SACRAMENTO COUNTY EMPLOYEES RETIREMENT SYSTEM ( SCERS ) Important Information, Resources & Issues for Advanced Career Members

Transcription

1 SACRAMENTO COUNTY EMPLOYEES RETIREMENT SYSTEM ( SCERS ) Important Information, Resources & Issues for Advanced Career Members Presenter: John W. Gobel, Sr. Chief Benefits Officer Session: September 19, 2012 Slide 1

2 OBJECTIVES 1. Review Existing Plan Rules and Select Changes under California Public Employees Pension Reform Act of 2013 ( PEPRA ), which the Governor signed last week. 2. Discuss Estimated and Final Benefit Calculations 3. Address Benefit Elections and Other Retirement Decisions 4. Identify Common Mistakes by Retiring Members Slide 2

3 PLAN PROVISIONS Eligibility & Enrollment Covers regular employees of Sacramento County and 12 other participating employers. Enrollment is automatic, but persons hired on after age 60 may opt out. Contributions are required for all periods of regular employment, which is generally limited to 40 hours per week. Slide 3

4 PLAN PROVISIONS Membership SCERS provides benefits for 2 different memberships: Safety - Applies to job classifications whose principal duties involve active law enforcement or fire suppression. Miscellaneous - Applies to job classifications and bargaining agreements that do not confer Safety retirement. Slide 4

5 PLAN PROVISIONS Membership (cont d) Membership tiers dictate benefits at retirement: Safety Tiers 1 & 2 Based on Government Code and provides 3% at 50 benefit. Miscellaneous Tiers 1, 2 & 3 Based on Government Code and provides 2% at 55 ½ benefit. Safety Tier 3 Based on Government Code and provides 3% at 55 benefit for new County hires. [2012 change negotiated with County.] Miscellaneous Tier 4 Based on Government Code and provides maximum benefit of 2.43% at age 65 for new County hires. [2012 change negotiated with County.] Slide 5

6 PLAN PROVISIONS Membership (cont d) Membership tiers may need to expand in 2013 to reflect changes mandated by PEPRA. Safety Tier 4 Possible addition would apply to new members on and after 1/1/2013, consider Government Code (d), and provide 2-½% at 57 benefit. Miscellaneous Tier 5 Possible addition would apply to new members on and after 1/1/2013, consider Government Code , and provide maximum benefit of 2.50% at age 67. Slide 6

7 PLAN PROVISIONS Member Contributions Employee contributions are subject to applicable tax law, which does not allow cancellation of these tax-deferred contributions. Employee contribution rates consider individual s membership and tier. Current rates reach 5.02% for Miscellaneous Tier 3 members and 11.55% for Safety Tier 2 members. Employee contributions are limited to Compensation Earnable. Employee contribution rates are subject to increased costsharing under PEPRA, but immediate impact will be limited to any new required tiers. Slide 7

8 PLAN PROVISIONS Compensation Earnable Common Components for County Employees Regular Earnings Management Differential Shift Differential 7/12 Work Shift Premium One-Time Bonus 4850 Payments Disability Pay Animal Allowance Auto Allowance Clothing Allowance Equipment Allowance Food Allowance Incentive Pay Allowance Special Pay Allowance Vacation Cash-In and Vacation-Over-Max Payments received during employment. Slide 8

9 PLAN PROVISIONS Compensation Earnable (cont d) PEPRA requires exclusion of certain pay elements from Compensation Earnable on and after 1/1/2013. Sample of pay elements subject to exclusion: In-kind payments converted to cash during Final Compensation period. Bonuses and other ad hoc payments targeted to individual members. Payments received during employment for unused vacation if hours exceed what can be earned during 12-month period. Slide 9

10 PLAN PROVISIONS Vesting Vesting is the period of service required to earn employer-paid retirement benefits. Member of SCERS can become vested 2 different ways. 1 st Option: Complete equivalent of 5 full-time years of service with County or other participating employer. 2 nd Option: Work up to age 70, regardless of service. Slide 10

