Monthly Archives: March 2016

Who Can Participate in LAGERS?

photo-1441448770220-76743f9e6af6Like with any benefit, there are certain eligibility requirements to be able to participate in LAGERS, and from time to time I’ll get a question from either an employee or employer wondering if a person qualifies for the benefit. This week, I thought we’d do a quick rundown of who is and is not eligible to participate in LAGERS.

For starters, for a person to become a LAGERS member, they must be employed by an employer who has elected to provide LAGERS retirement benefits.  If your employer does not yet participate in the LAGERS system, then you cannot individually elect to participate.  However, many of the prospective employers I have worked with over the years don’t look into LAGERS until one or more of their  employees have expressed concern over their future retirement security, and so if your employer is receptive to employee suggestions, it may be worth the conversation with your administration or board.  Keep in mind that inquiries into LAGERS must be initiated by your employer’s governing body or administration, so while individuals interested in bringing information to their employers are more than welcome to call and speak with a LAGERS representative about the program, only an official representative from your employer can actually request the initial cost study.

If your employer already participates in LAGERS, then the next step to eligibility is to be classified as a full-time employee. Pay attention, though, because ‘full-time’ for LAGERS purposes may not be the same as the full time definition for other benefits at your employer.  In LAGERS, each employer defines ‘full-time’ as meeting one of three annual benchmarks:  1500, 1250, or 1000 hours of work per year.  When an employer joins LAGERS, they choose one of these three benchmarks, and it can never be changed going forward.  If, for example, your employer elected the 1500 hour benchmark, your job would need to require that you work at least 1500 hours annually in order for your position to qualify.  Again, be mindful that it is very important both as an employee and an employer to pay attention to your benchmark, because the requirement for LAGERS may be significantly less than the requirement for other full time benefits.  For example, if you consistently work 29 hours a week and your employer has elected the 1500 hour benchmark, you are eligible for LAGERS even if for other benefits like health insurance, you may be required to work 35 hours per week.  As far as LAGERS goes, there is not much wiggle room when it comes to this definition.  If you work the hours, you must be covered, and if you don’t, you are not eligible for LAGERS.

Another issue that frequently arises when determining eligibility is whether the employee becomes eligible once they’ve actually worked 1500 hours or if they immediately become eligible when they start a full time position. Any employee that works in a position that normally requires 1500, 1250, or 1000 (depending on your employer’s election) hours of work on an annual basis should be immediately enrolled in the system.  For example, if an employee is hired into a position that requires 30 hours per week, but they are hired in November, they should still be immediately enrolled even though they are not going to work 1500 hours in that calendar year.

As an employer, if you ever have questions about whether an employee should or shouldn’t be enrolled, feel free to give your LAGERS Accounts Analyst a call. If you are an employee who believes you are working the hours to qualify for LAGERS, but have not been enrolled, make sure to take a moment to speak with your HR department about your eligibility and if a correction does need to be made, your employer can call our office.

One final piece to the eligibility pie is making sure that you work in a LAGERS-covered department. Just because your employer has elected to provide LAGERS benefits, it doesn’t necessarily mean that they automatically cover their police and/or fire employees.  All full-time non-uniformed employees are required to be covered as general employees for LAGERS purposes, (keep in mind this includes all non-uniformed employees in a police or fire department), and then each employer chooses whether to include their uniformed police and/or fire department employees.  If, for example, you are a commissioned police officer and you work for a LAGERS participating employer, your employer must have elected to provide benefits to the police department in order for you to be eligible.  If they have only chosen to cover their general employees, you would not be eligible for LAGERS benefits.

Making sure that an employee is enrolled in the correct department is important for several reasons. For one, police and fire employees have different retirement ages.  If your employer enrolls you in the wrong department, your retirement age can be affected.  From an employer standpoint, police and fire departments also have different contribution rates, so making sure employees are enrolled in the correct department is vital to properly funding your benefits.

If your employer only covers their general department and decides to later hire full time police or fire employees who they wish to provide LAGERS benefits to, make sure that you call our office so we can walk you through the process of adding those departments. Remember that simply enrolling them as general employees can cause problems down the road, especially when employees are ready to retire!

Your LAGERS benefits are one of the greatest resources both for your employer and for you as individual employees. Making sure that you are correctly receiving the benefits that you are entitled to is important!  As always if you ever have any questions or concerns about your eligibility, please feel free to give our office a call!

