HomeMy WebLinkAbout12 Retirement System Plan Summary RETIREMENT
SYSTEM PLAN
SUMMARY
TAB 12
RETIREMENT SYSTEM
PLAN SUMMARY
City of Lansing
Police and Fire Retirement System
Fire
SUMMARY PLAN DESCRIPTION
November 2002
City of Lansing
Police and Fire Retirement System
Purpose of Booklet
The purpose of this booklet is to describe in simplified language the main provisions of your
Retirement System, The operation of the Retirement System is governed by the provisions of
relevant labor agreements, City ordinance, and the Board of Trustees' official rules and
regulations. Any conflict between the statements contained in this booklet and the provisions of
relevant labor agreements will be governed by the provisions of the labor agreements.
November 2002
City of Lansing Police and Fire Retirement System
As a valued member of the City of Lansing Police and Fire Retirement System, you are included
in a program of benefits to help you meet your financial needs in retirement, or in the event of
disability or death. This booklet summarizes the benefits available to you in the Retirement
System.
Planning for retirement begins now. This booklet can be a valuable tool in preparing for your
retirement and financial future. If you require any fiirther information on any of the topics
presented in this booklet, please contact the City Finance office or a Retirement Board Trustee.
The Board will answer any questions to help you better understand your benefits.
The booklet is intended to acquaint you with the main provisions of your Retirement System.
The descriptions of benefits are greatly simplified and do not include many conditions and
restrictions. For this reason, we caution you not to rely solely on this booklet when planning for
your retirement, Instead, we urge you to consult with the City Finance office or a Retirement
Board Trustee, to make certain you understand the benefits and options available to you and your
i
beneficiaries.
Your benefits will be based on current union contracts, city ordinance, and
applicable internal revenue code.
Board of Trustees
City of Lansing Police and Fire
Retirement System
Paul Luzynski, Chair, Fire Department Tony Benavides, City Council
Tom Cochran, Fire Department David Hollister, Mayor
Bruce Holliday, Police Department Bruce Lanlcheet, Police Department
Kimberly Johnson, Citizen Appointee Jill Miode, City Treasurer
November 2002
City of Lansing Police and Fire Retirement System
Table of Contents
Definitions .................... .......... . .. ..... ............. ,1
Questions and Answers About the City of Lansing Police and Fire
Retirement System
1,How do I become a member of the Retirement System?............
2,When do I become eligible for a pension? ....:..........,:.. ;.-.>.:,::,::.,,.:,.,.;...,..;;,.: .-..,.,,..,.......2
3,How is the amount of my pension computed? - ..; ...2
4.Is my pension increased after retirement? ................+...............:.r':...,,'....,.�:y: .,,.... . ...,,7
5,Can I provide for payments to a beneficiary upon my
death?.... ..... ............. ......................... ..........,....,.,.......7
6,Are benefits paid if I die before I retire?
f TWhat if become disabled before retirement?.........,
8.What if I leave my job with the City before I am eligible for
retirement? .................... ............................_..:............;.>...,„:..........,...............13
9.Can I receive service credit for military service? ...............:,:.....,.•,.:.......:.:;:..:.........;:;.14
1 O.The.City of Lansing has adopted the Michigan Reciprocal
Retirement Act. Does this have any effect on my pension?;,.;f....,,..r.......... ............a,14
11.Suppose my spouse and I divorce before I retire,
ismy pension affected?....................................................... . ...... .. ..........15
12.How do I apply for a pension?.........................................................................,..............15
13.What does it cost me to participate in the Retirement System?.........................,.........15
14.Does the Retirement System pay interest on my contributions?.......:...........:.............16
15.Who administers the Retirement System and manages its fiinds?...I ......................,....16
November 2002
Definitions
Accumulated contributions - the total of all amounts contributed by you to the City of Lansing
Police and Fire Retirement System, plus regular interest.
Beneficiary-A spouse at the time of retirement is your sole beneficiary for pension benefits. A
child may be a beneficiary under the duty death provision. Options for non-spouse are available
with spouse sign off under current union contracts.
Board -the Board of Trustees, which administers, manages and operates the Retirement System.
Compensation - compensation includes salary, wages, and longevity. Any retroactive pay
adjustments will be included in the period earned for purposes of determining compensation.
Credited service - your total accumulated service with the City of Lansing as a member of the
Police and Fire Retirement System. (Example 25 x 12).