11 PLAN PROVISIONS Retirement Rules Vested members are eligible to retire from current tiers after certain milestones. 10 years of service and age 50 or older. [All members] 20 years of service, regardless of age. [Safety] 30 years of service, regardless of age. [Miscellaneous] Age 70, any years of service credit. [All members] For vested members, years of service can mean (a) total years of service credit or (b) combined years of service credit and years of separated service. All members earn service credit for periods that they contribute. Slide 11

12 PLAN PROVISIONS Tiers & COLAs Within both membership categories, individual tiers determine if retiree Cost-of-Living Adjustment ( COLA ) will be available. Safety Tier 1 Provides 3% at 50 retirement benefit to persons who retire on or after 6/29/03 and offers COLA up to 4% per year. Safety Tier 2 Provides 3% at 50 retirement benefit to persons who retire on or after 6/29/03 and offers COLA up to 2% per year. Safety Tier 3 Provides 3% at 55 retirement benefit and offers COLA up to 2% per year. Slide 12

13 PLAN PROVISIONS Tiers & COLAs (cont d) Misc. Tier 1 Misc. Tier 2 Misc. Tier 3 Misc. Tier 4 Provides 2% at 55-½ benefit to persons who retire on or after 6/29/03 and offers COLA up to 4% per year. Provides 2% at 55-½ benefit to persons who retire on or after 6/29/03 and offers no COLA. Provides 2% at 55-½ benefit to persons who retire on or after 6/29/03 and offers COLA up to 2% per year. Provides benefit and offers COLA up to 2% per year. Slide 13

14 PLAN PROVISIONS Final Compensation Final Compensation is key variable for calculation of monthly allowance at retirement. Other two variables are (a) Years of Service credit and (b) Age at retirement. Final Compensation is determined by averaging Compensation Earnable over a 1 or 3 year look-back. Safety Tier 1 & Misc. Tier 1 - Final Compensation considers 12-month period preceding retirement or other 12-month period requested by member. All Other Retirement Tiers - Final Compensation considers 36-month period preceding retirement or other 36-month period requested by member. Slide 14

15 PLAN PROVISIONS Final Compensation (cont d) Sets ceiling for member benefits, which are limited to 100% of Final Compensation Limit applies to all service accrued during participation in SCERS, including service through employment, service through purchase, and service assigned to a former spouse. Final Compensation only considers wages and other payments identified as Compensation Earnable which means that it excludes overtime, terminal payments and some other elements. Effective 1/1/2013, PEPRA will also require Board of Retirement to exclude elements paid for the (primary) purpose of enhancing individual retirement benefits. Slide 15

16 PLAN PROVISIONS Reciprocity Overview Members who work for a SCERS employer within 180 days of coming from or going to work with another public employer can use reciprocity to preserve and coordinate benefits across multiple public retirement systems. Advantages Reciprocal retirement systems consider same service history for vesting and eligibility for retirement. Reciprocal retirement systems calculate Final Compensation for all plans using highest wage experience. Slide 16

17 Restrictions PLAN PROVISIONS Reciprocity (cont d) Reciprocal members cannot receive benefits from SCERS while working for employers with other retirement systems. Reciprocal members must retire from all retirement systems for same reason, i.e., service or disability. Reciprocal members must retire from all retirement systems on same date to receive Advantages of reciprocity. Example Reciprocal member completes 4 years of service at System A and 6 years of service at System B. Because of reciprocity, both retirement systems recognize 10 total years of service and treat member as (i) vested and (ii) eligible to retire at 50. Slide 17

18 PLAN PROVISIONS Service Purchases Members can increase benefits through different permissive service purchases, including items listed below. Additional Retirement Credit ( ARC ) Available to active members with 5 years of service. Purchase option will close after 12/31/2012, so interested members must deliver completed purchase agreements by year-end and (i) provide lump-sum payment to SCERS or (ii) establish periodic payment plan with SCERS. Medical Leave-of-Absence Applies to periods of State Disability and Workers Compensation integration. Public Service Limited to prior employment with public agencies in Sacramento County. Redeposit Reserved for prior refunds from SCERS. Slide 18

