FPPA Retirement Overview & Process Presented by LaRiea Thompson, Justin Burkhardt, Ben Colussy
Presenters and Panelists Ben Colussy Justin Burkhardt Benefits Director Benefit Administrator LaRiea Thompson Chip Weule Benefit Administrator Chief Benefits Officer
Agenda l Member Account Portal l FPPA Defined Benefit Plan Overview l Preparing for Retirement 3
If you are an active member; l Review your contributions into the Defined Benefit Plan or DROP account l View your Fidelity account balances l Update beneficiaries l Run estimates: retirement estimates and service credit purchase estimates l Apply to purchase service credit l To sign up for MAP, FPPA needs to have a valid email address on file 4
Check Your Beneficiaries l Beneficiary information for your Defined Benefit accounts is available on the Member Account Portal (MAP) l Active members can update beneficiary information directly on MAP l FPPA accounts with Fidelity: Beneficiary can be updated at fidelity.com – Currently, 51% of these accounts do not have a named beneficiary! 5
If you are a retired member or in DROP; l Update your tax withholding and direct deposit information l Access to your “Awards Letter” if you are being asked for proof of pension l Download your annual 1099R when filing your taxes l Keep track of your current monthly benefit 6
What is a Defined Benefit Plan? l A retirement plan with a pre-determined, lifetime monthly retirement benefit – Based on age, years of service credit, and pensionable salary – Ad hoc benefit adjustments may be awarded annually – Optional survivor benefits l FPPA Members’ Benefit Investment Fund – Pooled assets vs. Individual Account l FPPA is responsible for making sure assets are available to provide lifetime monthly pension benefits 7
FPPA Defined Benefit Plans 8
Plan Overview l Contributions into the Statewide Defined Benefit Plan (SWDB) and Statewide Hybrid Plan (SWH) are in lieu of Social Security (unless you are in the Social Security Supplemental Plan) l Retirement formula is based on: – Service Credit in the plan – Your Age – The average of your 3 Highest Base Salaries in the plan 9
FPPA Defined Benefit Plans l Members in SWDB earn: – 2% for each year of service credit for the 1 st 10 years – 2.5% for each year of service credit thereafter l Members in SWDB – Supp SS earn: – 1% for each year of service credit for the 1 st 10 years – 1.25% for each year of service credit thereafter l Members in SWH earn: – 1.5% for each year of service Average of Annual Monthly Benefit Highest 3 Pension Pension 12 Percentage Years’ Salary Benefit Benefit (HAS) 10 I
FPPA Defined Benefit Plans l Highest Average Salary (HAS) – Years do not have to be consecutive nor do they have to be the last years – We look over your entire career history to find your three highest salaries in the plan Average of Annual Monthly 12 = Benefit Highest 3 Pension Pension Years’ Salary Percentage Benefit Benefit (HAS) 11
FPPA Defined Benefit Plans 57.5% X $80,000 = $46,000 12 = $3,833 SWDB 28.75% X $80,000 = $23,000 12 = $1,917 SWDB – Supp SS 37.5% X $80,000 = $30,000 12 = $2,500 SWH Average of Monthly Annual Benefit Highest 3 12 Pension Pension Years’ Salary Percentage Benefit Benefit (HAS) The table above is an estimate and for illustrative purposes only. Based on 25 years of service and the standard monthly benefit 12
Plan Overview l Types of Retirement – SWDB Plan: Normal Retirement: Rule of 80, age plus years of service equals 80 – SWH Plan: Normal Retirement: 25 years of service and at least age 55 – Vested Retirement: Payable at 55 with at least 5 years of service – Early Retirement: Age 50 with at least 5 years of service, or 30 years of service – Deferred Retirement: Normal/Vested can defer up to age 65 13
Deferred Retirement l Deferred Retirement – Member applies for retirement, leaves employment and delays receiving pension payments – Defer receipt of Normal or Vested Defined Benefit Pension to as late as age 65 – Benefit increases due to delayed payment – Your benefit will be determined by the exact actuarial tables and factors in effect at the time you begin to receive your benefit You can either defer your pension or participate in DROP, you cannot do both 14
Deferred Retirement Age 55 / Normal Defer to Option $4,740 / Monthly Age 58: $ 6,098 Age 60: $ 7,242 Begin pension at age Age 62: $ 8,633 55 Age 65: $ 11,326 The table above is an estimate and for illustrative purposes only 15
