Ohio Public University’s Alternative Retirement Plan (ARP):
What is ARP?
ARP is an alternative to OPERS/SERS/STRS for eligible faculty and staff at Ohio’s Public Universities. It provides a defined contribution (401k-like) program as opposed to a defined benefit (like the state pension or social security) program.
The program was legislated back in 1998 to provide University employees the opportunity to become more quickly vested, as to not lose as much of the employer contribution should they change employers in the future.
Who contributes to ARP and how much (as of August 2018)?
OPERS eligible Staff contribute 10% of their salary each pay period and the university also contributes 11.56% to the staff member’s retirement plan and is required to contribute 2.44% of salary to OPERS to finance unfunded liabilities, which are both contributed on a pre-tax basis.
SERS eligible Staff contribute 10% of their salary each pay period and the university also contributes 10.52% of the faculty member’s salary to his or her retirement plan and is required to contribute 3.48% of salary to SERS to finance unfunded liabilities, which are both contributed on a pre-tax basis.
STRS eligible Faculty contribute 14% of their salary to the retirement plan. The university contributes 9.53% of the faculty member’s salary to his or her retirement plan and is required to contribute 4.47% of salary to STRS to finance unfunded liabilities, which are both contributed on a pre-tax basis.
Who is eligible?
Staff and Faculty of Public Universities in Ohio who meet eligibility criteria, which are different for each institution so you should ask your HR department if you are unsure about your eligibility, who elect benefits within the first 120 days following their hire date. This election is irrevocable unless you leave public employment for more than one year or you fundamentally change positions (like changing from a Staff to a Faculty position).
Who should enroll in ARP?
Individuals who may leave public employment within the near future:
Vesting schedules are generally much faster with the ARP program (immediate to one year, depending on the university).* If you plan to leave within 5yrs. or think that you have decent probability of leaving public service then you should seriously consider electing ARP.
*Vesting refers to the employers contribution to the plan. If you leave an employer and you were 66% vested then you would lose 34% of the employer contribution and growth from the contributions when you transferred or withdrew your funds.
Individuals who want an asset rather then an income:
Some individuals may value the aspect of owning their retirement and having the freedom to invest it at their own direction. While a defined benefit program will only credit a member ~2.5-4.5%/yr. if they wanted a refund or transfer, a defined contribution plan (like the ARP) gives the participant the ability to invest their funds per their own direction, which could result in significantly more accumulation.
Furthermore, once retirement is reached, the participant may use the funds as desired and not in just a monthly check format. This also has the estate planning flexibility of allowing one to leave unused funds to children, grandchildren, extended family, and/or charities, which may not be available from the pension.*
*This may also run the participant the risk of running out of money before they die if they act without careful planning and execution.
Individuals who may not trust the future promises of the State Government:
As our governments accumulate more debt and take on greater future payment liabilities, there are some that would like to separate their financial futures from that of the general obligations of the state. Contributions that have entered a participant’s ARP account are no longer party to the obligations of the pensions and/or the state.*
*Except as future governments change tax law on taxable income as the funds within ARP are pretax, but under current law, they could not take ARP account funds to pay OPERS/STRS benefits.
What institutions can I enroll in ARP with rF as my advisor?
*No advice on this subject can be truly universal or objective, you should consult with your appropriate financial, tax, and/or legal advisor about your individual circumstance(s) before taking any action.
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