Final Average Compensation (FAC) - the average of the two highest consecutive years of annual
compensation during the last 10 years of your City employment. (i.e. 24 consecutive months not to
exceed 52.2 pay periods)
i
Member - an individual included in the membership of the City of Lansing Police and Fire
Retirement System.
Pension - a monthly (payable and dated at months end) amount payable throughout the future life
of a person or persons. Also referred to as a pension annuity,retirement allowance or retirement benefit.
Regular interest- the rate of annual interest as determined by the Board of Trustees.
Longevity— Annual payment of compensation based on years of service.
November 2002
Questions & Answers
About the City of Lansing
Police and Fire Retirement System
1. How do I become a member of the Retirement System?
The membership of the Retirement System includes all police and fire employees of the City
except (1) those temporarily employed during an emergency, (2) those privately employed as
police and fire employees, (3) civilian employees, or (4) special officers or special fire
employees.
2. When do I become eligible for a pension?
You become eligible for a regular pension when you complete 25 or more years of service,
as a member of this retirement system, or attain age 55 with a minimum of 10 years
of service in the system.
3. How is the amount of my pension computed?
Your pension is based on the amount of your credited service and final average
compensation.
Credited service refers to the amount of time, measured in years and months; you are an
active member of the Retirement System. Under certain conditions, the Board may approve
credited service for time not spent as an active member in cases of disability or military duty
(see questions 7 and 9).
Final average compensation (FAC) is the average of the highest two consecutive years of annual
compensation during the last ten years of service. Compensation includes payments such as
salary, wages, longevity bonus and other items as may be defined by your union contract.
November 2002 2
Illustration of
Final Average Compensation
(FAC)
The calculation of FAC can be illustrated using the following sample:
Year Sample
Before Annual
Retirement Compensation
10 $40,000
9 48,000
8 41,000
7 42,000
6 43,000
5 44,000
4 44,000
3 44,000
2 45,000*
1 46,000*
* Earnings for these years produce the highest annual compensation,
To calculate the final average compensation, total the annual compensation for the highest two
consecutive years and divide by 2:
$45,000+$46,000=$45_3500
2
Your
Example Estimate
1, Compensation for the highest two consecutive
years of the last 10 years: (a)$45,000
(b)$46,000
2. FAC: add (a) + (b)
And divide by 2: $45,500
November 2002 3
Pension Illustrations
Fire Members
Your annual pension is the sum of 3.00% (.03) of the first 25 years of service to a maximum of
75% of FAC. (Factor changes on the first pay period on or after July I" as follows:
7/03 to 3.05%, 7/04 to 3.10%, 7/05 to 3,20%)
To illustrate, with 25 years of credited service and FAC of$45,500, the annual pension would be
calculated as follows;
(1) Multiply 3.00%times years of service to a maximum of'25 years:.
.03 x 25 = .75
(2) Multiply (1) by FAC: .75 x $45,500= $34,125
If a member has more than 25 years of service, the maximum percentage is 75%.
The Social Security Administration will provide you with an estimate of benefits for which you
might qualify now or in the future based on other employment. You can contact the Social
Security Administration at www.ssa, ov or by calling 1-800-772-1213 to request the form (SSA-
7004 -PC-OP3) needed to obtain a Request for Earnings and Benefit Estimate.
Social Security Pension — no time is earned towards a social security
pension while a member of this system. Members may be eligible for the
Social Security Medicare Program.
November 2002 4
Pension Computation Form
Your pension is based on your credited service and final average compensation (FAC). This
form can be used to calculate your estimated annual pension,
Your
Example Estimate
Fire Members
(a) Service at retirement —25
(b)FAC $45,50(L
(c) 3.00%x(a) to a maximum of 25 years _75
(d) (c)x FAC D4,125
1
November 2002 5
Illustrations of Age and Service Pension Amounts
Fire Members
Age& Service Pension
Annual Annual Age 6S Estimated
Final Average % of Lansing Estimated Monthly
Compensation (FAQ* FAC Pension Soc. Sec.# Total
10 Years of Credited Service at Retirement
Payable at age 55
$45,000 .30% $13,500 $ 0 $1,125
48,000 .30 14,400 0 19200
52,000 .30 159600 0 1,300
58,000 .30 17,400 0 1,450
65,000 .30 19,500 0 1,625
20 Years of Credited,Service at Retirement
Payable at age 55
$45,000 .60% $27,000 $ 0 $2,250
489000 .60 28,800 0 2,400
52,000 .60 31,200 0 2,600
58,000 .60 34,800 0 2,900
65,000 .60 39,000 0 31250
25 Years of Credited Service at Retirement
Regardless of age
$45,000 .75% $33,750 $ 0 $ 2,812
48,000 .75 369000 0 3,000
525000 .75 39,000 0 3,250
58,000 .75 43,500 0 39625
65,000 .75 48,750 0 4,062
Amounts are shown to the nearest$1,for simplicity; actual amounts are to nearest cent. Regular Pension is used
throughout as an example.
