(a) Effective February 16, 2010, members will no longer be able to enroll in elective benefits. Elective benefits were offered to the members of this plan and were voluntary elections, the costs of which are borne entirely by the member through payroll deductions during their employmentwith the city. Such deductions are taxable dollars at the time the deduction is made. Members who were enrolled in elective benefits as of February 16, 2010 may continue to participate in these benefits or elect to cancel participation. The employee contributions used to purchase such elective benefits shall be accounted for separately and are non-forfeitable.
(b) Open enrollment. A member may elect to cancel an elective benefit only during the open enrollment period as provided by the Board of Trustees. Contributions shall be reimbursed to the member on cancellation of the elective benefit and shall only be refunded for the elective benefit canceled. No interest earnings will be applicable to the premiums contributed or to the refunded amount. The cancellation of such elective benefit is irrevocable.
(c) Costs. The costs for all elective benefits are borne by the member through payroll deductions during employment with the city.
(d) In the event of death before retirement of any participant, all premiums paid shall be refunded to the beneficiary. If the employee was eligible for normal retirement and the retirement annuity option had already been selected by the employee, the deceased member’s earned pension amount will be actuarially reduced to a joint and survivor form and two-thirds of this amount will be paid to the survivor for his or her lifetime. For the 25-year retirement at any age benefit option, the retirement factor used shall be the factor which provides the most benefit to the employee.
(e) Elective benefits. There were four elective benefits options. The elective benefit options were as follows:
(1) Option 1A - health insurance subsidy.
a. The health insurance subsidy will provide a monthly benefit up to $200 per month upon normal retirement. In the event of death prior to retirement, where the member is eligible for normal retirement and the retirement annuity option has been elected by the employee, the $200 per month will be actuarially reduced to a joint and survivor form of benefit and two-thirds of this amount will be paid to the survivor for his or her lifetime.
b. The amount to be received for the health insurance subsidy at retirement is based on years of contributions by the employee. The full benefit of $200 per month is based upon 25 years of employees contributions. A prorated benefit will be provided for years of contributions less than 25 years.
Illustration for prorated health insurance subsidy:
Member age @ retirement 55
Years of premium payment 5
Based upon this illustration, the employee contributed for five years which represents 5/25, or 20% of the full benefit calculated period. Therefore, the health insurance subsidy at normal retirement would be 20% of $200, or $40.
(2) Option 1B - health insurance subsidy with 2% per year COLA.
(a) The health insurance subsidy with 2% cost of living adjustment (“COLA”) will provide an initial monthly benefit up to $200 per month at normal retirement in 1999. In the event of death prior to retirement, where the member is eligible for normal retirement, and the retirement annuity option has been selected, the $200 per month will be actuarially reduced to a joint an survivor form of benefit and two-thirds of this amount will be paid to the survivor for his or her lifetime. The $200 per month will beindexed by 2% per year, compounded for all affected members.
(b) The amount to be received for the health insurance subsidy with 2% COLA at retirement is based upon years of contributions by the employee. The full benefit of the indexed insurance subsidy per month is based upon 25 years of employee contributions. A prorated benefit will be provided for years of employee contributions less than 25 years.
Illustration for prorated health insurance subsidy with 2% COLA:
Member age @ retirement 55
Years of premium payment 8
1st year monthly benefit $64
2nd year monthly benefit $65.28
(3) Option 2 – Cost-of-Living Adjustment (“COLA”). The cost of living adjustment (“COLA”) provides a 5% deferred COLA commencing five years after retirement and compounded with additional 5% increases every three years thereafter. Spouse benefits, if elected, would also be eligible for the COLA, but the actuarial equivalent factors at retirement for conversion to the joint and two-third survivor benefit would need to be updated. A prorated benefit will be provided for years of employee contributions less than 25 years.
Illustration of the Cost-of-Living Adjustment (COLA):
Member age @ retirement 62
Years of premium payment 12
An employee that made full contributions for this elective benefit option would receive a 5% COLA. Since the illustrated employee contributed 12 years toward the COLA it has been prorated to 2.40% which represents 48% of the fully contributed percentage.
(4) Twenty-five-year service requirement (any age). The 25-year service requirement (any age) would allow the employee to retire with 25 years of service, regardless of age. This option will provide an increase in the early retirement factors based upon years contributed. The cost will be actuarially adjusted on an annual basis. A prorated benefit will be provided for years of employee contributions less than 25 years. The factors used for retirement based upon years of service are as follows:
25 years 72.51% of calculated benefit
26 years 76.91% of calculated benefit
27 years 81.81% of calculated benefit
28 years 87.36% of calculated benefit
29 years 93.41% of calculated benefit
30 years 100.00% of calculated benefit
Illustration of the 25-year service requirement (any age):
Member age at retirement 45
Years of premium payment 5
Average pay while contributing $29,700
Percentage cost per year 1.89%
Adjusted ER factor 78.01%
(Adjusted factor of 72.51% + Differential of (100.00-72.51) x 20%)
(Ord. No. O06-027, § 2, 4-4-06; Ord. No. 10-006, § 9, 2-16-10; Ord. No. 10-028, § 11, 11-3-10)