DROP Overview l DROP (Deferred Retirement Option Plan) – Retire from the plan and benefit is calculated – Continue to work for your employer – Pension payment directed into DROP account with Fidelity 16
Career Timeline Ø Employer Contributions Stop DROP ü FPPA Retirement Benefit has been Before DROP Entry Date determined ü Payment Option Selected • Continue to work and receive salary for Salary up to 5 years Defined Benefit Earning Service Credit FPPA Member Contribution Defined Benefit EE Contr. DROP Account Employer Contribution Two Funding Sources: 1. FPPA Defined Benefit 2. Employee Contributions 17
DROP Account Illustration Pension Payment Fidelity “DROP” Investment Account Choice Funding Sources Option 1 – Pension Member 100% Survivor Payment Contribution Pre-tax funds $4,130 $483 X 12 (monthly) X 26 (pay periods) Member Pension $49,560 Member Contribution $12,558 Annual Total $62,118 x 5 (years) Pre-tax contribution total in 5 years $310,590 The table above is an estimate and for illustrative purposes only. Note: Fidelity account is a self-directed investment account subject to earnings and losses. 18
Deferred Retirement vs. DROP Deferred Retirement • Defer receipt of a Normal or Vested retirement up to — age 65 Benefit increases due to delayed payment — DROP • Monthly benefit is deposited into DROP account at — Fidelity Benefit may increase due to ad hoc benefit — adjustments (COLAs) Continue to receive salary from employer — 19
DROP vs. No DROP Age 55 / Normal Option Work to age 60 $5,080 / Month $7,260/ Month (60% benefit – 26 years) (72.5% benefit – 31 years) Pension –$60,966 Annually EE Contributions – $13,000 Annually 2% Annual Raise ($73,966 Combined Annual Total) TOTAL Pre-tax After 5 Years Difference $2,180 a month $369,830 (before earnings/losses) The table above is an estimate and for illustrative purposes only 20
Payment Options l Normal Option l Option 1 – 100% Survivor l Option 2 – 50% Survivor l Option 3 – Last Survivor l Option 4 – 100% Survivor with Pop-Up l Option 5 – 50 % Survivor with Pop-Up 21
Payment Options Example Member and Survivor Member DESCRIPTION Survivor Only Only Benefit Benefit Benefit NORMAL OPTION $ 4,470.15 $ 0.00 $ 4,470.15 OPTION 1 - 100% SURVIVOR $ 3,877.18 $ 3,877.18 $ 3,877.18 OPTION 2 - 50% SURVIVOR $ 4,152.59 $ 2,076.30 $ 4,152.59 OPTION 3 - 50% LAST $ 4,332.42 $ 2,166.21 $ 2,166.21 SURVIVOR OPTION 4 - 100% SURVIVOR $ 3,827.34 $ 3,827.34 $ 4,470.15 WITH POP-UP OPTION 5 - 50% SURVIVOR $ 4,123.85 $ 2,061.92 $ 4,470.15 WITH POP-UP The table above is an estimate and for illustrative purposes only 22
Preparing for Retirement 23
Tips to Strengthen Your Benefit l Highest Average Salary You must be on your employer’s payroll through June 30th in – order to include the current year in the Highest Average Salary (HAS). Assuming there is no gap in service during those 6 months l Benefit Adjustments ( a.k.a. COLA’s ) Increases may be granted by the FPPA Board and if awarded, – are effective October 1 for retirees who have been on FPPA’s payroll for at least 12 months l Selecting a DROP Date Choose a date at the beginning of a pay period – 24
Retirement Income Planning Considerations Prior to Retiring l Defined Benefit Pension – Payment Option – DROP Participation? – Defer? l SRA, DROP and/or SWH-MP Balance (if applicable) – Distribution options including option to convert SRA, DROP and/or SWH-MP into a monthly lifetime benefit. 25
Retirement Income Planning Option to Purchase a Monthly Lifetime Benefit WHEN: At retirement or at termination of DROP, whichever is later l Increases monthly defined benefit pension, for you and your beneficiary's lifetime, if applicable l You may use all or a portion of the SRA, DROP and/or SWH- MP Funds Payment Option and COLAs apply – l Must be elected prior to the receipt of pension payments in retirement or prior to terminating DROP 26
Process & Timing 📆 3 to 6 months prior to retirement date • Schedule an appointment with one of FPPA’s Benefit Administrators • Appointments can be scheduled by phone or email — (303) 770-3772 ext. 6400 — Generalbenefits@fppaco.org • FPPA Benefit Administrators can run estimates for: — Retirement — Service Credit Purchase — Converting SRA, DROP and/or SWH-MP to a monthly lifetime benefit — Deferred Retirement 27
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