Elizabeth Althoff Communications Specialist

Elizabeth Althoff
Communications Specialist

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Decades from Retirement? Visualize Your Future to Ensure Financial Independence

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We all recently received our annual benefits statements showing an estimate of our future retirement income from LAGERS.  For those of you close to retirement, congratulations, you are one year closer and may be sniffing the finish line within a few months.

But for many of us in the millennial generation, the annual benefit statements are easy to ignore.  I mean, it’s so far away it may even be a little depressing (I have at least 20 more years to go).  But you know what else I think about when I see my annual statement?  Financial independence.  Isn’t that a goal for all of us, at any stage in our lives?  It should be.  It’s the freedom to do what you want, when you want, and not have to rely on your family, friends, or the government to support you.

Financial independence, to me, represents dreams and aspirations.  It means contentment and well-being.  It’s good health and low stress.  It’s a cabin in the woods and vacations.  Man, all of that sounds great.  Yep.  That’s what I want, now and into the future.  OK, I have a goal, now how do I get there?

It’s hard.  I have two hilarious, smart, happy young daughters.  I want the best for them.  I want them to have the best education, the most supportive home life, great friends, awesome experiences, and so much more.  So much of me (and my income) gets poured into making sure they are taken care of to the level they deserve.  But I also know I have to take steps now to ensure my financial independence, not only for tomorrow, but for 10, 20, 30, 40, 50 years from now.

Wow.  That’s a little overwhelming.

The good news is that some of the income I will need in retirement has already been earned and protected with my LAGERS benefit.  Of course I know it’s not going to be enough, but it gives me great comfort knowing that if I continue to work hard and put in the time, my LAGERS benefit will help me towards the retirement lifestyle that I want.  It’s great to get my statement each year and see how my benefit grows with another 12 months of service.

Receiving my statement gives me a chance to dream of all of the things I want to do in retirement.  I visualize the things I want to see, the places I will go, the kind of lifestyle I will have, how my wonderful wife and I will look when we’re in our sixties.  How many grandchildren will we have?  Where will my daughters be living?  Where will I be living?  For me, visualization is the key to financial independence.

My parents never made a lot of money.  Neither is a college graduate.  They had to fight, scratch, and sacrifice for everything they ever had.  They are hard workers.  My parents are also great visualizers.  They never take their eye off the ball.  They provided my sisters and I with a great childhood and helped us start lives of our own.  Now, because of the sacrifices they made and a ton of planning and visualizing along the way, my dad was able to choose to retire at age 60 and my mom is very close.  They travel often.  Their stress is low and both are in great health.   When they were my age they visualized the life they wanted and they now have it.

My parents won.  It was hard.  I can win too.  So can you.  Visualize your future.  Our goal is financial independence, today, tomorrow, indefinitely.

So, for all of you who are decades away from retirement like I am, I have a challenge for you.  The next time you look at your annual statement, take a moment to visualize your future.  Close your eyes, stare out the window, whatever you need to do to focus for just a few seconds.  Picture yourself.  What do you look like?  What is your life like?  Is your visualization a picture of the life you want?  The life you dream of?  If so, are you on track?  If not, what do you need to change now to ensure your financial independence when you get there?

 

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

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Luck Has Nothing To Do With It

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With all of the discussion about luck surrounding St. Patrick’s Day, I began to think about how lucky my Dad will be in a few short months when he will be retiring. As I continued to think about how lucky my Dad is for being able to retire, I began to realize that luck really has nothing to do your ability to retire.

During my father’s 40+ year career he has worked a public sector job and a private sector job. The retirement plans that were made available to him at the two employers were vastly different. However, both took dedication. For public sector, dedication to his job increased his pension benefit. Just like what you have with your LAGERS. Whereas, when he moved to the private sector, it took a dedication to saving money through his 401(k). A combination of a pension and personal savings throughout your entire career is best to ensure your financial independence throughout retirement.

As a LAGERS member, you do have the advantage of receiving a guaranteed pension benefit upon retirement. This pension benefit will be a direct reflection of how much you made and how long you worked for your LAGERS employer(s). In other words, the longer you work, the more you earn, the larger your LAGERS monthly benefit will be. See, no luck to it.

