Monthly Archives: December 2014

Is My LAGERS Benefit Secure?

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You’ve probably been hearing chatter in the media about the recent Congressional Spending Bill, which includes provisions that may allow certain multiemployer pension benefits to be cut.  Many of the articles in the news are unclear about which plans are affected by this particular bill and have raised further questions from our members about the security of their LAGERS benefit.

First and foremost, the current Congressional debate would not apply to public sector pension plans, like LAGERS.  The federal government maintains greater oversight of private sector plans, and this legislation, in particular, targets private, multi-employer plans that are ‘severely underfunded.’  Fortunately for LAGERS members, the control of LAGERS remains with the State, and member benefits are governed by the state statutes under which they were created.  There are currently no proposals to make any changes to current or future benefits or to LAGERS structure before the Missouri General Assembly.

Regardless of whether or not the current national debate will impact LAGERS benefits, the natural follow up question is, how secure is my benefit in the future?  While there always remains the possibility that Congressional changes could set a precedent that eventually trickles down through state legislation, here are a few important thoughts to keep in mind about LAGERS:

LAGERS benefits are statutorily and constitutionally protected in Missouri.

LAGERS benefit guarantees can be found both within LAGERS’ governing statutes as well as Missouri’s constitution, providing multiple levels of protection to your accrued benefit.  Any changes in benefits or plan design would require a change in the law, initiated by Missouri’s general assembly.  Currently, those change made by an employer or through a change in Missouri’s statute, could only impact a member’s service prospectively, meaning that any benefits earned prior to the change are guaranteed at the highest earned level.

LAGERS is an extremely well-funded plan.

Even if Missouri’s general assembly someday decided to follow Congress’ lead and look at allowing Trustees of our public plans in Missouri to make benefit reductions to prevent full termination of a plan in the event of financial insolvency, LAGERS would most likely still not be affected by that legislation.  Here’s why:  If you read about what is going on at a national level, the plans targeted are those few which are nearing financial insolvency, most likely due to that fact that the fund has not consistently been making their actuarially required contributions.  LAGERS has extremely sound plan design and 100%  of our over 650 employers across the state are required to make their full actuarially required contributions each and every month…no exceptions.

The results of great plan design is ultimately stable funding and benefit security not just today, but tomorrow, 50 years from now, and beyond.  When employers make their full contribution each month, benefits can be pre-funded.  This means that when a LAGERS member is ready to retire, 100% of the benefit that they will receive for the rest of their life has already been paid for and set aside in a Trust that can be used solely for the purpose of paying retirement benefits.  How’s that for security?

LAGERS staff monitors all legislative action, both at the state and federal level.

LAGERS staff takes the security of our members’ benefits and future benefits very seriously.  People who work hard their entire life should be able to retire with a little security, a little dignity, and plenty of peace of mind that their benefit will always be there for them.  Our staff constantly monitors these debates and works tirelessly to ensure that we are educating our legislators on this important issue.

Wondering if there is anything you can do to help?  Retirement security isn’t just an issue for the already retired.  A 20-something will eventually be just as impacted by changes to current retirement benefits.  So regardless of whether you are just starting your career, or you’re already enjoying your hard-earned benefit, make sure you are staying connected with LAGERS and engaged with your legislators.  Follow us on Social Media to ensure that you are getting the latest updates from LAGERS staff, and as always, we love to hear from you; whether it’s with a question, or if you just want to let everyone know how much you LOVE your LAGERS!!

 

Elizabeth Althoff Public Relations Specialist

Elizabeth Althoff
Public Relations Specialist

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What’s the Best Payment Option

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LAGERS offers several retirement payment options for you. When you retire and pick a payment option, it can never be changed. The payment options themselves are designed to ultimately pay the same total amount to you or your beneficiary by the time the payments stop. However, that may not help you in deciding what option is best for you. Here are a few things to think about when making this very important decision.

Does my spouse have a pension of their own? Sometimes, both spouses have a pension. When considering your payment option, consider what retirement income your spouse will be receiving from his or her own pension. Depending on the circumstances, this may lessen the need for you to provide a monthly benefit for your spouse. Option A and Option B are spousal options that offer varying amounts payable to a spouse.

Do I want to provide for my children? Currently, there are a few options that allow for a non-spouse to receive a monthly benefit. Under Option A and Option B, the beneficiary must be a spouse of two or more years or a person who is 40 or older and has received more than half support from you for two or more years. Also, Option C allows you to list someone other than a spouse as a beneficiary. Another way to provide for your children is through the Partial Lump Sum (PLUS). If you choose, the funds from the Partial Lump Sum can be directly transferred to a qualified retirement account (IRA, 457, 401, etc.). Once the funds are transferred, you can set your beneficiaries of the qualified account to also include your children. You may have thought that there was no way to leave any of your LAGERS pension to your children, however, you do have quite a few options.

