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Communications to Date for Current ParticipantsCommunications for 7/1/11 EnrolleesProcesses that Remain UnchangedCritical Points
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1. KEY POINTS FOR THE EMPLOYEE AND TEACHER REFORMED PENSION SYSTEM & OPTIONAL RETIRMENT PLAN EFFECTIVE ON OR AFTER 7/1/11 (Relevant to Regular Employees hired on 7/1/11 and after)
2. Communications to Date for Current Participants
Communications for 7/1/11 Enrollees
Processes that Remain Unchanged
Critical Points & Goals of Pension Reform
Key Changes to Plan
Frequently Asked Questions
AGENDA 2
3. Letters sent to all regular employees identifying their specific retirement plan
Senior leadership provided details of communication plan
HR Partners provided copies of each letter & a retirement query
COMMUNICATIONS FOR CURRENT PARTICIPANTS 3
4. Meetings held for all current pension participants on:
5/17/11 SCHOOL OF MEDICINE
5/18/11 - SCHOOL OF DENTISTRY
5/18/11 - SCHOOL OF PHARMACY
5/24/11 - SCHOOL OF SOCIAL WORK
5/25/11 - MARYLAND PSYCHIATRIC RESEARCH CENTER
5/27/11 - PHONE CONFERENCE SHADY GROVE
5/27/11 - UNIVERSITY POLICE
6/2/11 - FACILITIES MANAGEMENT
PRESENTATION NOW ONLINE AT: http://hr.umaryland.edu/benefits/index.html COMMUNICATIONS FOR CURRENT PARTICIPANTS - CONTINUED 4
5.
Mandatory retirement plan comparison chart updated - new hire packet
Mandatory retirement plan comparison chart updated online benefits page
All web material updated by mid-June
This presentation available at payroll representative site & HR Partners site
COMMUNICATIONS FOR 7/1/11 ENROLLEES 5
6. Processes that Remain Unchanged 6
7. New regular employees must select a mandatory retirement plan to be placed on payroll
Employee contributions continue to be automatically deducted on a pre-taxed basis
Exempt employees (staff & faculty) still have a year to switch from the pension to the ORP PROCESSES REMAIN UNCHANGED 7
8.
Retirement agency enrollment forms remain the same part of the new hire packet
Form 4 designation of beneficiary remains the same, but was updated in March
Once you join the ORP always in the ORP
PROCESSES REMAIN UNCHANGED (continued) 8
9. As of 7/1/11 there will be a new pension plan called the Reformed Contributory Pension
Current pension participants as of 6/30/11 will remain in their current plan Alternate Contributory
Regular employees hired prior to 6/30/11 can not switch to the Reformed plan as of 7/1/11 CRITICAL TO REMEMBER 9
10. The Optional Retirement Plan (ORP)changes impact healthcare subsidy eligibility for employee and dependents Approved language still pending
Technically the changes to the ORP & Pension healthcare eligibility were part of Healthcare cost adjustments vs. Pension Reform
State Retirement Agency (SRA) is responsible for retirement plans. The Department of Management and Budget (DBM) are responsible for Employee/Retiree healthcare benefits CRITICAL TO REMEMBER(continued) 10
11. US government accountability office recommends a healthy pension system be funded at 80%
Currently the Maryland pension system is projected to be only 60% funded by 2012 WHY NOW? 11
12. Sustainable retirement benefits
Preserve defined benefit for state workers
Reduce unfunded liability
Increase system funding level GOALS OF PENSION REFORM 12
13. State funding is anticipated to reach 80% system funding by 2023
State employees can continue to count on receiving their benefit upon retirement
UMBs benefits remain strong and very competitive despite changes IMPACT OF CHANGE 13
14. Employee contribution
as of 7/1/11 -----------------7% of annual earnable compensation automatically deducted on a pre-taxed basis from paycheck NEW HIRES AS OF 7/1/11 IN THE REFORMED PENSION SYSTEM 14
15. As of 7/1/11
Compound COLA remains linked to consumer price index (CPI) but capped at:
2.5 when the systems investment fund earns its assumed actuarial rate of return (currently 7.75%)
or
Capped at 1% when the assumed actuarial rate is not met
POST RETIREMENT/REFORMED PENSION 15
16.
The change to cost of living adjustment calculation is the same for current participants as it will be for new reformed pension participants hired on or after 7/1/11
POST RETIREMENT - CONTINUED 16
17. The multiplier is one of the factors that determines the amount of your monthly retirement benefit along with average final compensation (AFC) and years of service (including earned unused sick leave)
Multiplier is 1.5%
BENEFIT MULTIPLIER/REFORMED PENSION 17
18. Formula the following is the calculation for the service retirement benefit:
.015 x average final compensation (AFC) x years of creditable service after 6/30/98
equals
annual basic allowance
BENEFIT MULTIPLIER FORMULA 18
19.
