Transcript Retirement Presentation to Baton Rouge Firefighters

Retirement Presentation
Training Center
City-Parish
Employees'
Retirement System
CPERS
CPERS
About the Retirement Office
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$964 Million in Assets (12/31/12)
3,500 Active Members
2,800 Retired Members
Employee Contributions 9.5%,
Employer (GF 24.53%, SF 29.44%)
• Funded by EE and ER contributions
plus investment earnings
7 Member Board of Trustees
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Linda Hunt (Finance) – 389-3061
Chad King (Police) – 389-3877
Richard Sullivan (Fire) – Headquarters
Casey Cashio (Metro Council)
Mark LeBlanc (Metro Council)
Marsha Hanlon (Finance Dept.)
Investments
• Professionally Managed Portfolio
• Investment Consultant & Managers
• Diversified Portfolio - 55% Equities, 30%
Fixed Income, 15% Alternatives
• 72% Funded Ratio (2011)
• 2010 Performance of 15.76%
• 2011 Performance of -1.84%
• 2012 Performance of 13.60%
Pension Plans (2 basic types)
• Defined Benefit Plan:
Benefit amount based on a preset formula
Usually a lifetime benefit
Usually contributory by EE and ER
• Defined Contribution Plan:
Benefit based on contributed balance (457 plan)
Finite balance from which to draw
Withdrawals must coordinate with available funds
The Retirement Process
• Schedule appointment at CPERS 1 to 2 years prior to
target date to get benefit estimate(s)
• As DROP entry/Retirement date approaches:
Visit with Deferred Comp and Social Security if
applicable
Furnish required documents to CPERS
Birth Certificate(s) (member, spouse, et al)
Marriage License
Military documents
Divorce/Community Property Settlements
• Once benefit is selected, triple checked by staff and
approved by Retirement Board
The Retirement Formula
2.5% (<25 Years) OR 3.0% (>= 25 years)
X
Years of Creditable Service
X
Highest Successive 36 Months Average Salary
CPERS Monthly Benefit
Types of Creditable Service
• Actual City-Parish Service (Headstart, BREC,
DA, Fire Protection Districts, etc.) for which
contributions are received
• Prior Service – must be purchased if
refunded
• Some CETA Service (II and VI)
• Transferred Service
• Military Service – (3 years at no charge)
• Trade in of Accrued Sick and Vacation Leave
Creditable Service Issue
• Creditable service is given only for service for
which retirement contributions are received
(except for military and leave traded in)
• Also excluded are LWOP and NP hours
• Family Medical Leave and maternity leave
without pay are available for purchase as
creditable service
Transferred Service
• Members can complete an actuarial transfer of
service from other Louisiana public employee
retirement systems
• Contributions must be on deposit with the transferring
system
• Actuarial deficiencies may exist between systems
• Retirement percentage factors remain the same after
the transfer
• Sec. 457 (deferred comp) monies can be used to pay
deficiencies
Round to Next Quarter
Additional benefit (not mandatory)
Work one day into the quarter and receive credit
for the entire quarter
Example:
Employee hired August 6, 1988
Today (May 7, 2013) has 24 years, 9 months, 1
day of service
Could retire or enter DROP with 25 years (trading
in no accrued leave)
Accrued Leave = Retirement
Creditable Service
Conversion formula (1-for-1)
No. of hours / 8 = No. of days
No. of days / 20.67 = No. of months
Use .689 for partial months
Example:
500 hours of sick leave and 600 hours of vacation
Total of 1,100 hours available to trade
1,100 hours / 8 = 137.5 days
137.5 days / 20.67 = 6.65 months
.65 months = 19.5 days
1,100 hours = 0 years, 6 months, 19 days
Trading Accrued Leave
– 1-for-1
one day traded = one day retirement credit
no separation pay from Retirement Office
severance pay may be due from Department
– 2-for-1
two days traded = one day retirement credit
separation pay payable from Retirement Office up
to (960 hours)
Can be sick, vacation, or a combination
960 hours are not “banked” - balance must be on
the books at retirement date
severance pay may be due from Department
1 – For - 1
• For those who want to retire ASAP
• For those who want to enter and exit DROP
ASAP
• For those who are content with up to 960
hours of severance pay from their department
• In many cases, a 1-for-1 conversion results in
a higher benefit amount
2 – For - 1
• For those who trade in no leave
• For those who have an abundance of
accrued leave
• For those who value separation pay (up to
960 hours from CPERS)
• For those who find themselves with “too
much” service for a full term DROP
Benefits of Trading Accrued
Leave
• Adds to creditable service toward retirement
eligibility
• May add to highest average compensation for
use in computing monthly benefit
• With proper planning, can make full use of
accrued leave balances
Service Allowance
Retirement
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10 Years of Eligible Service
Age 55
2.5% Factor Per Year
50% Surviving Spouse Benefit
Additional Surviving Spouse Benefits
Available
• 3-Year DROP Participation Eligibility
• Supplemental Funding of DROP
Service Allowance
Retirement
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25 Years of Eligible Service
Any Age
3.0% Factor Per Year
50% Surviving Spouse Benefit
Additional Surviving Spouse Benefits
Available
• 5-Year DROP Participation Eligibility
• Supplemental Funding of DROP
What is DROP?
