Monthly Archives: October 2014

So What Exactly Does it Mean to be a LAGERS Board Member?

hike, path, forest, woods, camp, bootsWith Annual Meeting upon us, you may be wondering what all the ‘Board Election’ fuss is about. As Member and Employer Delegates arrive at the Meeting, they take on the task of learning and reporting back to their coworkers and employers the status and health of the LAGERS system. Perhaps of all a delegates’ jobs, however, none is more important than that of participating in the Board elections.

What Does the LAGERS Board do?

The principal role of the LAGERS Board is to ensure that LAGERS is appropriately governed and managed. Their goal is to serve the best interests of LAGERS members and beneficiaries and to protect the assets of the system.

LAGERS Board takes on the broader issues and sets the tone of the system from the top down. Though many issues are handled at an all board level, many are also handled within specialized standing committees: Audit and Finance, Governance, and Legislative. While the Board holds ultimate oversight over both operations and investments of the system, the board does delegate the day to day tasks to the LAGERS staff.

What are the Time Commitments for Serving on the Board?

Board members serve four year terms and meet at least quarterly at the LAGERS office in Jefferson City, as well as during LAGERS Annual meeting. There may be issues that require additional meetings or conference calls in between normally scheduled meetings.

Wondering what qualifies an individual to help make global decisions for a $6 billion pension system? LAGERS board members must comply with state law which requires a minimum of six hours of educational training per year for all Trustees.   These education requirements are generally fulfilled at the MAPERS (Missouri Association of Public Employee Retirement Systems Conference), through in-house training, or by other educational conferences across the state and nation.

Do Board Members Receive Compensation for their Service?

Serving on the LAGERS Board is a volunteer position, and trustees are not paid for their services. While they do receive reimbursements for out-of-pocket expenses they incur while traveling to and from board meetings, they don’t receive any additional compensation.

Why Would I Want to Serve on the Board?

Want to know the coolest thing about LAGERS Board of Trustees? They are just like you: LAGERS members and employers working hard to provide/ earn retirement benefits that enable employees to retire with a little dignity and security. There is nobody who has greater skin in the game than LAGERS board members. They serve because they believe in the value and importance of your defined benefit. So whether you choose to run for the Board, participate in the board election process, or simply choose to trust others to make those decisions on your behalf, know that the individuals running your LAGERS retirement system care deeply about ensuring its long term success and stability.

Elizabeth Althoff Public Relations Specialist

Elizabeth Althoff
Public Relations Specialist

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Your LAGERS Benefit Will Not Be Enough

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The income you will receive from your LAGERS retirement benefit will not be enough.  Yes, it will be a stable, dependable, lifetime source of income, but it will not be enough to make you retirement dreams come true.

Now that I have your attention, here is a little story that proves my point.

Consider a LAGERS member named Frank.  Frank is a 60 year-old, hard-working public works employee for a medium sized city in Missouri.  He has dedicated most of his working life to his community and is considering retirement after 30 years of service.  His employer has the L-3, 1.25% LAGERS multiplier and Frank’s final average monthly salary is $3,500.  This will produce a LAGERS benefit of $1,313 per month or $15,750 per year.  Frank has not saved any additional funds for his retirement.

Will Frank be able to survive living only off his LAGERS benefit?  Probably so.  Will Frank find happiness and be able to have the retirement he has dreamed of?  Probably not.  If Frank decides to retire now, he will be forced to eventually return to work or substantially reduce his standard of living to near hermit levels.

It seems that Frank’s only option is to delay his retirement until at least age 62 when he can begin collecting a reduced monthly Social Security benefit.  But even delaying Social Security a few more years could help increase retirement income, not to mention staying longer with his employer will also raise his LAGERS benefit.

The point to take away from this example is that even though Frank had dedicated his career to one employer and that employer has provided him with a great benefit, Frank must begin to take responsibility for his future at a young age if he hopes to reach his goal of retiring at age 60. And by the way, because of his years of service, Frank’s monthly retirement benefit amount is above the norm.  The current monthly LAGERS benefit for an average retiree is $899 per month or $10,788 per year.

