Maryland Teachers Retirement

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The Maryland Public School Workers Retirement System covers educators in Maryland. In 1945, the MPSERS was established.

There are various state retirement plans available to new teachers in Maryland. Starting in February 2018, unless individuals voluntarily join Pension Plus two, they are automatically placed into the Defined Contribution (DC) plan. (Employees hired before 2018 may be enrolled in the original Pension Plus plan, which has a few nuances.) A hybrid pension plan, Pension Plus 2, incorporates aspects of both defined benefit (DB) and deferred compensation (DC) pension plans.

The hybrid plan’s Database component is set up similarly to other states’ programs. In contrast to other retirement plans, the value of the Pension at retirement is not based on the contributions made by the teacher and decisions that the state or school district makes on their behalf. The earnings on those assets do not directly affect any particular worker’s retirement benefits, even though those payments are invested in the market. Instead, they are established using a formula based on the worker’s years of experience and final salary.

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How Do Teacher Pensions Work in Maryland?

6.2 percent of each teacher’s annual salary in Pension Plus 2 is put toward the DB portion of the plan. Their employer matches the 6.2 percent. Teachers in the Plus 2 program contribute 4% annually to the DC element of the project, much like with the Pension Plus plan. The employer will match the first two percent of that contribution to the employee’s healthcare fund. Their employer will reach 1% of the remaining 2% that goes toward their retirement savings plan. The annual contribution to the personal retirement savings component is 7% of the pay.

How are Teacher Pensions Calculated in Maryland?

An equation is used to determine pension wealth. The calculation for a Maryland teacher pension is shown in the graph below. The state determines an educator’s final pay based on their highest 60 consecutive months of compensation. For instance, a teacher with 25 years of service and an average final income of $70,000 would be qualified for an annual pension benefit equal to 37.5% of last pay. But remember that the hybrid plan’s DB plan only makes up a percentage of a teacher’s retirement benefits.

Calculating Teacher Pension Wealth in Maryland

1.5% Multiplier     X     Avg. highest 3 years of salary    X   Years of service

Who Qualifies for a Teacher Pension in Maryland?

Teachers must work for several years before they are eligible for retirement benefits, as in most states. There is a ten-year vesting time for the DB component of the Pension Plus 2 plan for teachers. After ten years of service, educators are eligible for the pension portion; however, because they cannot start collecting their Pension until they reach the state retirement age, the Pension may not be worth much.

Based on their age and years of service, the state establishes particular timeframes during which teachers can retire with benefits. Teachers enrolled in the Pension Plus or Pension Plus two plan with at least ten years of service may retire with full DB benefits at age 60.

Teachers are immediately vested in their payments to the DC portion of the plan. They become 50% vested in their employer contributions after two years of employment, 75 percent vested after three years, and fully vested after four years.

How Much Does Maryland’s Teacher Pension Plan Cost?

Teachers new to the profession or recently employed are immediately enrolled in Maryland DC retirement plan, which does not have a defined benefit element. Instead, this program combines a 401(k) plan and a 457 retirement plan. Up to the federal IRS maximum contributions, a teacher may make as many contributions as they wish to the 457 section of the project. In exchange, their employer will make a 401(k) plan contribution equal to 50% of the teacher’s contribution rate, up to 6%.

For their contributions, teachers who participate in this plan are instantly vested. After two years, they have a 50% vesting in their employer’s contributions. They are 75% awarded after three years and 100% granted after four years.

The DC plan follows transferable vesting. This means that employees can take all of their vested retirement assets with them if they quit their jobs as teachers or move out of Michigan to teach in another state. Teachers covered by pension plans cannot do this, which will likely result in significantly lesser retirement income throughout their careers if they switch employment or move to a different state.

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

What are the Maryland Office of Retirement Services (ORS) office hours?

Call us from 8:30 a.m. to 5 p.m., Monday through Friday. For additional information on how to reach us, read Contact Us.

When can I retire?

MIP members can often retire at age 46 with 30 years of service (YOS), age 55 with 15 YOS (with restrictions), age 60 with 10 years of service, or age 60 with 5 years of service (with conditions)). Those who are part of the basic plan and have 30 years of service can retire at age 55. Learn more about pension eligibility.

I am ending my public school employment. Can I get a benefit?

You can keep your contributions or receive a reimbursement if you leave school employment before retirement age. If you have vested rights, you should keep contributing and delay retirement. Study up on delayed retirement.

Pros & Cons

Final Thoughts – Maryland Teachers Retirement

With the proper planning and strategic investments, Maryland Teacher Retirement System can be an invaluable resource for teachers preparing for retirement and looking toward a secure financial future.

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