Last Updated on March 2, 2023 by George
Disclaimer: If you use products or services based on our expert recommendations, we may receive a commission from the links in this post. Please take some time to read our Advertising Disclosure for more information.
A retirement system is a pension plan used by a state or local government to assist public employees in saving for retirement. Members must pay into the system while working so that when they retire, there will be enough money in the fund to get monthly benefits. As Social Security benefits operate, Each state has a retirement system, although they differ in size and breadth.
The system in Maine is called MainePERS, which stands for Maine Public Employees Retirement System. Continue reading to find out who and how this system applies. With a financial strategy to assist you in achieving your objectives, a financial advisor may also jump-start your retirement planning.
Teachers in Maine are included in the Maine Public Employee Retirement System, which comprises all state employees. The most extensive public retirement system in the state, it was founded in 1942.
Maine’s teacher-defined benefit (DB) pension system follows a similar fundamental format to other states. Unlike additional retirement funds, a teacher’s contributions and those made on their behalf by the state or school district do not affect the value of their pension when they retire. Although these payments are invested in the market and frequently managed by private equity and hedge funds, a teacher’s pension value is not derived from the returns generated by these investments. Instead, a formula based on their years of experience and ultimate compensation is used to decide it.
Most states, including Maine, had implemented different benefit categories for teachers based on when they were hired. There is essential information on those tiers contained inside this section.
How are Teacher Pensions Calculated in Maine?
An equation is used to determine pension wealth. The graph below shows how a teacher pension is resolved in Maine. But it’s crucial to remember that the state determines an educator’s ultimate pay based on their top three years of average income. For instance, a teacher who works for 25 years and earns a final average salary of $70,000 is qualified for a pension benefit equivalent to half of that amount each year.
Calculating Teacher Pension Wealth in Maine
2% Multiplier X Avg. highest 3 years of salary X Years of service
Who Qualifies for a Teacher Pension in Maine?
Teachers must work for a certain amount of time in most states before getting a pension, and there is a five-year waiting period in Maine before you can fully vest. Even though educators are eligible for assistance after five years of work, the pension may not be valuable. Additionally, educators can only start collecting it once they reach the state’s retirement age. When teachers can retire with benefits is a matter of age and years of service, which the state determines. When a new teacher in Maine has worked for the state for at least a year and reaches retirement age, they are eligible for full retirement benefits.
Maine also permits early retirement at any age after accumulating at least 25 years of service. However, teachers who choose this route would see a reduction in their retirement benefits based on their years of service and the age at which they retire.
How Much Does Maine’s Teacher Pension Plan Cost?
Teachers and their employers must contribute to the plan while they work. The state legislature determines these contribution rates annually and is subject to change. In 2018, teachers put 7.65 percent of their salary into the pension fund, and the state put 19.92 percent. In total, 27.57 percent of a teacher’s salary was contributed to the pension system for Maine teachers. But not all of that investment results in advantages. Regarding benefits, teachers put in 7.65% of their pay, but the state only puts in 4.186%. The remaining 15.74 percent of state contribution will repay the pension fund’s debt.
Finally, teacher pensions are not portable in Maine, as in most states. If a teacher leaves MPERS, they cannot take their benefits with them, even if they continue to work as a teacher. Therefore, a person who stops teaching or moves across state lines may have two pensions, but the total value of these pensions is likely to be less than if they had remained in a single system during their career. In other words, the inability of educators to move their benefits to another state or another job will harm their long-term retirement funds.
As with most state pension funds, Maine’s teacher retirement system gives the most money to teachers who stay the longest and not enough to anyone else. In light of this, prospective and practicing Maine teachers should carefully consider their professional goals and how they relate to the state’s retirement system.
Maine Teaching Salaries and Benefits
When you consider some of the traditional benefits of a teaching career, your thoughts will likely go to the copious vacation time, the joys of working with children, and the relative job security.
These benefits, albeit regularly enjoyed by teachers, overlook some of the more protective aspects of the job, including retirement and health insurance planning. As a teacher in Maine, you’ll have access to both, giving you more control over how you deal with problems related to your health and future goals.
Glossary of Financial Terms
Vesting period
The minimum number of years a teacher must work to be qualified for a pension. Although vesting periods vary by state, they typically last five years. Every state allows teachers who quit their positions before they are vested to withdraw their contributions, sometimes with interest. However, just a few jurisdictions permit these workers to receive any employer contributions made on their behalf.
Employee contribution
The proportion of a teacher’s annual income paid to the pension fund.
Employer contribution
The proportion of a teacher’s annual income that the state, a school district, or both contribute to the pension fund.
Average cost
The annual retirement benefit expense is expressed as a proportion of teacher pay, and these costs do not include debt.
Amortization cost
A pension fund’s annual payment toward any unfunded liabilities. This may also be considered the pension fund’s debt service expense.
Frequently Asked Questions
Must each make their own decision?
Members may be able to buy many different kinds of services. Each group has unique requirements. You can find a list of categories in the member handbook for your plan. Call or email our Retirement Services division for further details.
How does MainePERS determine the amount of my retirement benefit?
We figure out your benefit by using the formula for your plan. Your retirement benefit is typically determined by the following:
- The average of your three highest years of earnings
- Years of creditable service
- Retirement age
Can I roll my 401(k) funds into my MainePERS account?
Yes, if you have good MainePERS service credit. MainePERS accept tax-deferred direct rollovers as payment in whole or part to acquire creditable services. Call or email our Retirement Services department for details on the categories and requirements of purchasable services, or consult your plan’s member manual.
What does it mean to be vested?
Being vested indicates that you have satisfied the conditions necessary to qualify for a monthly payout at the standard retirement age under your plan. Members in service on or after October 1, 1999, must have five years of creditable service to become vested. Any member whose last day of MainePERS service was before October 1, 1999, must have ten years of creditable service to become vested.
Is MainePERS a 401(k) plan?
No, it is a federally qualified defined benefit plan under IRS Code Section 401. (a).
Pros & Cons
Pros 
Pros of Maine’s Teacher Retirement System:
- TRS combines a generous retirement benefit with professional development and resources to help members maintain fiscal health.
- It provides financial planning, estate planning, and other services to assist members in managing their future financial security.
- The system allows for flexible contributions and withdrawal plans while offering various investment options.
Cons 
Cons of Maine’s Teacher Retirement System:
- Contributing early could lead to a reduced benefit if the funds are withdrawn before retirement age.
- Contribution caps are often enforced, making it difficult for those looking to increase their savings rate over time.
- Increases in the cost of living can outpace increases in contributions without any corresponding adjustments in benefits.
Final Thoughts – Maine Teachers Retirement
The Maine Teacher Retirement System is essential in creating a secure and financially stable future for educational staff. With various benefits and programs, members can enjoy peace of mind while planning for retirement. Members must take the time to understand the system and its associated rules to make informed decisions about their financial future.
Related Post: