Considering DROP? Be aware of changes in July

Transcription

1 The quarterly newsletter for active and retired OP&F members and their survivors Volume 2, Number 2, Spring 201 Considering DROP? Be aware of changes in July OP&F members who are considering participation in the Deferred Retirement Option Plan (DROP) should be aware of changes to the program effective July 1. Changes include the minimum participation period, the amount of member contributions that are credited to a DROP accrual and when a member receives cost of living allowances (COLAs). For those who are DROP participants prior to July 1, the minimum participation period remains three years to realize the advantages of the program. Any member who joins DROP after July 1 would need to participate for five years before realizing all of the programs accruals. The maximum participation period for DROP remains eight years regardless of when a member enters the program. Part of the accrual in a member s DROP account is a percentage of their member contributions. For current DROP participants and those who enter the plan by July 1: Years one and two: 0 percent of member contributions; Year three: percent of member contributions; Years four through eight: 100 percent member contributions. For those who become DROP participants after July 1, this amount decreases: Years one through three: 0 percent of member contributions; Years four and five: percent of member contributions; Years six through eight: 100 percent of member contributions. Members who become DROP participants after July 1 also will not receive a COLA while in DROP, regardless of age. For members who are already in DROP prior to July 1, they would continue to receive a COLA if they are at least age. Each of these changes could affect a member s decision to enter DROP, and also when to enter the program. Please refer to OP&F s Member s Guide to DROP for details on the plan. OP&F urges members who want to become participants prior to July 1 to complete the application and additional required paperwork as soon as possible. Simply submitting a DROP application prior to July 1 does not guarantee participation before the deadline. Members are eligible to participate in DROP after they have reached age 48 and have 2 years of service. Member contribution rates scheduled to increase in July As a part of the funding plan approved by the OP&F Board of Trustees and included in Ohio Senate Bill 40, active member contribution rates will increase in July for the first time since The employer contribution rates remain unchanged. The rate for police employers is 19. percent of salary, while the fire employer rate is 24 percent. The current member contribution rate of 10 percent will increase to 10. percent beginning July 2. The rate will continue to increase the following two years until a 12.2 percent rate is established in 201. OP&F continues to work with employers across the state who will implement the change. While OP&F remains financially strong and able to pay all benefit obligations for many years in the future, the long-term funding status has not met Ohio s mandated requirements. These employee contribution increases are part of sweeping pension reform legislation that will reduce OP&F s unfunded accrued liability by $.2 billion. MEMBER CONTRIBUTION RATE INCREASE SCHEDULE Currently through July 1, % July 2, 201 through July 1, % July 2, 2014 through July 1, % July 2, 201 through thereafter 12.2%

2 2 MEMBER S REPORT SPRING 201 Message from the Executive Director Dear Members, John J. Gallagher, Jr. I ve now been on the job as OP&F s new executive director for more than three months and have learned a great deal. Most importantly I have become even more aware of how strong an organization you have managing your retirement system. I continue to be impressed with the professionalism of our staff, the expert advice from our consultants and the dedication of our Board of Trustees. I am also proud of our membership. The pension reform changes being implemented after the signing of Senate Bill 40 are not easy to accept, however I believe most OP&F members realize and accept that these changes are necessary to keep our system strong well into the future. During my brief tenure so far, I have enjoyed meeting members at Fraternal Order of Police meetings and also at the Ohio Association of Professional Fire Fighters winter educational seminar. I ve found our members engaged, curious and eager to find out more about their pension system. I would have it no other way! I also have already had a taste of the legislative process in Ohio by meeting individually with lawmakers and speaking at Ohio Retirement Study Council meetings. It must remain a priority for OP&F to inform and educate Ohio s elected officials about how our system operates, how successful we have been and the meaning of the detailed financial reports we present to them. PORTFOLIO UPDATE: OP&F s investment returns rank high among peers. A report provided to the Board of Trustees from its general investment consultant, Wilshire Associates, confirms that OP&F s portfolio returns were among the best institutional investors. The 4th Quarter Performance Review, presented to the Board on Feb. 2, indicated that OP&F s portfolio earned a 14.9 percent return for the year ending Dec. 1, The number was well above OP&F s expected 8.2 percent rate of return. The report showed that for 2012 OP&F ranked in the top seven percent of large institutional investors included in Wilshire s Cooperative Universe. OP&F ranked in the top four percent for the three-year period and in the top seven percent for the 10-year period. The OP&F investment portfolio ended 2012 with an approximate value of $12.6 billion. As of Feb. 26, the value had increased to $12.8 billion. These first few months here have energized me and confirmed what I suspected when I moved my family to Ohio OP&F is a great place to work and represents a hard-working group of public safety professionals who are vital to their communities. So, to our staff, our consultants, and also to each of you, keep up the good work. Don t hesitate to ask questions of us. We will do our best to answer your questions, resolve any issues that may arise and respond to any concerns you may have. Sincerely, OP&F s investment portfolio value 201: Current value (2/26): $12.8 billion End of Jan. value: $12.9 billion End of Dec. value: $12.6 billion OP&F 140 East Town Street Columbus, Ohio f.org

3 MEMBER S REPORT SPRING 201 Service purchases should be complete by July 1 Some provisions of Senate Bill 40, OP&F s pension reform legislation, call for different benefit levels for those with under 1 years of service as of July 1. For this reason, members who are able to purchase service credit in order to reach this threshold may want to complete the purchase before this date. Two specific provisions in Senate Bill 40 address members who have less than 1 years of service: When a member retires and reaches age, the Cost of living allowances (COLAs), will be different for members who have less than 1 years of service by July 1 of this year. OP&F members with 1 years of service or more will receive an annual COLA equal to three percent of their base salary, when eligible. Members with less than 1 years of service by July 1 will have their COLA based on either Salary spiking provision implemented Part of the pension reform legislation passed last fall included a requirement that OP&F implement a provision to protect the system from paying benefits that were calculated from inflated salary increases late a members career. This salary spiking provision protects OP&F from the adverse financial consequences of funding a benefit based on salary that dramatically increased in the 6 months prior to retirement. The provision would allow pay increases of up to 10 percent on average per year over this period to be included in the benefit calculation. Increases of more than 10 percent per year in the final 6 months of employment would be subject to the provision. OP&F estimates this provision will impact less than five percent of OP&F members. Promotions a member may earn during their final 6 months would not count against them in this calculation. the Consumer Price Index increase or three percent whichever is less. If a member has at least 1 years of service with OP&F on or before July 1, the pension benefit will still be calculated using the highest three years of salary, just as before Senate Bill 40. However, for those with less than 1 years of service on July 1, their pension benefits will be based on the highest five years of salary. Members have until June 0, 201 to complete service credit purchases in order to reach 1 years of service. For members who are purchasing service through payroll deduction, only the actual amount of time purchased by July 1 will be credited. OP&F staff is ready to assist in processing service credit purchases so members meet the deadline. OP&F will calculate a members average annual salary (three highest years regardless of when they occur) upon retirement or DROP entry. The average of the three highest years would then be compared to a 6-month benchmark period that is immediately prior to the 6 months from the last full month of contributions. For example, if a member retires in 2012, the benchmark period would be 2006, 200, and The formula would then apply a cumulative 10 percent increase to the benchmark period. For a member to be affected, the calculation would need to show that a salary spiked above the 10 percent per year threshold when compared to the benchmark period. If this is the case, the member s pension benefit would be calculated on the benchmark average plus 10 percent per year. Benchmark Years SALARY example Last 6 months before retirement SALARY Sept to Sept Sept to Sept Sept. 200 to Sept Benchmark total: Benchmark average: $2,290 $1,600 $0,214 $14,10 $1,68 Sept to Sept. 201 Sept to Sept Sept to Sept Last 6 months total: Average annual from last 6 months: $69,948 $69,002 $68,09 $20,260 $69,08 Benchmark average plus 10% per year: $68,0 In this example, since the average salary from the last 6 months is higher than the benchmark salary plus 10 percent per year, the member s benefit calculation would be based on the benchmark. Prudence Integrity Empathy

