Resignation timing affects health and pension benefits for school employees and teachers
Teachers and school employees in Plans 2 and 3 often ask us whether it’s better to retire in July (when they stop working) or in September (when their contract ends).
It’s all about the timing. Your resignation date will affect when you receive your cost-of-living adjustment (COLA) and your Public Employees Benefits Board (PEBB) retiree health insurance in retirement.
Retiree health insurance through the PEBB Program
While you’re working, the School Employees Benefits Board (SEBB) Program offers employer-paid health insurance options for teachers and school employees. When you retire, your employer-supported insurance ends. The PEBB Program provides retiree insurance coverage if you qualify and enroll no later than 60 days after your employer-paid COBRA or continuation coverage ends, but you will then be responsible for paying the Health Care Authority (HCA) for all your health insurance costs.
The two examples below show how a June 30 versus an Aug. 31 resignation date can affect your retirement and health insurance coverage. You must tell your employer which date you want.
July retirement example
You resign from your position effective June 30 so you can retire starting in July 2021:
- You’ll receive your pension benefit plus your salary for July and August
- The COLA will start in July of the following year (July 1, 2022)
- You won’t receive retirement service credit for July and August
- Health insurance coverage through SEBB Program will end after June 30
- You will be responsible for your health insurance costs for July and August
- If you’re eligible and meet PEBB’s procedural requirements, your retiree insurance coverage would start July 1
September retirement example
You resign your position effective Aug. 31 so you can retire starting in September 2021:
- Your pension benefit will start in September
- The COLA won’t go into effect until July 2023, but the one you missed will be banked. This means your COLA in 2023 could be bigger than it would have been if you had chosen to retire in July 2021.
- You’ll earn service credit for July and August (this doesn’t apply if you’re in TRS Plan 1)
- You’ll continue receiving SEBB Program insurance coverage in July and August
TRS Plan 1 only: Since you won’t earn additional service credit for July and August, and you likely have a pension based on many years of service, your pension payments for July and August could have a greater value than the difference in cost between the SEBB Program and PEBB insurance coverage for those two months. This could mean it makes more financial sense to resign your position at the end of June, then retire and begin PEBB retiree insurance coverage effective July 1.
In all the examples, eligible retirees can choose to purchase retiree health insurance through PEBB once their SEBB Program insurance coverage ends. Both programs are administered by HCA, which provides online information on SEBB Program employee plan costs and PEBB retiree plan costs.
How to decide
So which one should you choose? The answer is a personal one including:
- Costs – the cost of your current employer-paid benefits versus the cost of retiree health insurance coverage during the last two months of your contract
- Timing – when you want your COLA to start
You should think about what will work for you and remember to tell your employer, DRS and HCA whether you are resigning effective June 30 or Aug. 31.
If you have any questions about PEBB retiree insurance coverage, please call HCA at 800-200-1004, Monday through Friday, 8 am to 4:30 pm.
You can also visit HCA for forms, publications and more information or send a secure online message. You must setup a secure login to use this feature. This helps protect your privacy and sensitive health information.
If you have any questions about your retirement date or COLAs, please contact DRS.