• Contractually agreed upon pre-retirement program
that allows the member to accumulate from 2 to 5
years’ benefit amounts in an interest earning account
while remaining employed
• It carries penalty provisions if the terms are violated
by the member
• It is available beginning at 10 years of service if age
55 or older – 3-year participation
• It is available beginning at 25 years of service at any
age, and unavailable after 30 years of service
• Years of service + DROP participation <= 32 years
DROP Interest Rate
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5-year rolling (geometric) average
Based on CPERS’ investment earnings
Protection of principal (rate no lower than zero)
2012 rate of 0.5%
2013 rate of 1.2%
The 5 rates now in the average are:
10/1/07 – 9/30/08
-15.8%
10/1/08 – 9/30/09
1.1%
10/1/09 – 9/30/10
11.9%
10/1/10 – 9/3011
-0.2%
10/1/11 – 9/30/12
17.1%
DROP Example
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Assume $3,000 per month benefit
Assume 5.0% DROP interest rate
DROP principal = $180,000 ($3K X 60 mos.)
DROP interest = $24,887.33
Total DROP after 5-year participation =
$204,887.33
Survivor Benefits
Automatic 50% spousal benefit - no cost
Option 1 Benefit – Can purchase a refund of
contributions (net of benefits paid)
Option 2 Benefit - 75% and 100% spousal benefit
options available. Benefit reduction based on life
expectancies of member and spouse (Pop-Up
benefit can be purchased)
Option 3 Benefit - Can purchase a survivor’s benefit
for a child, grandchild, etc.
55 - The Magic Retirement
Age (non public safety)
• If you are age 55 or older in the year in which
you retire (not enter DROP):
no mandatory withdrawals from DROP
no restrictions on DROP withdrawals
rollovers possible at any time
Mandatory DROP withdrawals kick in at age
70.5
Mandatory DROP Distributions
If Retirement Age is < 55 (<50 public safety)
Option 1
Based on age at retirement and DROP balance
Amount is adjusted each year until age 59.5
Option 2
Also based on age at retirement and DROP
balance
Approximately 3 times the option 1 amount
Amount must remain unchanged until age 59.5
Option 3
Any amount in-between
Supplemental Benefit Payment
SBP
Paid if excess investment revenues available
Must be authorized by the Retirement Board
Non-recurring lump-sum payment
Minimum amount of $600 or less
Maximum amount of $1,200 or less
Based on: number of years retired
number of years of service
participation in DROP
receipt of RBA
Former Spouse Issues
• Can assert a right to your CPERS benefit if:
• Legal marriage existed during years of employment
covered by CPERS
• No community property settlement has been
executed protecting member’s benefit rights
• Benefit split is done according to the Sims vs. Sims
formula:
Number of years of community during employment
Number of years of creditable service
X 50%
Social Security Concerns
• Members should be aware of the
Government Pension Offset – GPO
• Members should also be aware of the
Windfall Elimination Provision – WEP
• CPERS has no control or jurisdiction over
these laws
• Members should visit Social Security Office
after receiving a CPERS benefit estimate
Decisions at DROP entry or
Retirement without DROP
• Date of DROP entry or retirement (payroll
ending date)
• Amount and type of leave to trade in
• 1-for-1 or 2-for-1 option
• Survivor options
Decisions at Retirement After
DROP
• Severance and/or separation pay (take
receipt, rollover, or supplement DROP)
• Supplemental funding of DROP (mandatory
vs. elective)
• Mandatory or elective DROP distributions
(rollover anytime if =>55 and one-time shot if
<55 (<50 for public safety))
• Direct deposit
• Federal tax and other deductions
Other Considerations
Plan retirement around:
Earliest eligibility
Best use of accrued leave
Target monthly retirement amount
Job promotion
Your spouses retirement date
Your childrens’ education
Age 55
Other employment opportunity
Helpful Tips
• Use vacation leave instead of sick leave since
sick leave has no maximum
• Never deplete leave balances when entering
DROP
• If possible, retire early in year to minimize tax
effects of severance/separation pay
• Transition into retirement gradually to make
the process smooth for you and your
employer