4 4 MEMBER S REPORT SPRING 201 Pharmacy benefit will transition to OptumRx on June 1 OP&F members who are enrolled in the prescription drug plan through UnitedHealthcare will be using OptumRx beginning June 1. OptumRx, a UnitedHealth Group company, will take over from Medco, the previous administrator for prescription drug services. UHC expects that the change will improve the overall prescription benefit experience. What does this mean for you? No change to your benefit coverage as a result of the move to OptumRx. OP&F members can expect pharmacy service and support that is comparable to what is currently available. Members will receive a new health plan identification card in the mail in May with the new OptumRx information and logo. The new health plan card is effective as of June 1. Members should continue to use their current card until that date. Members should advise their physician and their pharmacy of the change once the new cards are received. Can I go to the same pharmacy? How can I find pharmacies covered by my plan? The OptumRx network includes over 64,000 retail pharmacies, including all large national chains, many local and community pharmacies and the OptumRx Mail Service Pharmacy. This network compares in size to the network you have today. There should be little, if any, disruption to the access of pharmacies you currently use. If a pharmacy is no longer in the network and a member has filled a prescription at this pharmacy in the past three months, UHC will mail a notification to the member. Remember to use the new card when filling a prescription after June 1. What happens to mail service prescription(s)? Most mail service prescriptions with remaining refills will automatically transfer. OptumRx will contact members when it is time to process refill orders. Prescriptions for certain medications, like painkillers and other narcotics will not transfer. In these cases members will receive a letter from UHC that a new prescription is required. Congratulations to our Winners! As of June 1, members can place new mail service orders and refills: Online: Log in to myuhc.com and visit the pharmacy section Mail: Mail in your prescription with a completed order form. Phone: By calling the OptumRx Mail Service Pharmacy number on the back of the new ID card. A member s physician can also fax, speak to a pharmacist or e-prescribe a new order. Will I still be able to see my prescription information online? Yes, members can still access prescription and mail service information online by logging into to myuhc.com and visiting the pharmacy section. I use Medco s Worry Free Fill program (auto refill) for mail service prescriptions. What will happen to these prescriptions? If members currently use the Medco Worry Free Fill program through Medco, they will receive an additional letter about enrolling in the new OptumRx automatic refill program, Hassle-Free Fill. Members will not be able to enroll in this program until after the June 1, transition. Following June 1, members will not be able to use the Medco Worry-free Fill. Members will receieve a letter explaining how to optionally enroll in OptumRX Hassle-free Fill to continue service. Enrollment will be required for the auto portion, but open refills will still transfer. Members will be receiving important information in the mail from UHC leading up to the June 1 transition date that will help answer most questions. Please watch for these important mailings. If members have any questions, after receiving these mailings, please contact the number listed on the specific materials or call Please remember to check the current Prescription Drug List for covered drugs under the OP&F sponsored plan with UHC when discussing medications with a physician. This information is available on line or members may call the number on the back of their new ID card to have a list mailed. All members and dependents enrolled in any of the UnitedHealthcare or AARP Ohio Police & Fire sponsored health care plans were eligible to participate in the 2012 Get Screened campaign to win one of 10 gift cards valued at $100 each. The drawing took place Feb.1 and winners were notified by March 1. The OP&F 2012 Get Screened campaign was designed to encourage members to obtain a primary care doctor and see their doctor for an annual wellness exam and recommended preventive care screenings. Thank you to the 6 members and dependents who participated. Please look for upcoming health care opportunities and incentives. OP&F 140 East Town Street Columbus, Ohio f.org

