When starting a new job, you often have many new things to learn and get used to: new commutes, new coworkers, different policies and procedures. Being successful in your new position requires you to get up to speed as quickly as you can. An item that’s often pushed off until later, but one that’s crucially important to achieving your long-term goals is understanding and maximizing your new retirement plan benefits.
The governmental, non-profits, contractors, and large health systems that make up the majority of employers in the healthcare world offer a wide array of benefits and retirement plans. The variety and seeming complexity can be overwhelming to anyone, whether you are a med school grad starting your first residency or an experienced PA making a move to a different hospital.
Ohio State University, in Columbus Ohio, provides a good example of this complexity. As a state university they employee faculty, university and hospital staff, as well as student employees. The subsequent variety of retirement plans offered can confuse even veteran healthcare workers with years of experience.
This variety can be confusing at first, but in the end provides a great opportunity for employees to contribute and save a ton for retirement in multiple different accounts. After reading this post you should have a better idea of what’s available when it comes to choosing an OSU retirement plan.
Key Points
- As an OSU employee you can fully contribute to three separate retirement buckets (and in some cases even a fourth!).
- For your “primary” retirement account employees choose between a pension version, for most staff this is OPERS the Ohio Public Employees Retirement System, or a defined contribution version the ARP the Alternative Retirement Plan, similar to a 403b.
- All employees can also contribute to a 403(b) plan and/or a 457(b) plan.
- Ohio State Employees don’t pay into Social Security. Your primary retirement account (OPERS, STRS, or the ARP) are meant to replace your social security benefit.
OSU classifies three types of employees: Faculty, Staff, Student
OSU places employees into three buckets: Faculty, Staff, and Student employees. Which bucket you fall into affects which OSU retirement plan you have access to. There are also scenarios where you could fall into multiple buckets. A surgeon at the OSU medical center would be classified as a staff employee, but if they were also teaching a course outside of their normal duties they could be classified as faculty as well.
Staff Employee Retirement Plans
Staff Employees will be automatically enrolled in the Ohio Public Employees Retirement System (OPERS) for their primary retirement plan, or they can instead opt out of participating in OPERS and choose the Alternative Retirement Plan (ARP) for their primary OSU retirement plan.
Staff can also contribute to a 403b and/or 457b. OSU calls these their Supplemental Retirement Accounts (SRA).
Some staff, where their salary exceeds the IRS and Ohio retirement system limits may even be able to contribute to the Retirement Continuation Plan (RCP)/415(m).
Faculty Employee Retirement Plans
Faculty Employees will be automatically enrolled in the State Teachers Retirement System (STRS) for their primary retirement plan, or they can instead opt out of participating in STRS and choose the Alternative Retirement Plan (ARP) for their primary OSU retirement plan.
Faculty can also contribute to a 403b and/or 457b. OSU calls these their Supplemental Retirement Accounts (SRA).
Some faculty, where their salary exceeds the IRS and Ohio retirement system limits may even be able to contribute to the Retirement Continuation Plan (RCP)/415(m).
Student Employee Plans
We will focus mainly on the retirement plans available to OSU Faculty and Staff in this post. Student Employees have access to similar OSU retirement plans and can choose to enroll or opt out of OPERS as well as contribute to the Supplemental Retirement Accounts.
Ohio Public Employees Retirement System (OPERS) Plan
- Available to Staff employees
- Can be like a pension or a 401k/403b depending on your choice
- Employees can opt out and choose the ARP instead
Staff employees can choose to participate in the OPERS plan. The base version of this plan is a defined benefit plan where employees receive retirement benefits calculated using their salary and years of service.
Employees can also participate in a member-directed version of OPERS and choose their own investments. In this version the employee assumes all of the risk and their retirement benefit is based on the growth in their investments.
In either plan employees contribute 10% of their eligible compensation to the plan and OSU contributes 14% of their eligible compensation. In the member-directed version, not all of the 14% employer contributions ends up in the employee’s account. 7.5% goes to their OPERS account, 4% goes into their OPERS Retiree Medical Account (RMA), 2.24% goes into the OPERS Traditional Pension Plan to fund past liabilities (required by law), and 0.26% goes towards administrative expenses.
There are also different limits on the amount that can be contributed to each of these accounts. The member-directed limit is pretty straightforward. The maximum that can be contributed each year is $66,000 combined from employer and employee contributions.