CALCULATED USING HIGHEST 5 CONSECUTIVE YEARS
AVERAGE FINAL COMPENSATIONREFORMED PENSION PLAN 19
20.
10 YEARS OF ELIGIBILITY SERVICE VESTING REFORMED PENSION PLAN 20
21.
RULE OF 90
(Sum of age and eligibility service must equal 90)
OR
Age 65 with 10 years eligibility service FULL SERVICE RETIREMENTREFORMED PENSION PLAN 21
22.
Age 60 and 15 years eligibility service EARLY SERVICE RETIREMENT/REFORMED PENSION PLAN 22
23.
Must retire directly from state service with at least 25 years of creditable service, for full subsidy. Between 10 and 24.99 years, subsidy prorated on 1/25th for each year of creditable service. This is the same for the spouse/dependent.
RETIREE HEALTHCARE SUBSIDY/REFORMED PENSION PLAN 23
24.
Full retiree subsidy equals what an active employee pays for their benefits WHAT IS A HEALTHCARE SUBSIDY 24
25. FREQUENTLY ASKED QUESTIONS 25
26. How many retirement plans are there?
There have been several plans offered over the years. They include:
-Reformed Pension Plan (State plan for employees hired after 6/30/11)
-Alternate Contribution Pension Plan (for employees hired between 1/1/80 -
6/30/11
-Teachers & Employee Retirement Plan (for employees hired prior to 1/1/80)
-LEOPS Law Enforcement Officers Pension System for University Police
only
-ORP Optional Retirement Plan - optional plan for exempt and faculty only
FREQUENTLY ASKED QUESTIONS (FAQS) 26
27. How can a payroll representative know which retirement plan an employee is enrolled?
See your departments HR Partner as they have a retirement query with an instruction sheet on how to read the query FREQUENTLY ASKED QUESTIONS (FAQS) 27
28. If a contractual employee who was here prior to 6/30/11 converts to a regular employee will they be in the Reformed Pension plan or the Pension Plan?
They will be in the Reformed Pension Plan as their regular employment with contributions going into the plan begins on or after 7/1/11. They may be able to purchase their previous time but it is very expensive and most employees do not do this.
Note: as of June 8th the Retirement Agency is reconsidering this decision. FREQUENTLY ASKED QUESTIONS (FAQS) 28
29.
When an employee is ready to retire, how does the retirement agency know how to validate which pension plan he/she is in?
It is based on his/her hire date as a regular employee and when they signed the retirement document
FREQUENTLY ASKED QUESTIONS (FAQS) 29
30. Will new hires as of 7/1/11 who join the pension have different provisions than current participants - such as vesting etc.?
YES
PLEASE remember that there have been several mandatory retirement plan options available over the years therefore employees in the same job title could be in a different retirement plan than your plan
30
31. Since current employees will be contributing 7% and employees hired as of 7/1/11 will be contributing 7% will the participants prior to 7/1/11 receive a higher pension check ?
YES
If all other factors in the benefit formula are the same you will receive a higher pension check It is estimated that participants prior to 7/1/11 based on 30 years service will get 54% of salary. Reformed pension participants with 30 years service will get 45% of salary
31
32. A current pension plan employee leaves UMB after 6/30/11 and comes back to UMB several years later. Which retirement plan are they in?
The rehired employee will be in the Alternate Contribution Plan as long as they didnt withdraw their contributions AND they are rehired prior to 6/30/2016. 32
33. What happens to a vested employees pension if they leave the University prior to retiring?
They will receive a monthly pension check once they are 62; they contact the State and request their pension. 33
34. What happens to a pension participants money who is not vested and leaves the University?
Former employees have 4 years to leave their monies in the plan. If after 4 years the former employee has not been rehired the State Retirement Agency will send the participant forms to withdrawal the monies.
Note: if a former employee withdrawals their monies and is rehired back, they will be in the NEW REFORMED PENSION SYSTEM. 34
35. Who makes the final decision about an employees account?
The Maryland State Retirement Agency administers all criteria, calculations, processes related to a State Authorized Plan. The UMB Benefits Office has made every effort to present the information correctly . The Retirement Agency is the final authority. 35
36. Does this mean there will be no other changes in the future to retirement plans?
-NO, however the law requires any change has to be proposed, reviewed and approved by the State Legislature and signed by the Governor. Therefore, future proposed changes just as the current will be available to the public. 36
37. QUESTIONS 37