5 MEMBER S REPORT SPRING 201 RETIRING? OP&F OFFERS INFORMATION ON THE PROCESS The complete retirement process, from being an active OP&F member to retirement, could take several months. Therefore, preparedness and planning are essential to ensure the process is smooth. An important practice in preparing for retirement is preparing additional paperwork as far ahead of time as possible, explained Becki Gates, supervisor of the Pension Contributions Group in the OP&F Member Services Department. This may entail more than OP&F forms. Information required for service credit purchases, such as military, refunded time, or prior employment under another Ohio retirement system purchases needs to be made available early in the retirement Becki Gates: Pension Contributions Group Supervisor process to ensure everything is in order. It is important to have these possible purchases completed well in advance of a planned retirement date in order to avoid a possible delay in a benefit payment. If a member has service credit that is available to purchase but decides not to purchase the time, OP&F requires a waiver stating this intention. Other paperwork, such as divorce decrees, separation agreements, and miscellaneous legal documentation should also be provided to OP&F. This does not include child custody information. If additional information is needed or if a form is not completed correctly, OP&F s Member Services Department will mail a letter advising members of what is required. A common omission that can delay retirement benefits is with OP&F s Direct Deposit Application. Incorrect bank routing account numbers and not indicating whether a bank account is a checking or savings account are common mistakes. If the routing number or account type is incorrect the bank will not accept the transfer. In these cases, the money will be returned to OP&F and the benefit payment will only be deposited after receiving written confirmation from the member on the correct account designation. Contacting the member and processing a new direct deposit transfer can sometimes take up to a week, or longer, to complete. Immediately after retirement an interim monthly benefit is paid while OP&F determines the final monthly benefit amount. The transition from an interim benefit to a final benefit can take up to several months. Payrolls may not always be processed until a few months after a member has actually worked. Interim benefits are calculated using the last 6 months of earnings posted to your account, explained Gates. Once all of a member s earnings through their termination dates are posted to their account, OP&F can then use the three highest 12-month periods to calculate a final benefit. It is also important to remember that a current, legible signature with an effective signing date is also commonly omitted from OP&F forms, added Gates. If a notarized signature is required on a form, be sure to do so in the presence of a notary. Forms should be completed days before retirement. Signatures older than six months expire, which would then require a new form or forms to be completed. OP&F encourages members to call at least six months prior to retirement to schedule a retirement interview or with questions concerning the retirement process. If you would like to speak to an OP&F representative, please call Customer Service at Prudence Integrity Empathy

6 6 MEMBER S REPORT SPRING 201 Health care fund able to absorb expected Affordable Care Act fees OP&F will be charged new fees starting in 201 as the Federal Affordable Care Act continues to be implemented. Fortunately, health care funding in place will be able to absorb the fees without a significant effect on OP&F s ability to offer a health care plan. The first is the Patient Centered Outcomes Research Institute fee. This fee was established to fund comparative effectiveness research. This research evaluates and compares health outcomes and the clinical effectiveness, risks, and benefits of medical treatments and /or services. October 2012 marked the first year for the fee, which will phase out in The fee is equal to the average number of covered lives for the policy year times the applicable dollar amount. For 201, the fee equals one dollar for each covered life, or $26,440. This fee has been budgeted for the 201 plan year in OP&F s annual budget. For 2014 the fee will increase to two dollars per covered life. In years beyond 2014 the applicable dollar amount is the prior fiscal year s dollar amount plus an adjustment for medical inflation. The other ACA fee upcoming is the Transitional Reinsurance Fee. As the market reforms and exchanges begin in 2014, Affordable Care Act established three premium stabilization programs, the Transitional Reinsurance Program, Temporary Risk Corridors Program, and the Risk Adjustment Program. The goal of these programs is to provide insurers with greater payment stability and protect against adverse selection in the market while stabilizing premiums in the individual and small group markets. The program affecting OP&F is the transitional reinsurance program. All health insurance issuers and third party administrators on behalf of self-insured group health plans must make contributions to support reinsurance payments that cover high-cost individuals in non-grandfathered plans in the individual market. The Federal Department of Health and Human Services has estimated an annual rate of $6 per covered life for 2014, which will then decline over the next two years. The Transitional Reinsurance Fee, which is budgeted for 2014, will be nearly $61,000. The Affordable Care Act became law on March 2, According to OP&F s independent actuary, these fees will have a negligible effect on the health care funding solvency. Group decreasing term life insurance plan available for active members An open enrollment period for active members to enroll in the NCPERS Family Protection Plus Group Voluntary Life Insurance Plan (FPP Plan) will be this fall. The plan is designed for public safety employees and offers a supplementary survivor s benefit to augment retirement benefits and is issued by the Prudential Insurance Company of America. The FPP Plan provides life insurance and accidental death and dismemberment insurance for the member and life insurance for eligible dependents for a cost of $1 a month, which is a rate guaranteed to remain the same. The plan is available for active members and coverage is in effect whether the member is on or off the job. No physical examination is required and no health questions will be asked. As long as the monthly premium is paid, members may keep this coverage throughout their retirement. Additional information regarding this optional benefit will be communicated in future editions of the Member s Report. No trustee elections scheduled for 201 Each spring usually signals election season for at least one member of the OP&F Board of Trustees. However, no terms are expiring in 201 and, therefore, no elections are scheduled. In 2014, active firefighter members of OP&F are scheduled to elect one of the two active fire positions on the Board. OP&F 140 East Town Street Columbus, Ohio f.org