For the OPERS pension plan, the limit on contributions is based on your salary and when you were hired. Employees hired prior to 1994 get contributions based on up to $490k in earnings, and if you were hired after 1994 you make contributions based on up to $330k of your earnings.
State Teachers Retirement System (STRS)
- Available to Faculty employees
- Can be like a pension or a 401k/403b depending on your choice
- Employees can opt out and choose the ARP instead
The STRS retirement plan is very similar to the OPERS plan offering a defined benefit pension version and a defined contribution version, but unlike OPERS an employee can choose a combined plan that has pension and self-directed accounts.
OSU and the employee both contribute 14% of their eligible salary to the STRS plan. In the member-directed STRS plan 11.09% of employee contributions go to your STRS account and 2.91% goes to the STRS plan to fund past liabilities (required by law).
The total contribution limits ($66,000) and the eligible compensation limits ($490k if hired before 1994, $330k if hired after) are the same as the OPERS plan as well.
Alternative Retirement Plan (ARP)
- Available to both Faculty and Staff employees
- No pension option – only a defined contribution plan like a 401k/403b
If an employee doesn’t want to enroll in the OPERS or STRS plans they can set up an account with the Alternative Retirement Plan instead. The ARP only offers one plan type – a defined contribution plan similar to a 401k/403b.
Contributions to this plan are very similar to what an employee would contribute to their OPERS or STRS plan. Employees contribute 14% of their pay and OSU contributes 10% for staff or 14% for faculty. A portion of your employee contribution goes to OPERS or STRS as a mitigating rate to mitigate any negative impact on the state retirement system. The total employee/employer contribution limit is $66,000.
Additional Retirement Plans employees have access to
Along with an employee’s primary OSU retirement plan – whether that is OPERS, STRS, or the ARP – OSU employees also have access to a few supplemental retirement accounts. This is great news for employees looking to sock away even more money for retirement accounts as these supplemental accounts exist in their own retirement buckets and you can contribute to all of them at the same time.
Supplemental Retirement Accounts (SRA) – Traditional and Roth
- 403b plan (Traditional and Roth versions)
- 457b deferred compensation plan (Traditional and Roth Versions)
- Allows an additional $45,000 in retirement contributions ($22,500 in each account), $60k for those over 50 years old due to catch-up contributions
Along with one of the State pension plans and the ARP, employees are able to contribute to both a 403b plan and a 457b deferred compensation plan.
A 403b, similar to a 401k is a defined contribution plan where you (the employee) make contributions and select your investments. There are no employer matching contributions for either of these plans because OSU is already contributing to your primary retirement plan.
A 457b deferred compensation plan is another plan where you contribute your own money on a pre-tax or Roth basis and make your own investment decisions within the plan. Your contributions are technically income that you haven’t been paid yet and it’s held within a trust managed by your employer. If you want to learn more about 457b plans you can read this explainer article I wrote here.
The great thing about these plans is that they exist as 2 distinct retirement buckets and you can make the maximum contribution ($22,500 in 2023, plus an additional $7,500 if you’re over 50) for both of them. So that’s an additional $45,000 in retirement contributions you can make in these accounts, not counting what you are already saving in your primary OSU retirement plan.
Executive Retirement Plan – Retirement Continuation Plan (RCP)/415(m)
- Only available to select employees
- RCP and/or 415(m)
- A way or employees with salary greater than retirement plan limits to save more
The Executive Retirement Plan is only open to employees with salary and retirement savings needs higher than the retirement plan limits.
Wrap up and which retirement plan is right for you
As I said in the beginning of this post there are a lot of options to choose from when it comes to selecting your OSU retirement plan. But it really boils down to whether you’d rather have a pension and allow the state of Ohio to manage your investments for you, or if you’d like a plan where you have more control over your investments and assume more of the risk. And depending on how much you can contribute you can have both options – selecting OPERS for your primary retirement plan while also contributing to a 403b and/or a 457b plan.
For employees that plan to work at OSU for their entire career, and for 30 years or more, choosing the OPERS plan likely makes the most sense. But for individuals know they will be transferring to another employer or just aren’t sure, then choosing the ARP might make more sense since they will be able to bring their retirement contributions with them and roll them over into another plan.
No matter your situation, with all of the OSU retirement plan options, you are sure to find one that works for you.