October 31, 2011
Potential Retirement Age Transition Rules
Basic Rule: eligible retirement age is Social Security Retirement Age ("SSRA") (age 65 to 67). Members with 20 or more years of service may elect a retirement age within 5 years of SSRA with an actuarially reduced benefit.
Optional Transition Rule 1:
for all members who are age 52 with 10 years of service on June 30, 2012 -- who currently have a retirement age less than age 62 --
their the new minimum retirement age is age 62 (instead of SSRA).
Members with 20 or more years of service may elect a retirement age within 5 years of age with an actuarially reduced benefit.
- On June 30, 2012, Joe Smith is age 58 with 26 years of service and could have retired under current plan rules at age 61.
- His benefit at June 30, 2012 will be 54% of compensation.
- Under the transition rule, rather than waiting until his SSRA, Joe can retire when he reaches age 62 (about 5 years earlier).
- His benefit at age 62 will be his June 30, 2012 accrued benefit of 54% plus an additional benefit of 1% per year under the new plan for a pension benefit of 58% of final average compensation.
- In addition, for the 4 years of participation under the new plan he will receive contributions of 6% annually into the defined contribution plan.
Optional Transition Rule 2: all members may retire as of their projected retirement date under the current pension rules but their benefit under the pension fund will be determined as of June 30, 2012.
- On June 30, 2012, Andy Smith is age 56 with 28 years of service and could have retired at age 57 under the prior rules of the plan.
- At June 30, 2012, his accrued benefit under the plan is 60% of final average compensation.
- Under optional transition rule 1 above, Andy would have to wait until age 62 to retire, but would receive the additional pension benefits as described above.
- Under optional transition rule 2, if Andy does not want to wait until age 62, he can still retire after working one additional year at age 57 (his old retirement age) but his retirement benefit remains at 60%. He would receive a contribution of 6% to the new defined contribution plan for his additional year of service.