19 Overview PLAN PROVISIONS Required Minimum Distributions Internal Revenue Code compels qualified plans to pay distributions to non-working members at age 70-½. Required Minimum Distributions ( RMDs ) must begin by April 1 of calendar year following attainment of age 70-½. Requirements of SCERS & Other Governmental Plans Issue first RMD no later than April 1 of calendar year following terminated member s attainment of age 70-½. Mandate normal or Unmodified payments for deferred, vested members who do not request benefits by deadline. Slide 19

20 BENEFIT CALCULATIONS What Are My Resources? Member Estimate - Worksheet in Service Retirement Packet Explains calculation process. Estimates allowance for Unmodified payment. Illustrates different age factors for retiring Safety and Miscellaneous members. Member Estimate - Retirement Planning Calculator on Web Extracts Final Compensation data for latest look-back period. [Requires password from Annual Statement.] Estimates allowance for Unmodified payment and 3 options. Shows Before and After numbers available for level income. Slide 20

21 BENEFIT CALCULATIONS What Are My Resources? (cont d) Staff Calculation Retirement Allowance Program ( RAP ) Considers Final Compensation data for latest look-back period or look-back period requested by member. Computes allowances payable for all payment options. [If applicable, includes actuarial review of Option 4.] Discloses present value of benefits provided by employee and employer contributions. Offered for review during Retirement Orientation process. Slide 21

22 NOTE: Instructions for Retirement Planning Calculator are available at HIGHLIGHTS 1. Members can override default Retirement Date & Final Comp. 2. Members can change service projection from Fulltime to other schedules. BENEFIT CALCULATIONS Estimates from Web Slide 22

23 HIGHLIGHTS (cont d) 3. Members can obtain optional estimates by entering Birth Date of beneficiary. 4. Members can include Additional Purchases for costbenefit analysis. 5. Members can also enter Social Security Estimate for Social Security Advance. BENEFIT CALCULATIONS Estimates from Web Slide 23

24 NOTE: Staff calculations are reserved for retiring members & presented at Retirement Orientation. KEY POINTS A. Service considers periods of Social Security participation (Integrated) & exclusion (Non- Integrated). B. Service at retirement also reflects Sick time not used (or cashed out) at termination. BENEFIT CALCULATIONS Final Calculations by SCERS Slide 24

25 KEY POINTS (cont d) C. Beneficiary named at retirement & relationship to member determines available survivor benefit. D. Total Pension reflects lifetime benefit payable to member under different payment options. E. Continuance reflects survivor benefit provided to spouse, registered domestic partner, or other eligible beneficiary who outlives member. BENEFIT CALCULATIONS Final Calculations by SCERS Slide 25

26 KEY POINTS (cont d) F. Amounts described as Reserves reflect cost of different retirement components. G. Service Annuity reserve reflects amount paid by member for all Service. H. Service Pension reserve and Spouse or Domestic Partner reserve (if applicable) reflect present cost to employer of lifetime benefit. BENEFIT CALCULATIONS Final Calculations by SCERS Slide 26

27 BENEFIT CALCULATIONS Overview of Payment Options Unmodified Provides lifetime allowance and 60% Continuance to spouse or domestic partner who is married or registered to member at least one year prior to retirement. 60% Continuance is only paid to surviving beneficiaries who remain married or registered to retired member. Option 1 Provides lifetime allowance that is nominally less than Unmodified payment and offers no Continuance. Option 2 Provides lifetime allowance that is noticeably less than Unmodified payment and offers 100% Continuance to spouse, registered domestic partner or other eligible beneficiary. Slide 27

28 BENEFIT CALCULATIONS Overview of Payment Options (cont d) Option 3 Provides lifetime allowance that is noticeably less than Unmodified payment and offers 50% Continuance to spouse, registered domestic partner or other eligible beneficiary. Option 4 Provides lifetime allowance that is less than other options, but allows member to share variable Continuance with multiple beneficiaries. Calculation reserved for members who submit written request with Application for Retirement and express bona fide interest in offering Continuance to multiple beneficiaries. Slide 28

29 BENEFIT ELECTIONS & RETIREMENT DECISIONS Understanding the Election Form Beneficiary Designation Form Considerations Number of beneficiaries and relationship to retiring member dictates whether SCERS can offer joint and survivor annuity or Continuance. Designation must be affirmed or modified upon Application for Service Retirement. Slide 29

