With the state recently announcing a new voluntary separation incentive program, a common discussion in the office where I work has been: “When are you retiring?”
Seventeen state agencies have opted into the program. The participating agencies will need to pay for the program out of their own budgets, and there is the expectation that each agency will experience savings by leaving the position open for a period of time or hiring a new employee at a lower cost.
Most state agencies have struggled to recruit and retain staff, so I’m not surprised by the relatively low number of agencies participating.
Employees should have a good understanding of their health and retirement benefits and the options available to them.
The North Dakota Public Employees Retirement System (NDPERS) defined-benefit main plan has three tiers, which provide different retirement dates and multipliers.
- Tier one (hired prior to 2016) — offers early retirement at age 55 with a 6% reduction and a rule of 85 (age and years of service) or 65 with a 2% multiplier;
- Tier two (hired Jan. 2016 – Dec. 2019) — offers early retirement at 55 with an 8% reduction and a rule of 90 with a minimum age of 60 or age 65 with a 2% multiplier;
- Tier three (hired after Jan. 2020) — early retirement at 55 with 8% reduction and a rule of 90 with a minimum age of 60 or age 65 with a multiplier of 1.75%.
The three tiers do not provide employees with inflationary adjustments, so your pension will remain constant throughout your retirement years. Without an inflation adjustment, a retiree’s spending power will decrease over their lifetime. The defined benefit plan provides an employee with a modest retirement and should be supplemented with Social Security and the employee’s personal savings.
Without inflation adjustments, one way you can increase your retirement income is to make contributions to a 457 deferred compensation plan or 403(b) plan. The NDPERS plan allows contributions as low as $50 per month, and with the Portability Enhancement Provision (PEP), employees will be transferring up to 4% of the state’s contribution to the employee’s retirement bucket. The money in the employee’s retirement bucket belongs to the employee, providing transferability should you choose to leave employment with the state or your political subdivision.
The balance in your retirement bucket can also be used to purchase service credit to help you meet your rule or to increase your years of service, which will increase your monthly pension payment. Contributions to your deferred compensation plan over a period of years will increase your savings and provide you with options as you approach retirement.
Prior to January 2026, only pretax contributions were available for NDPERS deferred compensation plans. Starting in January 2026, employees can now choose to make contributions pre-tax (which lowers taxable income) or post-tax through a Roth IRA where the earnings are tax-free upon withdrawal.
The NDPERS website is a great resource to learn about your retirement benefits and the options available to you. Run an estimate to see your monthly retirement benefit based on the assumptions you provide. Be prepared for the life you want to live after your working career.