I don’t have a spouse or any children, what options do I have? As a single person, you have two options available to you. You may choose the Life Allowance which pays you the highest monthly amount and when you pass away nothing else is payable unless you have employee contributions remaining. If so, the employee contributions will be refunded to your beneficiary of record or your estate. The other possibility is Option C. It is the only option that allows you to list whomever you choose to be the beneficiary.  This would include a trust or charitable organizations.   And remember, you may be able to choose Option A or B if you are financially supporting another person that is at least age 40.

What if my spouse significantly younger than me? If you are choosing a spousal option, there are additional adjustments to the member’s benefit based on the age difference between you and  your spouse. Option A and Option B both have additional reductions to compensate for the spouse being younger. However, your younger spouse will still receive a benefit for their lifetime upon your death. So, some might say that the additional reduction is well worth a lifetime spousal benefit.

Can I take a piece of the partial lump sum to pay off my mortgage? One quick way to receive a sum of money to pay off unpaid debt is the Partial Lump Sum. However, you can’t receive just a portion of the lump sum. Also, if you receive the lump sum and deposit it into a checking account, it is fully taxable. So, if you need only a portion of the lump sum, you could choose  a direct rollover of the funds into a qualified retirement account. Once the lump sum has been transferred, you may withdraw only what you need from the account to pay off your mortgage.  The taxability of the withdraw at that point would be based on the rules of the account you rolled the partial lump sum into.

As you can see, there are several different scenarios that could play out and several more that were not illustrated here. Bottom line: there is not one option that is the best. However, there may be an option that fits your needs better than the others. Do your research, attend a seminar and make an educated decision.

Jeff Pabst, CRC Public Relations Specialist

Jeff Pabst, CRC
Public Relations Specialist

 

 

 

The 2015 Missouri Legislative Session: What You Need to Know

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The 2015 Missouri Legislative Session will begin January 8th so I thought I would give readers a preview of what LAGERS will be focusing on during the upcoming assembly.

Our top priority is what we affectionately call the “Local Plans Bill.”  This legislation allows LAGERS-participating entities the opportunity to voluntarily transfer the administration of their closed pension plan to LAGERS.  We first proposed this legislation during the 2014 session and it received wide support from LAGERS members, legislators, and even the media.  In an opinion piece published in the Jefferson City News Tribune, a staffer wrote, “Rare is the proposal that presents no downside and attracts no opposition.”

Senate Bill 675 (the Local Plans Bill), which was not testified against in either chamber, passed the House with a 136-10 vote and the Senate unanimously in March 2014 but was vetoed by Governor Nixon in July.  LAGERS board and staff, however, still believe that this legislation is good public policy and will propose slightly modified language during the upcoming session that we trust will be agreeable to all parties.

We do not have plans at this time to propose any other legislation, but will be monitoring all pension and retirement related bills, especially those that may affect LAGERS membership.  You may track all public pension related legislation in Missouri here.

LAGERS staff will continue its education and outreach with the legislative community.  LAGERS believes retirement security is an important issue for Missourians and secure, stable retirement plans that provide steady monthly income are the most efficient way to help middle class workers transition into middle class retirees.  Our outreach, aimed specifically at policy makers, includes new videos and publications that convey the value of the public sector worker and the positive economic impact of LAGERS benefits.  One such example is this video directed at all stakeholders, depicting the partnership of all working toward a common goal to grow communities better and stronger.

This education is vital as an attempt to negate the well organized and funded movement to abolish pension plans like LAGERS. If this movement succeeds, the retirement stability of countless Missourians would be in serious jeopardy.  Not to mention how this would upset the economic fabric of the entire state.

Please visit molagers.org for updates during the 2015 legislative session and don’t be afraid to contact your state legislators to let them know how important your LAGERS benefit is to you and your community!

 

Jeff Kempker, RPA, CRC

Jeff Kempker
Manager of Member Services

 

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Do You Know How Your Benefit is Determined?

DeathtoStock_Creative Community9If you have recently logged in to your myLAGERS account or reviewed your Member Annual Statement, you might notice that you have an account balance. What is the account balance exactly? In short, it is the 4% in member contributions that you have paid into the LAGERS system. Don’t have an account balance? Not to worry. This simply means that your employer pays in the entire cost of your LAGERS benefit.

