The KPERS benefit formula

The multiplier

• KPERS 2: 1.85% for every year. Membership Guide, p. 13; Pre-Retirement Guide, p. 8
• KPERS 1: 1.75% for years before January 1, 2014 and 1.85% for years from then on. Purchased service counts at 1.75%. Membership Guide, p. 13, Calculating Your Retirement Benefit and Statutory Multiplier; Pre-Retirement Guide, p. 8

KPERS's examples

How KPERS counts years and age

Your age is your age at your last birthday. Extra months don't count. Service is counted in quarters; a remainder of two or three quarters rounds up to a full year, one quarter rounds down (9.5 years counts as 10). The rounded years are used both to qualify and to calculate the benefit. Membership Guide, p. 12, When Can You Retire? ('Your age is your age at your last birthday. Additional months do not count. However, the last two quarters of your years of service round up. (Example: 9.5 years rounds up to 10 years of service.)'); Pre-Retirement Guide, pp. 6-7

Final average salary

• KPERS 1: Members whose membership date is on or after July 1, 1993: the average of the 3 highest years of salary (no leave payouts).Membership Guide, p. 13 ('Highest 3-year salary average (12 quarters)'); Pre-Retirement Guide, p. 8
• KPERS 1: Membership date before July 1, 1993 (or in your 'year of service' wait on that date): the higher of your highest 3-year salary average (12 quarters) or your highest 4-year average including 'add-on pay' (unused sick and annual leave payouts). KPERS calculates both. Add-on pay is spread over the days you worked in the calendar year you retire. School employees under continuing contract can include add-on pay only if they stay on payroll to the end of the contract. Early retirement incentives and severance pay never count.Membership Guide, p. 13, Final Average Salary; Pre-Retirement Guide, pp. 8-9
• KPERS 2: The average of the 5 highest years of salary from any participating service.Membership Guide, p. 13 ('Highest 5-year average (20 quarters)'); Pre-Retirement Guide, p. 9
• KPERS 1: When pay in substantially the same position rises more than 15% between two consecutive years used in the FAS, the excess over 15% is left out (and the member's contributions on it are returned). Reclassification to a higher range and, for 'compensation', leave payouts are not capped.Membership Guide, p. 13, Final Average Salary Cap (15%); Pre-Retirement Guide, p. 9
• KPERS 2: When salary in substantially the same position rises more than 7.5% between two consecutive FAS years, the excess is left out (and contributions on it returned). Leave payouts are not counted (KPERS 2 uses 'salary').Membership Guide, p. 13, Final Average Salary Cap (7.5%); Pre-Retirement Guide, p. 9
• The highest years can come from any point in participating service ('any three years of participating service preceding retirement or termination').Membership Guide, p. 13; K.S.A. 74-4902(17)

The formula gives your maximum benefit at full retirement. Retiring before then cuts it (see Retiring early), a survivor or lump-sum choice lowers it (see Payment options), and each extra year raises it (see One more year?). Open the calculator with Dan's numbers to see it worked out.

Everything KPERS says about the formula

• Check with KPERSKPERS 1: Yearly benefit = final average salary x (1.75% x years of participating service earned before January 1, 2014 + 1.85% x years earned on or after January 1, 2014) + 1% x final average salary x years of prior service. Purchased service is credited at 1.75%. Paid in equal monthly installments.Membership Guide, p. 13, Calculating Your Retirement Benefit and Statutory Multiplier; Pre-Retirement Guide, p. 8The 1.75%/1.85% split depends on service earned before January 1, 2014. Without the member's split, the engine assumes continuous full-time service from the hire date.
• KPERS 2: Yearly benefit = 1.85% x final average salary x years of participating service, for all service, for members retiring on or after July 1, 2012 (normal or early).Membership Guide, p. 13; Pre-Retirement Guide, p. 8
• KPERS's KPERS 1 example: $40,000 x 1.75% x 20 years = $14,000, plus $40,000 x 1.85% x 10 years = $7,400, for $21,400 a year ($1,784 a month).Pre-Retirement Guide, p. 8, KPERS 1 Example; KPERS 1 & 2 webinar, slide 16 ($1,167 + $617 = $1,784 a month)
• KPERS's KPERS 2 example: $40,000 x 1.85% x 30 years = $22,200 a year ($1,850 a month).Pre-Retirement Guide, p. 8, KPERS 2 Example; KPERS 1 & 2 webinar, slide 17
• Each year an additional interest credit ('dividend') is posted around March 31 on the December 31 balance of each account: 75% of the five-year average net compound return on the market value of KPERS assets above 6%. For 2015-2018 the average ran from 2015 and the dividend was capped at 1.5%; from the December 31, 2019 balance on there is no cap. If the 5-year average is 6% or less, there is no dividend.2025 actuarial valuation, p. 153 (dividend = 75% of the five-year average net compound return above 6.0%); K.S.A. 74-49,306(b)
• Recent KPERS 3 dividends: 2021: 3.525%; 2022: 0%; 2023: 1.875%; 2024: 0.675%; 2025: 0.975%. KPERS's actuary assumes 2% a year on top of the 4% guarantee.2025 actuarial valuation, p. 153 (schedule of dividend rates); 2025 actuarial valuation, p. 2 (2025: 7.3% average, 0.975% dividend)
• Check with KPERSThe annuity factors use a 5% interest rate (the assumed investment return minus 2%) and life with 10 years certain. The only factor KPERS ties to an age is 13.061217 at age 66; KPERS doesn't publish the table for other ages.2025 actuarial valuation, p. 173 ('KPERS 3 Annuity Factors: Payment Form: 10-year certain and life; Interest Rate: 5.00%')Only one KPERS 3 annuity factor is tied to an age: 13.061217 at 66 (KPERS 3 Plan Design, 2024). The webinar's 12.2625 has no age. The valuation (p. 173) gives the basis (5.00%, life with 10 years certain, blended mortality) but no table.

Questions

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