The Educational Retirement Act is a defined benefit plan. The benefit received upon retirement is defined by a prescribed formula, which may only be altered by the New Mexico State Legislature.
Earned Service Credit
Service credit is earned when you are employed at SJC greater than .25 FTE. Credits are accumulated on a quarterly basis.
- Participation in the retirement program is a condition of employment.
- Employer contribution is 11.65% of gross earnings.
- Employee contribution is 7.9% of gross earnings and is tax deferred.
Allowed Service Credit
- Up to five years of allowed service credit may be purchased if you have been an administrator, teacher or employee in one of the following: any public educational system in the United States; any U. S. Military Dependent School; any accredited private school or Federal Education program in New Mexico. The current cost to purchase allowed service credit is 12% of member’s current annualized New Mexico salary for each year of credit that you wish to purchase. The amount of time you can purchase in a single year is governed by IRC Section 415 (c): you can purchase the lesser of 25% of your wages or $30,000 in a single fiscal year. Includible wages equal gross wages, less cafeteria plan contributions, less any tax sheltered annuity amount. [Note: Peace Corps and Job Corps service do not qualify as allowed service credit.]
- Up to five years of active military service may be purchased if your payment is made within three years of the effective date of coverage under the Educational Retirement Act. Current cost to purchase military service is 10.5% of member’s average annual salary for all years of covered employment for each year purchased.
Effective July 1, 1998, members can purchase out-of-state service in two ways: (1) Members can payroll deduct, on a pre-tax basis, payments for the purchase of allowed service credit. Payments can be spread over a 12-month period. (2) A roll-over provision which will allow for the transfer of retirement contributions from one plan to another, as allowed by the IRS. ERA is a 401(a) plan and funds can only be rolled over from another 401(a) plan.
Restoration of Contributions
If you have previously withdrawn your ERA contributions, you may restore service credit by paying the amount that you withdrew plus interest, compounded annually from the date of withdrawal to the date of payback. To determine the exact amount due, you will need to correspond directly with the Educational Retirement Board, P O Box 26129, Santa Fe, NM 87502-6129.Retirement Eligibility
In order to receive an ERB retirement, you must meet one of the following criteria:
- Rule of 75. When your age plus the number of years of earned service credit equals 75
- Age 65 if you have a minimum of five years of earned credit
- 25 years of earned or a combination of twenty-five years of earned and allowed service credit.
- The annual benefit is equal to 2.35% of the average of the five (5) highest consecutive years of salary multiplied by the number of years of service (earned and allowed credit).
- Benefit may be reduced by election of an option that guarantees continuous income to a surviving beneficiary.
- The benefit may also be reduced if the member has less than 25 years service and is less than age 60.
Your beneficiary may be any individual(s) who has a vested interest in your life. You may change the beneficiary at any time prior to retirement. In the event of your death, your beneficiary should contact the SJC Benefits Office.
Upon termination, you may make application for a Refund and/or Roll-over of your contributions at the Human Resources Department.. You will receive interest on those monies that have been on deposit for at least one year. [Note: You will not receive any SJC contribution.] The Unemployment Compensation Amendment of 1992 requires a mandatory 20% withholding of federal taxes on refunds unless the funds are transferred to another custodian or agent using a direct rollover. You have one of the following three options:
Direct Partial Roll-over
If you do not roll-over the refunded monies into another custodian or agent account using direct roll-over (e.g., an IRA), contributions may be subject to a 10% penalty for withdrawal on your income taxes if you are under the age of 59-1/2.
For more information, click on the ERB webpage at www.era.state.nm.us, or call them (505) 827-8030.