30 BENEFIT ELECTIONS & RETIREMENT DECISIONS Understanding the Election Form (cont d) Payment Election Form Considerations Unmodified payment offers highest allowance, whether or not retiring member is married or registered. Standard Election reviews three other Optional payments available to retiring members. Slide 30

31 BENEFIT ELECTIONS & RETIREMENT DECISIONS Understanding the Election Form (cont d) Payment Election Form Considerations Standard Election does not reference Optional Settlement 4, which is only calculated upon written request. Slide 31

32 BENEFIT ELECTIONS & RETIREMENT DECISIONS Understanding the Election Form (cont d) Required Consent Form Considerations Consent of spouse is required for some payment elections and all alternate beneficiary designations. Requirement has extended to registered partners since Alternate elections must be witnessed by notary or plan representative. Slide 32

33 BENEFIT ELECTIONS & RETIREMENT DECISIONS Considering the Social Security Advance OVERVIEW Members who retire prior to age 62 and participate in Social Security may pop-up their SCERS allowance in anticipation of future Social Security benefits. Members who request the Social Security Advance should be aware that this decision does not affect the actuarial value of benefits paid by SCERS. Members who request the Social Security Advance should understand that this decision reduces the SCERS allowance at age 62 or 65, regardless of whether they arrange to draw their Social Security benefits. Slide 33

34 BENEFIT ELECTIONS & RETIREMENT DECISIONS Considering the Social Security Advance (cont d) EXAMPLE Part I Member Variables Member s Age at Retirement = Unmodified Allowance = $ 1, Social Security Estimate for Age 62 = $ Part II Impact of Advance without COLAs Unmodified Allowance with Temporary Annuity Allowance Prior to Age 62 = $ 1, Allowance On and After Age 62 = $ 1, Difference in Allowance: Before & After = $ Slide 34

35 BENEFIT ELECTIONS & RETIREMENT DECISIONS Considering the Social Security Advance (cont d) ILLUSTRATION Before 62 After 62 SSA COL Base Pension Slide 35

36 BENEFIT ELECTIONS & RETIREMENT DECISIONS Working Post-Retirement OVERVIEW Decisions regarding beneficiaries and payment options are set at retirement and cannot be changed. Benefits are payable for the lifetime of retired members and their eligible beneficiaries. SCERS retirees have options for post-retirement employment, subject to the County Employees Retirement Law of 1937 and other rules and requirements set to change after 12/31/2012. Slide 36

37 BENEFIT ELECTIONS & RETIREMENT DECISIONS Working Post-Retirement (cont d) OPTIONS & LIMITATIONS 1. Private Sector or Outside Public Employment Arrangement does not affect retirement allowance. 2. Retired Annuitant Work for County or Participating Employer Arrangement requires termination of employment, as defined by applicable tax law. Arrangement is limited to 960 hours or 120 days per year. Arrangement does not affect retirement allowance. Arrangement will be subject to PEPRA, which establishes a 180-day post-retirement period for non-safety retirees. Slide 37

38 BENEFIT ELECTIONS & RETIREMENT DECISIONS Working Post-Retirement (cont d) OPTIONS & LIMITATIONS 3. Independent Contractor for County or Participating Employer Arrangement requires termination of employment, which means contract cannot start immediately or be guaranteed at retirement. Arrangement is not limited to specific hours or days of service per calendar year. Arrangement does not affect retirement allowance. Slide 38

39 BENEFIT ELECTIONS & RETIREMENT DECISIONS Working Post-Retirement (cont d) OPTION & LIMITATIONS 4. Re-Employment by Prior SCERS Employer Summary Arrangement is permitted under Government Code , but requires Board of Supervisors approval. Arrangement was approved on November 10, 2009 and effected 30 days later. Arrangement requires suspension of service retirement benefits until member retires again, at which point initial allowance is restarted (with Cost-of-Living increases) and combined with second allowance for additional service. Slide 39

40 BENEFIT ELECTIONS & RETIREMENT DECISIONS Working Post-Retirement (cont d) OPTION & LIMITATIONS 4. Re-Employment by Prior SCERS Employer Key Considerations Allows persons to return to County or other participating employer from which they retire. Provides additional service credit at same tier or benefit level offered for original employment. Recognizes termination standards already in place for service retirement and refunds. Slide 40