So where do you stand?  What are your plans?

February 23-28 is America Saves Week.  It is a great time to start putting away money for your retirement nest egg or to renew your commitment to your future self.  As a LAGERS member, you have a pension that will provide a guaranteed stream of payments in retirement, and that is a wonderful thing!  But you still must take initiative to ensure you will be able not only to survive, but thrive in the retirement lifestyle you have chosen.  LAGERS is designed to provide a secure base for your financial future and intended to be combined with Social Security and your own personal savings to create the retirement you have envisioned.

What to do now?

Pay attention to your LAGERS annual statements and maybe even run a benefit estimate using the myLAGERS online web tool.  Try an online retirement savings calculator, like this one from AARP that allows you to include income from your LAGERS pension.  Envision your future self and the life that you are creating for that person.  Is it a life you would want?

Frank must work longer than he planned to make his retirement dreams come true.  Are your dreams on track?

 

Jeff Kempker, RPA, CRC

Jeff Kempker
Manager of Member Services

How Do I Increase My Retirement Income?

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It seems like every time I attend a pre-retirement seminar, someone asks me “how can I increase my benefit?” There are few ways to increase your retirement income that you may not have thought of yet.

Work longer and make more. This may not have been your first thought for increasing your benefit. However, the LAGERS benefit formula is designed to reward long term employees. The longer you work and the more you make, the greater your monthly benefit will be. So, if you’re willing to ‘keep on workin,’ just remember that your benefit will keep on growin’.

Can I contribute (more) to LAGERS? Some of LAGERS employers require their employees to contribute to the system. At first glance, you may think that contributing to the system is going to increase your benefit and you may want to increase the amount you’re already contributing to LAGERS (if you are contributing). However, being required to contribute to the LAGERS system will not increase your benefit. Instead, your contributions are assisting your employer in paying for the cost of your LAGERS benefits. So, can you contribute to the system? If your employer chooses this option, yes, but it won’t increase your monthly benefit amount. If you are looking for an additional place to contribute or save for retirement, look into whether or not your employer has a defined contribution provider. If so, this can be a great way to save for retirement. If they don’t, look in to opening an IRA at your local investment or banking organization.

Purchase previous service. Do you have any previous military service or public employment within the State of Missouri? If so, you may be eligible to purchase additional credited service. Click here for more details about how to purchase service and what kinds of service can be purchased. If you decide to purchase service, this will increase your total service under LAGERS and thereby increase your future monthly benefit. Be prepared though, purchasing service can be quite expensive, however, you are getting a guaranteed lifetime benefit in exchange.

Annuitize your current assets. If you have assets in a defined contribution account (457, 401, IRA, etc) and are looking for more guaranteed income, you may want use those assets to purchase an annuity when you retire. An annuity will pay you a stream of payments during your retirement years. While annuities can be a useful retirement planning tool, be sure to do your research about the product(s) that you may be exploring and the advisor who you may be purchasing it through. Don’t sell yourself short! Trust your gut! If you don’t feel comfortable purchasing a particular insurance or investment product, you probably shouldn’t purchase it.

Continue working after retirement. I know this may sound a little backwards, but quite a few retirees seek part-time or ‘lower responsibility’ employment after they have retired from the career they have held for the last 25+ years. As a LAGERS member you have several options that allow you to continue to receive your monthly benefit while still working. Click Here for more information about working after retirement and your LAGERS benefit.

These are just a few suggestions of how to generate more retirement income. Each person’s retirement income situation is different. So, do your research and plan according to your needs.

Jeff Pabst, CRC Public Relations Specialist

Jeff Pabst, CRC
Public Relations Specialist

My Employer is Changing Benefits, What Do I Need to Know?!