LAGERS employers elect to pay for your benefits in one of two ways:

Contributory: If your employer is contributory, you are required to contribute 4% of your gross wages to help fund your retirement benefit.  Your contributions are protected, meaning that, at the very least, you will receive back your contributions plus interest when you leave employment.  In other words, you cannot lose a dime by contributing to LAGERS.

Non-Contributory: If your employer is non-contributory, you are not required to make contributions. Your employer has chosen to pay all necessary expenses for your retirement benefit.

So is the the account balance how much your retirement is worth? It is not. Your LAGERS retirement benefit is based on a formula, not an account balance. All LAGERS benefits are calculated using the formula below:

Benefit Program X Final Average Salary X Credited Service = Monthly Benefit for Life

Benefit Program is a percent elected by your employer that ranges from 1% to 2.5%.

Final Average Salary is an average, also elected by your employer, of either your highest consecutive 60 or 36 months of wages within your last 120 months of LAGERS credited service.

Credited Service is the years and months you worked in a LAGERS covered position. This may also include service prior to your employer joining LAGERS.

Monthly Benefit for Life is a protected benefit that is payable every month for your lifetime.

For example, if you work for an employer with an L-7 benefit program (1.50% multiplier), your final average salary is $3,000 and you have worked there for 25 years your benefit calculation would look like this:

0.015 x $3,000 x 25 = $1,125

You would be receiving a monthly benefit of $1,125 for life!

That sums it up! Remember, employee contributions do not affect the amount of your retirement benefit, but only help the employer fund the benefit.

If you have more questions on member contributions, give us a call!

 

Dennise Schaben, Accounts Analyst

Dennise Schaben, Accounts Analyst

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Final Average Salary: Decoded

Diner, Senior, CoffeeUnderstanding what wages your employer is reporting to LAGERS is important because those wages have a direct impact on your benefit calculation; the higher the wages, the greater your monthly benefit at retirement.

When you’re ready to retire, LAGERS calculates your Final Average Salary by looking at your highest consecutive either 36 or 60 months of wages from your last 120 months (10 years) of credited service. We get a lot of questions about what is and is not included in this calculation and how that information is reported to LAGERS. Here are a few of the most frequently asked questions.

What wages are reported to LAGERS?

Your employer submits a monthly wage report with your gross wages that were paid to you during the month. These gross wages include your normal pay, any overtime worked, and vacation or sick pay used. Other items that should be included are any recurring bonuses, recurring sick/vacation buy-backs, and any uniform or other allowances.

Keep in mind, everything LAGERS does is on a monthly basis, including your ‘highest wage’ period. This means that what you see as an ‘annual’ salary period for LAGERS purposes may not match your W-2.

I make elective deferrals into a retirement account; does that reduce my LAGERS wages?

Elective deferrals into any retirement account, including any 4% withholding for LAGERS, do not reduce your LAGERS wages. Remember that your LAGERS benefit is based on gross wage, so any deferrals, even pre-tax ones, will still count towards your LAGERS Final Average Salary.

I received a reimbursement from my employer for a conference I attended this year, is that reportable?

No; reimbursements are not considered compensation, and so they are not included in your LAGERS wages.

I was on workers compensation for three months last year, how will those three months of lower wages impact my benefit?

This one can look a little confusing. When a member is on worker’s comp, their employer is actually reporting no wage for that period, even if the member was receiving partial compensation. Don’t fret! If you find yourself in this position, remember that you are still receiving service for all months you are on workers comp, however, when LAGERS calculates your Final Average Salary, those months are excluded from the salary calculation, as if they never existed.

I took a lower paying job with my employer three years before I plan to retire, how does this impact my Final Average Salary?

A lower paying position may or may not affect your final benefit. Here’s why: it’s a common misconception that your Final Average Salary must be the last three or five years of salary, but that is not the case. LAGERS looks at the highest consecutive 36 or 60 months from within your last 120 months of credited service. If you are considering moving into a lower paying position, or perhaps cutting your hours back, just keep in mind that as long as at least 36 or 60 months worth of your higher paying service remain within that 120 month window, your benefit will not be adversely affected.

I will receive a lump sum payout of my vacation and sick leave when I retire, is this included in my Final Average Salary?

One time lump sum payments are never reportable to LAGERS. If you are taking a payout of vacation or sick time prior to retirement, it will not be included in your benefit calculation. If, however, your employer pays that time out as if you were still working, you simply need to delay your retirement effective date until the payments stop, and you will continue to earn credited service for as long as the payments continue.

Want to see what wages your employer has been reporting for you? Log on to your myLAGERS account today!

Elizabeth Althoff Public Relations Specialist

Elizabeth Althoff
Public Relations Specialist

 

 

 

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