Frequently Asked Questions - Guide to Retirement
We recommend that you notify your Human Resources Department of your intent to retire first. These discussions should take place about 2 - 3 months prior to your expected retirement date, or as soon as you know you plan to retire.
Before you decide to retire, you should contact your retirement plan administrator. If you participate in the State Employee’s Retirement System (SERS), you can contact them at 1-800-633-5461. If you participate in TIAA, you can contact them at 1-866-842-2173. Your plan administrator can provide assistance to prepare you for retirement by taking into account a variety of factors including your age, number of years of service, and savings.
We realize that many facing retirement underestimate their net retirement income by overlooking the fact that items currently deducted from the paycheck will no longer be withheld in retirement. Taking these withholding items into account can significantly increase your projected spendable income. For instance, in retirement, you will no longer have Social Security and Medicare taxes withheld from your retirement checks. These two taxes amount to roughly 8% on income up to $106,800 annually, and 1.6% on incomes above that.
In addition, you also will not have unemployment insurance, long-term disability, parking, and likely life insurance withheld from your retirement checks. Another big deduction that will not occur with a retirement check is your SERS or TIAA monthly contribution, depending on which retirement plan you participate in. In Pennsylvania, retirees do not pay either state or local income tax on retirement income.
Currently, Penn State's practice is to allow retiring staff to request the payout of unused vacation/sick time in the month of retirement or the month following. For December retirements, all pay needs to occur in the same tax year, so the practice of allowing unused vacation/sick to be paid the month following retirement is only applicable for months other than December.
Effective with June 2017 retirements all unused vacation/sick will be paid in the same month as the final paycheck.
Sick time is paid at a rate of up to 12.5 or 17 days, based on your number of years of service.
Deductions taken from a vacation and/or sick time payoff are limited to taxes only. However, if you are enrolled in a supplemental retirement program, the Long-Term Care benefit, or have other charity deductions (i.e. United Way), you will have a deduction taken from the final check. If you do not want these deductions, you will need to complete the appropriate paperwork to stop deductions.
Checks will be automatically deposited into your account that is set up currently with the payroll office.
If you are retired prior to being Medicare eligible, you have remained in an “active employee” health plan. At the time you (or a covered dependent) become Medicare eligible, you will need to contact your local Social Security office to enroll in Medicare Parts A & B. This process should be done 2-3 months prior to turning age 65. You need to enroll in Medicare Parts A and B in order to participate in the Medicare-eligible health plan through the University. Please see socialsecurity.gov for details about Medicare and secure.ssa.gov for information about contacting your local Social Security office.
In addition, you will receive a Freedom Blue and an age-in letter from Penn State in addition to receiving a Freedome Blue Medicare plan packet from Highmark approximately 60 days prior to turning age 65. Please be sure to include a copy of your Medicare card with the Freedom Blue application.
Note: You must be enrolled in Medicare Parts A and B to be eligible for Medicare medical coverage through the University. Prescription drug coverage is included in the Freedom Blue PPO. You do not need to elect separate Medicare Part D drug coverage; the Medicare medical coverage through Penn State includes a comprehensive Part D prescription plan. If you enroll in a separate Part D drug plan, you will invalidate your Penn State coverage.
If you are an active employee at the time you become Medicare eligible (turning 65 in most cases), and you are not retiring at that time, you DO NOT want to enroll in Medicare Part B. If you plan to enroll in the PPO Savings Plan (high-deductible health plan) with the Health Savings Account (HSA) at any time in the future as an active employee, you should also not enroll in Part A. IRS regulations prohibit anyone in Medicare Part A or B from owning a Health Savings Account.
The “active” health plan will continue to be your primary coverage while still an active employee. If your spouse is retired from their job, but you are still an active employee at Penn State and cover your spouse on your health plan, that individual would remain covered through the Penn State medical plan as their primary coverage and would not need to enroll in Medicare Part B until such time that you, the Penn State employee, chooses to retire. Once you decide to retire, at that time you need to contact your local social security office to enroll in Medicare Part B and/or Part A. This would apply to your spouse as well, if that person is Medicare eligible at the time of your retirement.
Contributions to flexible spending accounts end at your retirement date; however, you are eligible for reimbursement for any expenses that were incurred on or before your retirement date. You have 90 days from the date of retirement to submit receipts for reimbursement.
Questions about the flexible spending account should be directed to HealthEquity, who is our FSA administrator, at 1-866-346-5800. You can also manage your FSA online via My HealthEquity.
Regardless of which health plan an employee is enrolled in at the time of retirement, the funds in the HSA are theirs to keep for future eligible expenses. All questions regarding using HSA money after retirement should be directed to. Health Equity at (866) 346-5800.
You may choose to keep the same plan in which you are currently enrolled into retirement, or you have the ability to switch plans at the time you retire. If you are Medicare eligible at the time you retire, you will need to enroll in Medicare Parts A & B and then be enrolled in the University's Medicare plan, Highmark Freedom Blue PPO.
Each October, retirees receive updates on rate or coverage changes through mailings to your home address, or you can visit the retiree section of the Employee Benefits website. It is important to keep your contact information with the University updated to ensure that you are receiving all mailings regarding important updates.
Will I be able to get my flu shot at University-sponsored faculty/staff flu vaccine clinics after retirement?
Once retired, your annual flu shot is covered through the medical plan by Highmark Blue Shield, rather than through the University-sponsored faculty/staff clinics. You should schedule your flu shot with your personal physician.
How do I update my address, marital/family status, and beneficiary designation with Penn State after retirement?
Contact the Employee Benefits office for any of these events. Address updates made with our office will also transfer to any applicable insurance carriers. Please notify other necessary University offices directly to ensure that they have updated information.
When adding or removing a dependent from medical insurance, please notify Penn State Employee Benefits as soon as possible, in order to ensure accuracy of the retiree’s medical insurance bill. You will need to complete a Retiree Request for Change form and scan/email it to firstname.lastname@example.org or mail it to our office.
Changes to beneficiaries can be made anytime by contacting HR Services at 1-814-865-1473. Once the applicable information is obtained for your request, a Penn State Employee Benefits representative will provide you with the correct form for changing your beneficiary.
If you do not meet the medical plan participation criteria, but meet the years of service criteria, you will be considered a Retiree, but will not carry the medical plan into retirement.