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Last week, Jeff blogged about some of the frequently asked questions employers have when making changes to their LAGERS benefit package. Nothing spurs coffee pot chatter like rumors of a LAGERS upgrade, so I thought we would take this week to sort out some of the fact and fables about how your benefit is impacted when an employer makes a change to their LAGERS benefit structure.

Benefit changes only affect active members with an employer. This means that retirees and terminated employees who have not yet retired are in no way impacted by these changes. If you retire from or quit working for an employer, your benefit would be calculated at whatever benefit program you had when you retired or terminated, regardless of any future upgrades or downgrades at that employer. The one exception: if a past employer makes a benefit upgrade after you have quit, and you later re-employ with that same employer prior to retirement, you are now eligible for the upgrade!

So how does an upgrade affect your benefit? It really depends on what your employer is changing:

If your employer is adding the Rule of 80, it does not impact the amount of the retirement benefit, but rather what age some employees may be eligible for unreduced retirement benefits.

If your employer is changing to non-contributory, again, your benefit amount does not change, but your employer is now footing the full bill, meaning you now get to take home that 4% that you were contributing out of your paycheck. (You still must keep your past contributions in LAGERS to preserve your credited service for that time.)

If your employer is switching from a 5 year final average salary to a 3 year average, the amount of your final benefit may increase slightly because a three year average generally produces a slightly higher salary; and the higher your salary, the higher your monthly benefit.

If your employer is changing benefit programs, these upgrades are what we call retro-active. This means that not only do we calculate all your future service at the new, higher program, but we also will calculate all you past service at the higher level too! For example, let’s say you’ve worked for your employer for 20 years, they then make and upgrade and you work 5 more years. When we calculate your benefit, all 25 years are calculated at the higher level, which can make a significant difference on your final benefit.

If you are nearing retirement, and think your employer is talking upgrade, make sure that you pay careful attention to the timing of your retirement. Here’s why: as long as you received a month of credited service in the month preceding the effective date of the upgrade, all your past time will be calculated at the higher level. If you retire two months before an upgrade, however, you will not be eligible. So, if you know that your employer is considering a benefit enhancement, choose your retirement date wisely, because it could have a tremendous impact on your final benefit!

You may be wondering when’s the next time your employer will be making a change to your LAGERS benefit plan. Every LAGERS employer has 100% control over how and when they wish to make changes, but that doesn’t mean employees have to stand idly by. We often see upgrade discussions that are collaborative efforts between employees and employers, working together to create a benefit package that is beneficial (and realistic) for everyone. Everything from employees foregoing pay raises in return for a benefit enhancement to negotiating for a higher benefit program by agreeing to go back to contributory which helps offset the cost for the employer. Every employer and employee group is different, so if your employer invites you to the table for this discussion, find something that works for you, and remember that your LAGERS benefits are designed to flexible and customizable!

While employers can upgrade their benefits once every two years, they can also downgrade. While benefit downgrades are much less common in LAGERS, if your employer does need to make this change, it will only impact service going forward. In other words, all the time you earned at the higher benefit level is always protected and calculated at that level regardless of any future downgrades. How much will it impact your benefit? Benefit downgrades can have a significant impact on a future benefit, but remember that since downgrades only affect service going forward, the closer you are to retirement, the less your benefit will be impacted and vice versa. What does this mean if you have the Rule of 80? Again, remember that state law protects your benefit at the highest earned level. Since an employer can’t take away a benefit that they have already promised you, choosing to remove the Rule of 80 retirement age option is the one downgrade that would apply to new hires only.

Adjusting LAGERS benefit elections is a great way for employers to tailor a benefit package to meet the current needs of their employee group. Understanding how a benefit change impacts your LAGERS retirement benefit as well as your overall compensation package is important. If your employer does decide to make a change, either by way of upgrade or downgrade, it might be a good time to reassess your benefits to make sure that you are still on track with your long term retirement goals. As always if you have questions about your benefits, please contact the LAGERS office to speak with a LAGERS representative.

 

Elizabeth Althoff Public Relations Specialist

Elizabeth Althoff
Public Relations Specialist

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