7 MEMBER S REPORT SPRING 201 Executive Director Gallagher speaks at OAPFF conference. John J. Gallagher, Jr. Executive Director Jennifer Harville Member Services Director On Monday, Feb. 11, OP&F Executive Director John J. Gallagher, Jr. and Member Services Director Jennifer Harville spoke at the Ohio Association of Professional Fire Fighters (OAPFF) conference. The conference, held at the Hilton Hotel in Downtown Columbus, also was attended by OP&F Board Members David Witner, William Deighton and Lawrence Petrick, who also spoke. The presentations covered such topics as an OP&F overview, the Deferred Retirement Option Plan, salary spiking, and the effects of Senate Bill 40 on OP&F members. & Facts Figures 1 Pension Benefits: 6.2%, $80,961 2 DROP: 1.9%, $21,62 4 Health Care: 14.2%, $191,46 4 Administrative: 4.%, $62,92 Refunds: 1.9%, $2,6 6 Capital Depreciation Expenses: 0.1%, $1,900 Investments: 9.6%, $1,02, Employer: 24.%, $422,1 Member: 10.6%, $18,004 4 Health Care Contributions: 4.0%, $68,62 2 Other Income: 1.2%, $20,691 6 Employers Interest: 0.1%, $1,00 State Subsidy: 0.0%, $ Other Expenses: 0.0%, $10 1 Prudence Integrity Empathy

8 140 East Town Street Columbus, OH f.org BUG PRSRT STD US POSTAGE PAID COLUMBUS, OH PERMIT No. 6 RETURN SERVICE REQUESTED Toll Free: General Information: (614) Fax: (614) TTY: (614) E mail: questions@op f.org Business Hours: Monday Friday, 8 a.m. 4:0 p.m. EST OP&F Board of Trustees Ed Montgomery, Chair, Columbus Division of Police William Deighton, Retired, Cleveland Fire Scott Huff, Cleveland Police Lawrence Petrick, Shaker Heights Fire John Wainscott, Retired, Cincinnati Police David A. Witner, Cuyahoga Falls Fire J. David Heller, Investment Member David Owsiany, Investment Member OP&F Executive Staff John J. Gallagher, Jr. Executive Director J. Keith Byrd, Deputy Executive Director Mary Beth Foley, General Counsel Theodore Hall, Chief Investment Officer Scott Miller, Director of Financial Services Jennifer Harville, Member Services Director Mark Jordan, Internal Auditor Prudence Integrity Empathy Securing the future for Ohio s Police and Firefighters COPYRIGHT 201 by Ohio Police & Fire Pension Fund, All Rights Reserved. Important Dates: April 4- Annual Board of Trustees Retreat meetings April 2-24 Board of Trustees meetings May 2 OP&F closed in observance of Memorial Day May Board of Trustees Meetings June 2-26 Board of Trustees Meetings July 4 OP&F closed in observance of Independence Day July (all) No Board of Trustees Meetings are scheduled for July Notify OP&F of any address changes Whether you are an active or retired member, or a survivor, it is important to keep your address, phone number and address current with OP&F. Members can update their information online via the secure Member Self Serve Web, or a form and instructions may be downloaded from the Forms section of op f.org, and returned to OP&F by mail, fax or call Customer Service at