LAGERS benefits use a three component formula that multiplies together to calculate your monthly pension payment: Benefit Program x Credited Service x Final Average Salary

  • Benefit Program is an employer elected percentage that ranges from 1.00% – 2.50%. This is the one employer election that has the largest impact on your monthly benefit.

There are two different types of benefit programs that you may have at your employer:

  • Life Programs: Pay the same percentage for the lifetime of the member
    • Example L-7: 50% x 25 Years x $3,000 = $1,125 paid for life
  • Life & Temporary Programs: Pays a base life percentage, just like the Life Programs. However, these programs also pay an additional temporary benefit until 65 (unless the program is a LT-62 program).
    • Example LT-8(65):  1.50% x 3000 x 25 years = $1,125 paid for life

    0.50% x 3000 x 25 years = $   375 paid until age 65

  • Credited Service is the sum of your prior service (if any) and membership service. Prior service may be granted to you if you worked for your employer prior to it joining the LAGERS system, you didn’t have a previous plan similar to LAGERS, and your employer elected to cover the service under LAGERS.
  • Final Average Salary is employer-elected as either the highest consecutive 60 or 36 month average from the last 120 months of LAGERS credited service. The salary used for this calculation is based on your gross wages.

So, as you enjoy your corn beef dinner and other St. Patrick’s Day festivities, remember that retirement is not something that you can just luck into. It takes dedication to your employer and saving money to ensure your retirement security.

JPabst

Jeff Pabst, CRC Communications Specialist

The Message We Delivered to Washington, D.C.

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Last week my boss, Assistant Director Bob Wilson, and I traveled to Washington, D.C. for a retirement conference and to visit with Missouri policy makers to promote public pensions and Missouri’s local government workers.  Our goals throughout our meetings were to drive home the messages that public pension plans are a vital tools for building strong communities in Missouri and that LAGERS is truly getting it right in this space.  Here is a quick re-cap of our entire trip.

Day One:  National Institute on Retirement Security “Retirement Realities” Conference

This one day conference focused on the retirement savings crisis in America, especially as it relates to women’s financial issues.  Congresswoman Jan Schakowsy (D-IL) talked about how the retirement dream of travel and going out to dinner is “so 20th century.”  She said that because of the decline in pension plans and lack of individual savings, the retirement landscape has changed dramatically. She presented some sobering statistics but also spoke about what is being done on the federal level to turn things around. Most notably, the federal government stepping aside and allowing states to start savings programs for people who don’t have access to workplace retirement accounts.

Diane Oakley, the Executive Director of the National Institute on Retirement Security, unveiled a new report about the retirement prospects for American women noting that women age 65 and older are 80% more likely than men to live in poverty.

One of the most interesting speakers of the day was Lara Hinz from the Women’s Institute for a Secure Retirement (WISER).  She highlighted a program called the Appalachian Savings Project that focused on improving retirement savings for low-income childcare workers in Ohio and West Virginia, many of whom earn around $18,000 a year.  The idea is that anyone can save even a small amount.  The project provides incentives for saving and invests the money in U.S. bonds.  The success of the program has been incredible, with the average participant saving 5.5% of their income toward retirement!  That is an astounding amount of money for a low-income worker.

Later that day Bob and I hopped in a cab and sped off to the office of GOVERNING magazine where we talked with a reporter about how well-managed public pensions, like LAGERS, are sustainable and help build strong communities.  We are keeping our fingers crossed, hoping to see a story in the magazine or online soon!

Day Two:  Meetings with Federal Policymakers

The last day in D.C. was spent visiting the offices of Missouri’s Senators and members of Congress.  We relayed the positive economic impact LAGERS has on their districts and spoke about how we are partnering with their constituents to promote retirement security.  Over and over, throughout the day, we heard things like,

“Nice work.”

“Sounds like it ain’t broke, so we don’t need to try and fix anything.”

“Keep our constituents happy.”

“Keep up the good work.  A lot of my constituents are counting on you for their retirement.”

With feedback like this, it seems our message is working.

For the most part, the folks we talked to seemed to recognize that there is a retirement savings crisis in this country, something needs to be done about it, and good pension plans like LAGERS play a vital role in retirement security and building strong communities.

Message delivered, message received, for now.

 

 

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

How your benefit works when you’ve worked for more than one LAGERS employer.

