The Judicial Retirement System (JRS) was established by the State of Alaska in 1963 as a separate retirement system for its judiciary and court system administrators. Many participants in the JRS also have benefits under PERS or TRS, but JRS benefits are tracked separately due to distinct differences between the systems. An overview of the JRS is below, but for more granular details, you should always consult the JRS resources on the State’s Division of Retirement and Benefits website.
JRS Defined Contribution Plan-
Otherwise known as your JRS pension benefit, this is intended to provide lifetime income after your working years, paid monthly. This benefit is subject to taxes, and you may see additional deductions depending on what benefits you choose upon your retirement (survivor benefit, long-term care, etc.). As outlined in the State’s JRS plan booklet (linked above), 7% of your salary is contributed annually towards your JRS pension.
Vesting of your JRS pension occurs after 5 years of creditable service (10 years for an administrative director of the Alaska Court System). You can review the definitions surrounding “service credit” in the link above, but it’s important to note that the JRS system maximizes your total service credit for pension calculations to 15 years, so additional service beyond that time will not increase your monthly or annual pension amount.
While the benefit formula within the PERS and TRS systems are capped at 2.5% for the later years of creditable service, your pension credit is 5% per year of service from day one. Given the 15-year maximum for service credits, your maximum pension benefit will be 75% of your monthly salary, subject to some limitations (see information in the link above). When estimating your pension benefit you can multiply your monthly salary by 5% (0.05), and multiply that number by your years of service. For example, a judge with a monthly salary of $12,000 and 8 years of service has an estimated monthly pension benefit of $4,800 ($12,000 x 0.05 x 8), which equals 40% of the current monthly salary.
You should receive an annual statement each fall providing you with information on your accrued benefits and how they may be paid out at a future date. It’s a good idea to review this annually to ensure accuracy.
It’s worth noting that covered health benefits do not include Dental-Vision-Audio (DVA) benefits or the State of Alaska’s Long-Term Care (LTC) benefits, for which you’d still have premiums deducted from your monthly pension checks if you opt-in to those plans.
Supplemental Annuity Plan (SBS)-
This plan is effectively your replacement for Social Security, which the State of Alaska opted out of beginning Jan 1, 1980. While Social Security, a federal program, guarantees a monthly income for the remainder of the recipient’s life, the state sponsored SBS account will have to be managed effectively to provide similar income over a similar period.
The contribution amounts for the SBS are consistent across employment tiers, with 6.13% of your wages matched by a 6.13% contribution from the State, up to the Social Security maximum wage base (which changes annually). In total, you’ll have 12.26% of your annual income contributed to this account.
How you choose to handle this account in retirement is also important, so consult your planner or financial professional to discuss the available options. Every dollar distributed will be subject to federal income tax, and there will be Required Minimum Distributions starting at the stipulated age (currently age 73).
JRS participants have a unique set of circumstances related to their SBS account. If a retired judge is included on the annual pro tempore (pro-tem) list, their SBS account is unavailable to them during their pro-tem tenure. They will not be able to take distributions from the account, and their SBS balance will be excluded from their annual Required Minimum Distribution calculations if they have reached their Required Beginning Date/Age. There are some unique planning opportunities related to pro-tem judges and their SBS account, but this will also require planning around supplementary resources in retirement.
Deferred Compensation Plan-
This plan is governed by IRC Section 457, but is akin to a private sector 401k plan, The Deferred Comp plan has similar annual contribution limits to a 401k, with some differences related to “catch-up” contribution options.
The contributions can be pre-tax, but the plan also has an after-tax (or Roth) option. It’s always good to consult your financial professional when deciding which of these options is best, based on your circumstances. Utilizing this plan can help ensure you have the necessary wealth to fund your retirement at the end of your career, particularly for pro tem judges for whom the SBS account is unavailable.
Generally Applicable:
Retiree Health Benefits- In addition to the pension benefits listed above, vested JRS retirees are also eligible for medical benefits provided at no additional cost to them. This would cover the premiums for coverage under the Alaska Retiree Health Plan, which begins when you start to receive pension benefits. These benefits are available to JRS members, spouses, and dependents.
Survivor Benefits- Upon your decision to begin the pension benefits, you’ll be asked about whether you’d like a percentage of your pension to be payable to a beneficiary (typically a spouse). While everyone’s situation is unique, it’s typical to opt-in to some level of survivor pension benefit. In addition to your chosen pension survivor benefits, JRS participants with at least 2 years of credited service may also be eligible for survivor benefits for a spouse or dependents if they die prior to normal eligibility for their JRS pension. Please consult your financial professional to discuss this further.
Cost of Living Adjustment (COLA)- In retirement, you may receive annual increases to your pension benefit if the salaries for active judges experience an increase. The JRS system will recalculate your benefits based on those new salary levels once the increase takes place.
Pro-Tem Notes- In addition to the notes above about the pro-tem impact on your SBS account, it will be important to understand the rules around returning to service in pro-tem status. You can find more information on page 34 of the JRS retirement application available on the State’s website. In a nutshell, retired judges over age 62 must have a 60-day separation from service before they can apply for pro-tem status. For retired judges under the age of 62, that separation requirement is 6 months. It’s also worth noting that the separation from service requirements for SBS access is also 60 days, so it may be possible to roll out the SBS balance before accepting a pro-tem position if those funds are needed to supplement your retirement income.
Investment Options- The SBS and Deferred Compensation plans are considered participant-directed accounts. You can choose the investments in your plan on your own (limited to the options available within the plan) or utilize the fund management options offered. You can also engage a financial professional to discuss how to best allocate your current account balance and future contributions. For the most part, you’ll see similar investments available between all three plans, though there are some minor differences.
Fees- The State of Alaska has done a good job of building plans with low internal costs (the same cannot always be said for private-sector retirement plans). The SBS and Deferred Comp accounts have a 0.11% annual fee, plus the internal investment option fees. The Deferred Comp plan also has a $35 annual administration fee for actively contributing employees ($25 annually for non-contributing employees).
Vesting- For both the SBS and Deferred Compensation accounts, your contributions are 100% vested immediately.
Taxes- Most of the dollars accumulated within these plan options are pre-tax, which means they’ll be fully taxable upon withdrawal from the account. The exception would be the Roth option within the Deferred Comp plan. Consult with your financial professionals to develop the appropriate distribution plan for your circumstances.
Other Savings- While not unique to your JRS employment, there are several other savings options available for you to meet your goals. Whether you contribute to an IRA, a Roth IRA, save to a traditional brokerage account, or utilize one of the many other savings vehicles at your disposal, planning for your future is of paramount importance for achieving the financial independence that most seek. Integrating your employer retirement accounts with any “outside” savings is critical to your financial plan.
As noted earlier, this is not an exhaustive analysis of the Judicial Retirement System but should give you an overview of the options for which you may be eligible. At The Planning Center, we want you to understand all your options. If you have questions or would like to consider a more comprehensive discussion and planning work, please contact us to schedule an exploratory conversation.