"Final Average Compensation"is the average o(the highest pro consecufiveyears a/ruurual earnings during the fast:J yearn'gl.yoru'City
eurploymew.
it "Bstinrated:tiocinl seem-iry",necros mr empdoyre's erlimnlerl OtSDl pension rrud asivnnes lira!the menrixr waa•never'covered by 3rcial
Smirk),with any prior employers.
November 2002 6
Questions and Answers
About the City of Lansing
Police and Fire Retirement System
4. Is my pension increased after retirement?
Retirees or their beneficiaries receive a post retirement increase financed by the
Members' Benefit Fund after age 60 with a minimum of 25 years of service. No
minimum service requirement if on duty disability.
5. Can I provide for payments to a beneficiary upon my death?
You can provide protection for a spouse at the time of retirement with an insurable
interest in your life by electing Option 1, Option 2 or Option 3 when you retire. Your
election cannot be changed after you retire. Option 4 provides for a non-spouse
beneficiary with spousal sign off.
November 2002 7
Questions & Answers
About the City of Lansing
Police and Fire Retirement System
Standard Form - Straight Life. The benef t formula resulting from straight application of the
benefit formula is payable for the life of the retiring member. (See Pension Illustrations)
If you are married, Option 1, Option 2 or Option 3 are available as a convenience to you in
planning your personal retirement program. Prior to the date your pension commences, you will
be informed of the amounts you would receive under the various forms of payment. You must
elect in writing with the Board of Trustees before retirement one of the following options:
100% Retiree Pension
Option 1 -50% Survivor Pension. Under this option, you would be paid the straight.life benefit
for as long as you live, with the added provision that upon your death, if you are married, a 50%
survivor pension is payable for the remainder of the spouse's life.(spouse at time of retirement)
To illustrate, you retire with entitlement to a Pension of$45,000 a year. Upon your death, the
! spouse would be paid $22,500 ($45,000 x .50) a year for life. If the spouse predeceases you,
your pension would remain at $45,000 a year.
93% Retiree Pension
Option 2 - 75% Survivor Pension. Under this option, you would be paid a reduced pension for
as long as you live, with the added provision that upon your death the spouse at the time you
elected Option 2 would start to be paid 75% of your original pension for the remainder of the
spouse's life. The reduction would be 7%.
To illustrate, you retire with entitlement to a Pension of $4.5,000 a year. The amount of your
Option 2 Pension would be $41,850 ($45,000 x .93) - you would be paid $41,850 a year for
as long as you live. Upon your death, the spouse (at time of retirement), if living at that time,
would be paid $33,750 ($45,000 x .75) a year for life. If your spouse predeceases you, your
pension would remain the reduced amount of$41,850 a year.
Option 3 - 86% Survivor Pension, Under this option, you would be paid a reduced pension for
as long as you live, with the added provision that upon your death the spouse you elected for
Option 3 would start to be paid 86% of your pension for the rernaindcr of the spouse's life. The
reduction would be 14%.
November 2002
To illustrate, you retire with entitlement to a Service Pension of$45,000 a year. The amount of
your Option 3 Pension would be $38,700 ($45,000 x ,86) - you would be paid $38,700 a year
for as long as you live. Upon your death, your spouse above, if living at that time, would be paid
$33,282 a year for life. If your spouse predeceases you, your pension would remain the reduced
service amount of$38,700 a year,
I
November 2002 9
Questions & Answers
About the City of Lansing
Police and hire Retirement System
The table below shows option reduction percentages payable to you at retirement for as long as
you live, and upon your death, to your spouse if'you are man•ied. The difference between the
amount of your Age & Service Pension and the amount of the Option 2 and Option 3 Pensions
represent your share of the cost to the Retirement System of providing an income to your
beneficiary if you elect one of these options. Option 4 election is for a non-spouse as defined by
labor contract. You must have a spousal sign off for this option.