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It’s not uncommon for a member to work for two or three different LAGERS employers over their career. And while every employer uses the same formula to calculate retirement benefits, each employer makes a unique election of benefits that can affect a member’s benefit calculation and retirement eligibility.  If you have worked for more than one LAGERS employer, or even for two different departments within the same employer, here are a couple of important items to keep in mind when it comes to calculating your benefit.

 

How is my benefit calculated?

If you have worked for multiple LAGERS employers, chances are each employer had a different benefit program (multiplier). When your employers have different programs, it is important to keep in mind that the service you earn at each employer is calculated at whatever benefit program that employer had elected while you were employed.  For example, if you work 5 years at City A who has the L-1 program (1.00% multiplier) and 10 years at City B who has the L-7 program (1.50% multiplier), LAGERS will perform two separate benefit calculations that look like this:

 

City A Benefit: 1.00% x 5 years  x  Your Final Average Salary, PLUS

City B Benefit: 1.50% x 10 years  x  Your Final Average Salary

 

As far as our retirees are concerned, they receive one payment from LAGERS, but the calculation is separate. I sometimes hear of members who think that they can move to an employer with a higher multiplier for the last 6 months of their career, and it will ‘upgrade’ all the service at their former employer, which again is not the case.

When it comes to your Final Average Salary, however, salary changes at one employer may positively or negatively impact your final benefit calculation at the other. Here’s why:  unlike the benefit program, LAGERS does not separate salary by employer.  Rather we take the highest consecutive 36 or 60 months from your last 10 years of wages to use in each of your benefit calculations.  Take our previous example:  the member worked a total of 15 years between two LAGERS employers, but the last 10 years were exclusively at Employer B.  This means that in this case, we are only looking at wages from employer B for both benefit calculations.  If employer A had a 5 years final average and employer B had a 3 year final average, we simply take both a 5 and 3 year average from the same last 10 years and plug it into each respective calculation.

For most, this works well, because wages from employment that took place 15, 20, or 25 years ago are typically much lower than more recent wages. However, if you move to an employer and take a pay cut, keep in mind that if you stay long enough at that employer, it may impact that salary calculation at BOTH employers.

 

I took a refund, lump sum, or had a break in service, what now?

On occasion, I’ll have a member come up during a seminar and wonder why one of their stints of LAGERS employment isn’t showing up on their benefit estimate. Keep in mind that if when you left one of your LAGERS employers and choose to take a refund of member contributions, or had more than a 10 year break in LAGERS service and were not vested, then that service may have been forfeited.  This service may be eligible for purchase or possibly reinstatement, so make sure to call our office if you have questions about which option(s) are available to you. If you took a lump sum payout in the past, however, you have already received a benefit for that service and nothing else would be payable in the future for that period of service.

 

When can I draw what?

Once you are ready to retire, having more than one LAGERS benefit can also have impact on your retirement eligibility. For example, if you worked for two employers, one with Regular Retirement Age and one with the Rule of 80, you can use all of your LAGERS service from both employers to count toward eligibility for the Rule of 80, but you can only retire with unreduced benefits at your Rule of 80 age from the one employer with that benefit election.  You would have the option to draw your second account with an early retirement reduction, or you can delay your benefit from the Regular Retirement employer until you attain your full retirement age.

The same would be true if you worked for two separate departments, either at the same or a different employer, where your retirement age is different. For example; you worked for both a police department (with a normal retirement age of 55) and later a general department (with a normal retirement age of 60).  If you have turned 55 and are no longer working for a LAGERS employer, you can begin drawing an unreduced benefit from your police service and have the option to either take an early, reduced benefit from your general department service, or delay that benefit until age 60.  If, however, you have police or fire service and are still working as a general employee, you may not begin drawing your police or fire department time until you have completely stopped working.

In no circumstance can a member begin to draw one benefit while they are still actively employed with another LAGERS employer. If, however, you have already retired from your first employer and are drawing a benefit, you may have options if you desire to return to either full or part-time employment.  Check out our blog on working after retirement to learn more!

Working for more than one LAGERS employer can add an extra layer of things to think about when it comes to your retirement benefit. If you ever have specific questions about your individual situation, please do not hesitate to call your benefit specialist at 1-800-447-4334.  Taking time to review your accounts with LAGERS staff is one of the best ways to make sure you are maximizing your hard earned benefit!

 

Elizabeth Althoff Communications Specialist

Elizabeth Althoff
Communications Specialist

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