41 BENEFIT ELECTIONS & RETIREMENT DECISIONS Pursuing Disability Retirement Interested Member or Applicant Must File by Deadline Prior to Separation from Service OR Within 4 Months of Separation from Service OR Anytime After Separation from Service if Member Demonstrates Continuous Disability since Departure. Slide 41

42 BENEFIT ELECTIONS & RETIREMENT DECISIONS Pursuing Disability Retirement (cont d) 1. Nonservice-Connected Disability Criteria Requires permanent incapacity and inability to perform substantial job duties. Assigns burden of proof to member. Available to members with 5 or more years of service credit. 2. Service-Connected Disability Criteria Requires permanent incapacity and inability to perform substantial job duties. Assigns burden of proof to member. Available to all members. Requires real and measurable connection between incapacity and employment. Slide 42

43 BENEFIT ELECTIONS & RETIREMENT DECISIONS Pursuing Disability Retirement (cont d) 1. Nonservice-Connected Disability Benefits Award provides monthly allowance equal to 33-1/3% or up to 40% of Final Compensation (depending on membership and tier), if member applies before age 65. Award provides monthly allowance equal to member s service retirement, if member applies on or after age Service-Connected Disability Benefits Award provides monthly allowance equal to 50% of Final Compensation or member s service retirement, whichever is greater. Award provides 100% Continuance to spouse or registered domestic partner. Slide 43

44 COMMON OVERSIGHTS BY RETIRING MEMBERS Submitting Application too Early or too Late Application for Service Retirement is deemed filed upon receipt by SCERS. Retirement effective date can then coincide with application date or occur anytime during the following 60 days. Since retirement effective date cannot precede application date, SCERS cannot and will not effect any requests for retroactive dates. [Significant for reciprocal members.] Slide 44

45 COMMON OVERSIGHTS BY RETIRING MEMBERS Failing to Obtain Verifying Documents Eligibility for retirement benefits must be validated by certain documents, such as birth and marriage certificates. Failure to locate and/or produce required documents on a timely basis can delay retirement payments. See Service Retirement Packet for listing of required items. Slide 45

46 COMMON OVERSIGHTS BY RETIRING MEMBERS Missing Consent of Spouse or Registered Partner Required for alternate beneficiary designations and payment elections that are less favorable to spouse or registered domestic partner than Unmodified form of payment. Consistent with standards imposed on private sector plans, SCERS will not honor waiver of these rights unless signature of spouse or registered domestic partner is witnessed by notary public or plan representative. Slide 46

47 COMMON OVERSIGHTS BY RETIRING MEMBERS Postponing Domestic Relations Orders ( DROs ) Parties to marriage often agree to share and divide retirement benefits as part of dissolution agreements. Internal Revenue Code solution and requirement is DRO, which is explained on SCERS web site, DRO is separate and apart from other orders and is not enforceable on SCERS without joinder and Court approval. Extended periods of time between dissolution and DRO processes can limit benefit choices and delay retirement. Slide 47

48 COMMON OVERSIGHTS BY RETIRING MEMBERS Overlooking Purchase and/or Redeposit Issues Service purchases and redeposits must be requested before retirement. Service purchases and redeposits must be completed within 120 days of retirement, with exception of service upgrades and service between periods of active membership. For service purchase agreements, termination allows member to (a) complete agreement by paying lump sum or (b) retain service credit for all prior payments. For redeposit agreements, termination requires member to (a) complete agreement by lump sum or (b) accept refund of prior payments. Slide 48

49 CLOSING REMARKS 1. Retirement from SCERS requires some irrevocable decisions, such as beneficiary designations and payment options. 2. PEPRA changes will have a significant impact on persons who become new members of SCERS after 12/31/2012, but a much lower impact on existing members. Regardless, staff will analyze this legislation further in the coming months and continue to communicate with stakeholders. 3. Members with further questions about plan benefits or processes are encouraged to contact SCERS Benefits staff: Sacramento County Employees Retirement System th Street, Suite 1900 Sacramento, CA Phone: (916) Slide 49