Percentage of Age & ,Service Pension
Payable if Option is Elected
Option 1 Option 2 Option 3 Option 4
Member 50% 75% 100% Alternate
Spousal Benefits Spousal Benefits Spousal Benefits Beneficiary
Retiree 100% 93% 86% Reduced
from
Spouse 50 75 86 Option 1
Survivor Benefit
* Actuarially determined based on age of alternate (non-spouse) beneficiary and age of
retiree.
November 2002 10
Questions & Answers
About the City of Lansing
Police and Fire Retirement System
6. Are benefits paid if I die before I retire? (non-duty related)
In the event you die after you have acquired 10 or more years of service, your surviving
spouse will be eligible for a survivor benefit.
The amount of the pension is the same as if you had retired the day before your death and
elected Option 1 with your spouse named as beneficiary.
If you have less than 10 years of service, your accumulated contributions will be paid to
your designated beneficiary (or to your estate if there is no designated beneficiary) upon
your death.
7. What if I become disabled before retirement?
A pension may be payable to a member who becomes disabled before retirement.
Eligibility and the amount of the benefit depend on whether the disability occurred in the
line of duty.
An application for disability pension can be requested by the individual or respective
department director.
A qualifying disability may result from an injury or illness, which permanently prevents
you from either physically or mentally performing your duties in the service of the City
of Lansing as either a firefighter or police officer. The medical director will perform a
medical examination, recommend if you should be retired for either duty or non-duty
and certify their results to the Board. After review of the medical directors'
recommendation, the retirement board will make a determination, If. the board determines
you are disabled you shall be retired and you will receive a disability pension. (You must
have 10 or more years of service for a non-duty disability pension.) You may be
required to undergo periodic medical examinations under the direction of the medical
director to verify you are still disabled and entitled to benefits, If it is determined by the
medical director and the Board that you are capable of resuming employment, you will
return to active service and your disability pension will terminate.
November 2002 11
In the event you return to active service after a disability, your credited service will be
restored and, if the disability was duty related, you will receive credited service for the
period of time you received a disability pension,
Duty Disabilities
Disabilities resulting out of your performance of duties as an employee of the City may entitle
you to a duty disability pension. There is no minimum age or service requirement.
The amount of your pension is 2/3 of your FAC at the time of disability. At age 55, your benefit
is recomputed to include additional service you would have earned to age 55. You may
request the re-computation when you would have attained 25 years of service, if prior to age 55•
The duty disability pension is reduced by any worker's compensation benefits you may receive.
The FAC at the time of your re-computation will be based on the current pay rate for the rank
held at time of disability.
Non-duty Disabilities
If your disability is not the result of your City employment, you may be eligible for a non-duty
disability pension if you have 10 oi-mnre years of service with the City and are in the employ of
1 the City at the time of disability.
The amount of your non-duty disability pension is computed on the same basis as a regular
retirement based on your credited service and FAC at the time you terminated City employment
on account of the disability (see question 3 to review how a Service Pension is computed). The
maximum pension is 2/3 of FAC of a full paid Firefighter.
If your credited service is less than 10 years, you are not eligible for a non-duty disability
pension and your accumulated contributions will be refunded.
The non-duty disability pension is reduced by any worker's compensation benefits you receive.
November 2002 12
Questions & Answers
About the City of Lansing
Police and Fire Retirement System
8.: What if I leave my ,job with the City before I am eligible for retirement?
If you terminate employment or your employment is terminated as an employee with the
City before reaching your normal retirement age (other than by death or disability), future
benefits are forfeited unless you have 10 years of credited service. Your accumulated
contributions including credited interest (@ 3%) will, if requested,be refunded.
If you have at least 10 years of credited service when you end your employment with the
City, you or your surviving spouse will be eligible for a deferred pension if you leave
your accumulated contributions on deposit in the retirement system.
Your regular pension will be calculated using your FAC and credited service at the time
you ceased working for the City. The benefit begins at age 55. You must make
application at age 55 for benefits to commence.
In the event you die prior to attainment of age 55, your spouse will be eligible to receive
a pension at the date retirement would have occurred based on Option 1.
