What is the difference between a pension and an Annuity Savings Account benefit?
As a PERF-covered employee, you receive two interlocking benefits as part of your compensation: the pension (defined pension benefit) and the Annuity Savings Account or ASA (defined contribution benefit).
The two benefits are different in how they are funded, how they are paid after you retire, and what you may take with you if you leave PERF-covered employment before you retire. With both benefits, however, the longer you work for an employer who participates in the Fund, the greater your retirement benefit will be. As long as you are working for a PERF-covered employer, you cannot receive payments from either benefit.
The pension benefit is paid only to those who are eligible because they have accumulated at least 10 years of covered service and have reached an eligible retirement age. Pensions are paid in equal monthly amounts for life.
The ASA is a tax-deferred account administered by PERF in an employee’s name. The account increases through mandatory, and possibly voluntary, contributions. The ASA belongs to the employee, and may be paid out as part of a retirement, as a distribution if the employee leaves service, or may be left invested with PERF.
Important terms to remember:
- A PERF-covered position is any job for which an employer participates in the Public Employees' Retirement Fund and pays the defined benefit pension for that particular position.
- Creditable service is each period of continuous employment in a covered position. In addition, you may be entitled to service credit during military service and certain types of leave. Creditable service determines your qualification for benefits.
- Vested means the right to receive a benefit from a retirement fund at a future date when you become age eligible.
- Tax-deferred account means income taxes are not owed on funds in the account to the state or federal government until funds are removed from the account. Payouts before age 60 will result in a penalty payable to the Internal Revenue Service in addition to income taxes that may be owed on the funds.
