalent to twelve per cent of the employee salary. Six per cent out of that is contributed by the employer and the balance six per cent is given by the employer. These contributions by the employee are deducted from his or her salary at the end of each pay cycle.
- Tax Benefits – Many tax benefits are applicable to the contributions being made by the employee to the SDRS. These contributions are made on prior to tax basis. Contribution is reduced from the salary before the calculation of the federal taxes. The take home salary is therefore higher with this kind of tax deferred planning.
- Earnings on the Contributions – All contributions are credited with an interest rate that is fixed by the Board of Trustees every year. Currently, it is at 1.91%. For administrative record purposes, the interest is added to the cumulative contributions once every year on 30th of June. These accumulated contributions are the minimum pension benefits that the employees and their beneficiaries are assured of.
- Earning of Credited Service – Credited service will be completed years of service. One fourth of a year’s credit service is received by the employee for each quarter the contributions are made to SDRS. Employees can buy extra credited service to boost the retirement benefit. The extra cost will depend on the age of the employee at the time of buying. It will be on a percentage of the salary or the final average compensation, whichever turns out to be higher and that is actuarially established. An employee who has put in over five years of service may buy up to five years of on-qualified service credits. This will reduce the salary of the employee and will not be deemed as income that is taxable.
Early Retirement (Reduced Benefit)
If you have at least three years of contributory service, you can retire at the age of 55, and if payments commence straight away, you will see a reduction in the monthly lifetime retirement benefits. If however you go in for a special early retirement, you can receive your package of unreduced lifetime benefits immediately.
Plan Funding Level
In South Dakota, in 2011, the funded ratio stood at 96.3 % and the Unfunded Liability/Capita stood at $ 362.
Vesting Period or How Many Years Before One Could Get a Pension
If you have three years of contributory service, you can retire even at 55.
You can retire at the normal age of retirement, that is 65, if you have three years of contributory service or you can opt to retire later.
Pension Payment Benefit Schedule
When the employee retires, the benefit will be received in monthly installments throughout his or her life. If the employee dies after the commencement of the benefits, the surviving spouse will get sixty per cent of the total benefit. If early retirement is taken, there is an option of selecting an income benefit level. If the employee retires early between the age of 55 and 62, the level income benefit option can be taken to get the retirement benefits instantly. This option will increase the monthly payment amount up to the sixty second year of the employee. That is because the employee will then be eligible to get the benefits of social security. At the age of sixty two, the SDRS payment will reduce the amount being paid by social security benefits.
Under the early retirement scheme, employee can retire at the age of fifty five and get the monthly income pension benefit provided contributory service of a minimum of three years is credited. If the credited service is for a period of twenty years or less and the employee decides to retire early, the pension benefits will be decreased by 3% for every year the payments will be made before the age of sixty five.
What percentage of the current working salary can an employee expect to get from SDRS when he or she retires? Assuming that the employee has put in thirty years of credited service, he or she will get around 70% to 85% of the working salary from the combined SDRS and Social Security benefits.
Spouse and family pension benefits will be paid on a monthly basis if the employee dies while being active as a contributor to the SDRS. The family benefit is payable to surviving spouse and those children who are dependent and unmarried under the age of nineteen. Family benefit is 40% of the final average compensation with an extra 10% for each child up to a maximum of six children or up to 100% of the average compensation.
The employee has the right to appoint any person as a beneficiary. There can be a designation of a primary beneficiary as well as a contingent beneficiary. In case no beneficiaries are surviving, the pension benefits will go to the estate of the employee.
Cost of Living Adjustment
COLA is increased annually on 1st July of each year. It is index linked to the consumer price index and the market value of the SDRS fund as per the previous fiscal year. It is capped at 3.1% and cannot be less than 2.1% in any year.
South Dakota Codified Law 3-12-47(41) has defined the basis allowing for an improvement factor in the employee pension payments as cost of living adjustment for the fiscal year 2014 ending on 30th June 2014. It is linked to the Consumer price Index and o the South Dakota Retirement system’s fund market value. The current improvement factor is fixed at 2.1% with effect from 1st July 2013. (Source: http://www.sdrs.sd.gov/news/).
The South Dakota State Employees Association announced on 13 April that the South Dakota Retirement System Board, in its recent meeting declared the good news of the SDRS increasing by 14.9 % in the first 9 months of the fiscal year.