The NMERB plan is a Defined Benefit Plan.
That means, both you and your employer contribute a certain percentage (you from your salary, employer from its funds) towards your retirement plan. When you are eligible to retire, you receive a gross monthly, lifetime benefit that is currently based on the following formula:
Final Average Salary (FAS) x Years of Service x 2.35% pension factor (Tiers 1 thru 3)= Gross Annual Benefit.
Your Final Average Salary (FAS) is the average of your highest consecutive five years’ salaries. You have three benefit payment options:
Straight Life Benefit If you select this option, your monthly benefit is the full amount due you under the “FAS x service credit x .0235 (Tier 1, 2 & 3)” or “FAS x service credit x Tiered Multiplier (Tier 4)” formula. Option A is a life only annuity; meaning your pension payments end upon your death. There is no monthly survivor benefit under this option. In limited instances, your beneficiary or estate will receive the balance of your contributions to the plan if they have not been fully distributed to you in retirement benefits prior to your death. Generally, retiree contributions are exhausted within three to five years after retirement starts.
Joint 100% Survivor Benefit Under Option B, your monthly benefit is reduced to provide a designated beneficiary with a 100% survivor’s benefit for the remainder of his or her life. The monthly benefit is based on your age and your beneficiary’s age at the time of your retirement. If you plan on selecting a non-spouse as your beneficiary, they cannot be more than ten years younger than you. If your beneficiary dies before you, upon receipt of their death certificate, your monthly benefit will increase to the amount you would have received under Option A: Straight Life Benefit.
Joint 50% Survivor Benefit Under Option C, your monthly benefit is reduced to provide a designated beneficiary with a 50% survivor’s benefit for the rest of his or her life. If your beneficiary dies before you, upon receipt of their death certificate, your monthly benefit will increase to the amount you would have received under Option A: Straight Life Benefit. If you select Option B or C, you may name only one beneficiary and your beneficiary must be a person or, effective June 16, 2023, a supplemental needs trust. A supplemental needs trust is a third-party irrevocable trust that is authorized by the federal Social Security Act for the sole benefit and lifetime of a trust beneficiary who is disabled and is created for the purpose of providing, accounting for or receiving supplemental assets that do not supplant, impair or diminish any benefits or assistance of any federal, state or other government entity for which the beneficiary would otherwise be eligible. You may not name other types of trusts or other entities as the beneficiary. Prior to retirement, you may change your beneficiary at any time. Keep the information about your designated beneficiary current on your NMERB account.
Because both Options B and C provide for payments to your beneficiary after your death, your benefit will be reduced based on actuarial data. In Option B or C, you are choosing a lifetime benefit for the beneficiary in the event he or she outlives you.
Under the provisions of Options B and C coverage, the beneficiary must be a person, and only one beneficiary may be named. In accordance with the ERA, the term beneficiary means a person having an insurable interest in the life of the member.
Additional information and the approximate benefits payable in individual cases may be obtained from the Educational Retirement Board office.
Options Before Retirement
Any member who has accrued at least five years of earned service credit is entitled to the coverage of Option B from that point to the point of actual retirement, provided that the member’s contributions remain in the fund. This coverage provides protection of funds to the beneficiary in the event of the member’s death prior to actual retirement. Under the Option B coverage provided, the member must name one beneficiary; however, that named beneficiary can be changed as often as needed prior to the member’s actual retirement.
If a member who has chosen the Option B coverage should die prior to actual retirement, the deceased member’s retirement benefit would be computed as of the first of the month following the date of death, and the appropriate benefit due the beneficiary may be commenced as of that date. The beneficiary may choose to defer receipt of the deceased member’s benefit to any future date up to the date on which the deceased member would have become age 60, had he or she lived.
If the deceased member was under age 60, and did not have 25 years of service, deferring the benefit to a future date will result in a higher benefit to a beneficiary since the annuity is reduced for the member’s age at death. The surviving beneficiary, in any case, would have the right to withdraw the member’s contributions plus interest in lieu of the monthly benefit.
An example of a death benefit follows: A member dies at age 42 with 15 years of service. An initial benefit of 35% of FAS is calculated. The reduction on the amount is 2.4% for each year under 60 and 7.25 for each year under 55.
2.4% x 5 = 12% and 7.2% x 13 = 93.6% + 12%.
The reduction leaves the beneficiary with no income if they want the benefit immediately. Waiting until the member would have been 50, yields a 48% penalty, age 55 a 12% penalty, and age 60 no penalty.
A member eligible for Option B coverage may reject such coverage by completing the appropriate form. In the event of the death of a member prior to retirement who does not have Option B coverage, the beneficiary or the member’s estate would receive the member’s contributions plus interest.
Managing the retirement assets of New Mexico Educators since 1957.
701 Camino de los Marquez
Santa Fe, NM 87505
PO Box 26129
Santa Fe, NM 87502
Email or call ahead for an appointment.
8500 Menaul Blvd. NE, Suite B-450
Albuquerque, NM 87112