Thursday, August 28, 2014
NorCo HR Explains One Pension Change
To Northampton County Employees:
Effective January 1, 2015 the Hay Group, as actuary of the county retirement plan, is updating the mortality table used for actuarial equivalence from the 1983 Group Annuity Mortality Table to the RP 2013 Annuitant Mortality Table owing to longer life expectancies.
This change does not affect the amount of the benefit that a member earns (your contributions paid into the fund together with regular interest plus the county portion). It does affect the expected time period / number of years that your pension is expected to be paid over. The magnitude of the change depends on various factors including age at retirement, the amount of accumulated deductions and the present value of the benefit. In most cases the present value of the benefit is higher and therefore the monthly benefit amount is actually increasing.
The NO OPTION selection is typically where a decrease in the monthly benefit occurs. The decreased amount varies due to the factors noted above, but in most cases the monthly benefit fully recovers within a six month period (i.e., by June 30, 2015). Information explaining the various pension selection options, including the NO OPTION selection, is contained in Northampton County’s Pension and Retirement Policy at Code 3.31 which can be found on the Northampton County Intranet.
As you may know, the Department of Human Resources now has the capability of preparing retirement estimates for employees. If you are seriously considering retirement in 2014 or in early 2015, you may request an estimate for both years. The “Retirement Estimate Request” form is available on the Intranet. You will need to complete this form and return it to Human Resources in order to obtain retirement estimates for 2014 and 2015. Please keep in mind that it may take two weeks or more to process your request. Your patience will be appreciated.
If you are a supervisor or manager, please share this notice with those employees whom you supervise and who may not have computer access. Thank you.
This answers the concerns about one change to the retirement plan, which Siemiontkowski claims might actually work to the benefit of a county worker.
But there;'s another change being considered. That's the change in the actuarial rate from 1/50 to 1/60. I explained how this could work on Monday, but there have been so many questions, I'll repeat it.
Pension liability = Accrual rate × Final salary × Years of service
So, for a person whose salary is $70,000 and who has 30 years of service, the difference between a 1//50 and 1/60 accrual rate is $7,000 per year.
1 ÷ 60 × $70,000 × 30 = $35,000
1 ÷ 50 × $70,000 × 30 = $42,000
Let me also repeat that the Retirement Board has not implemented any change in the actuarial rate. I've heard from someone close to the Retirement Boar that this is being concerned. At the end of the last Council meeting., Glenn Geissinger stated he wants to discuss some changes. But at this point, I don't know if this change is on the table, or if it is, whether it can legally apply to existing employees. Executive John Brown has stated he will look into this, and get back to me.