If you are re-employed by the City within four years after your termination date, your
credited service will be restored. This provision will not apply if you withdrew your
accumulated contributions from the Retirement System. In this case, to recover your
credited service, you must repay all funds withdrawn from the Retirement System, plus
interest from the date of withdrawal to the date of repayment.
November 2002 13
Questions & Answers
About the City of Lansing
Police and Fire Retirement System
9. A. Can I receive service credit for military service?
If you leave or have leftt the employ of the City to enter the armed service of the United
States during a time of war, period of compulsory military service, or period of national
emergency recognized by the Board, you will be granted credited service for periods of
active duty to a maximum of five years provided that you are re-employed by the City
within one year from the date of termination of required active duty. Member
contributions that would have been paid during the military leave time military service, If
accumulated contributions were withdrawn from the Retirement System, all amounts
withdrawn from the employee savings fund must be repaid with regular must be paid
upon reemployment in order to receive service credit for interest from the date of
withdrawal to the date of repayment.
B. Can I purchase military service credits?
In certain circumstances military service credit may be purchased. The cost must be paid
by the employee as determined by the actuary. See you union contract for provisions.
10. The City of Lansing has adopted the Michigan Reciprocal Retirement
Act. Does this have any effect on my pension?
It may have an effect if you have accrued service with another Michigan public
retirement system. The Michigan Reciprocal Retirement Act allows a Michigan public
retirement system to recognize a member's service with another Michigan public
retirement system for purposes of vesting and normal retirement eligibility. Time
earned in a reciprocal unit does not count toward service for retirement
health care.
If both systems have adopted the act, and certain other conditions are met, a transfer of
assets and service may be allowed which would consolidate a member's pension under
the Retirement System of the most recent reciprocal employer. After the transfer, the
member would be treated as if the transferred service credit had been earned with the
most recent reciprocal employer, (This is not currently an allowable provision within the
retirement system)
Novvembei' 00? 14
Questions & Answers
About the City of Lansing
Police and Fire Retirement System
11. Suppose my spouse and I divorce before I retire, is my pension affected?
If your accrued pension is included as a marital asset in a divorce property settlement, the
courts can allocate the marital portion of your pension among the involved parties under
an Eligible Domestic Relations Order(EDRO).
12. How do I. apply for a pension?
Applications for regular retirement must be filed with the City Finance office not less
than 30 days or .more than 90 days prior to retirement. All necessary forms can
be obtained there. Prior to the date your pension commences, you will be advised of the
estimated amounts payable under the various forms of payment, and be requested to
submit your choice of benefit and required information regarding your designated
beneficiary. Your election may not be changed once your first retirement check is paid.
Upon actuarial, review your estimated pension will be adjusted accordingly, normally
within the first 3 months after retirement.
13. What does it cost me to participate in the Retirement System?
Members contribute 5.10% of annual compensation. Your contribution is determined by
your collective bargaining agreement. Effective the first pay period on or after
July 1 the contribution is as follows: July 2003 5.72%, July 2004 6.34%,
July 2005 7.58%
Contributions are automatically deducted from each paycheck and credited to your
Retirement System account.
The City of Lansing also contributes a substantial amount to the Retirement System,
which is mathematically determined so the combined contributions, plus investment
earnings, will meet the pension requirements of all members and beneficiaries,
November 2002 15
Questions & Answers
About the City of Lansing
Police and Fire Retirement System
14. Does the Retirement System pay interest on my contributions?
The Retirement System pays interest annually on your contributions. The Board has set
the interest rate at 3%. The interest does not increase the size of your pension.
However, if you receive a refund of your contributions (see question 8) or if your
contributions are paid to your beneficiary in the event of your death (see question 6), you
or your beneficiary would receive the credited interest as well as the contributions.
15. Who administers the Retirement System and manages its funds?
A Board of Trustees administers the Retirement System, which is responsible for
management of assets and enforcement of provisions of the system. The Board has
authority over distrihutinn of all benefits and makes final decisions on claims and
appeals.
The eight member Board of Trustees is made up as follows:
The Mayor
A member of the City Council
The City Treasurer
A citizen appointed by the Mayor who is not a City employee not eligible to receive
a Police and Fire Retirement System benefit
Two members of the Police Department to be elected by the members of that
department
Two members of the Fire Department to be elected by the members of that
department
The Board manages the assets, which are maintained and invested separately from other
City funds and cannot be used for any purpose other than related to the Retirement
System.
November 2002 J 6