ARLINGTON COUNTY EMPLOYEES RETIREMENT SYSTEM CHAPTER 46 MEMBERSHIP HANDBOOK

Transcription

1 ARLINGTON COUNTY EMPLOYEES RETIREMENT SYSTEM CHAPTER 46 MEMBERSHIP HANDBOOK (Established for employees hired on or after 2/8/81) Revised 1/2011 (Includes changes to the code that were approved September 2008, effective January 4, 2009.) C/Retirement/Documents/BGrowden

2 INTRODUCTION The Arlington County Employees Retirement System was established to help provide you with financial security at retirement, one of the most important long-range goals for you and your family. This handbook summarizes your Retirement System ( System ) as in effect on January 4, You can find more detailed information about the System in the Arlington County Code. The information and description of plan provisions outlined in this handbook do not in any way supersede or modify Chapter 46 of the Arlington County Code. The Code always takes precedence in the event of conflicts, questions or interpretations. Remember that you are investing a portion of your salary toward your retirement. It is important to know and understand the benefits available to you and your beneficiaries. Save this book and use it as a reference whenever your life or work situations change. Please feel free to contact Human Resources with any questions about your retirement System. Arlington County Human Resources Department #1 Courthouse Plaza, Suite Clarendon Boulevard Arlington, Virginia (703) (800) Revised 10/09 2

3 Table of Contents Becoming A Member 6 General 6 Optional Membership 6 Employees Not Eligible 6 How The System Is Funded 7 Employee Contributions 7 Tax Treatment of Employee Contributions 7 Employer Contributions 8 Investment Income 8 Interest 8 Withdrawal of Contributions 9 Taxation of Withdrawals 9 Assignment of Benefits 10 Full-Time Versus Part-Time 11 Normal Retirement Date 12 When You Are Eligible for Unreduced Benefits 12 How Benefits Are Calculated 13 What is Average Final Salary? 14 What is Credited Service? 14 Additional Service Credit 15 Early Retirement 16 When You Are Eligible for Reduced Benefits 16 When Benefits Are Payable 16 3

4 Table of Contents How Benefits Are Calculated 16 Workers Compensation Reduction 18 Deferred Vested Benefits 19 Optional Forms of Retirement 20 Joint & Survivor Option 20 Comparison of Payment Methods 21 Lump Sum Distribution 22 Social Security Option 22 Deferred Retirement Option Program (DROP) 23 Ordinary Disability Benefits 24 When You Are Eligible For Benefits 24 How Your Benefit Is Calculated 24 If You Return To Work 25 Service Connected Disability Benefits 26 When You Are Eligible For Benefits 26 4

5 Table of Contents How Your Benefit Is Calculated 26 How Long Benefits Continue 27 What Happens At Normal Retirement Age 27 Cost of Living Adjustments 28 Death Before Termination of Employment 29 Survivor s Benefit 29 Return Of Contributions 30 Line Of Duty Death Benefits 31 Benefits For Part-Time Employees 32 How System Benefits Are Calculated 32 How Service Connected Disability Benefits Are Calculated Other Benefits Following Retirement Social Security Benefits 34 Services To Members 35 Often Asked Questions 36 5

6 BECOMING A MEMBER General In most cases, you automatically become a member of the system on your date of hire if: your compensation is paid by Arlington County; you began your employment on or after February 8, 1981; You are a permanent full-time employee or a permanent part-time County employee; Optional Membership Membership in the system is optional if you are an elected official of Arlington County or are appointed County Manager. If you wish to join, you must do so within 60 days after assuming office. Employees Not Eligible You are not eligible to become a member of the system if you are hired as a temporary employee. 6

7 HOW THE SYSTEM IS FUNDED Benefits paid by the Arlington County Retirement System are funded from three sources: 1. Employee contributions; 2. Employer contributions; and 3. Earnings from investments made with the above funds. Employee Contributions Each member who is not a member of the Virginia Retirement System (VRS) and who is not a police officer, firefighter or deputy sheriff, contributes 4% of their creditable compensation toward retirement each payroll period. If you are a police officer, firefighter or deputy sheriff, you contribute 7.5% of your creditable compensation toward your retirement each pay period. Employee contributions are also withheld from accrued vacation and compensatory leave paid to an employee upon exiting the System (i.e. entering DROP or exiting employment while still a member of the System). Tax Treatment of Employee Contributions Employee contributions are made on a pre-tax basis. As a pre-tax deduction, your contributions are not considered part of your taxable income and do not appear on your IRS form W-2. You will not have to pay tax on these funds until they are actually paid to you at the time you begin receiving benefits. Prior to December 23, 1984, employee contributions were taxed before they were deducted from the employee s pay and were considered part of your taxable income. 7

8 Employer Contributions Your employer contributes toward your future retirement benefits. The amount of the employer contribution depends on the recommendations of actuarial consultants the Retirement Board retains to make sure the system has adequate funding. Investment Income Employer and employee contributions are invested to provide additional income to the System. Assets are invested as directed by the Board of Trustees. An independent accounting firm audits the financial statements of the system annually. The audit report and the comprehensive annual financial report are available for review online at Interest Your member contribution account is credited with interest at a rate set annually by the board of trustees based on the interest earned by the System s assets during the preceding year. The interest rate shall not exceed 6% and is applied each January 1 to your account balance as of the preceding year. 8

9 WITHDRAWAL OF CONTRIBUTIONS The County Code does not permit loans from your retirement account, partial withdrawals of employee contributions, or withdrawals of employer contributions. Withdrawal of contributions may only be made upon termination of employment. Upon termination of employment you may withdraw your contributions plus interest earnings or elect a direct rollover of the taxable portion of your refund. Payment is not automatic. You must sign a request for withdrawal form before your request can be processed. Payment will be made within 90 days of receipt of your request. Refund checks are mailed directly to you or to your financial institution. If you take a refund of the contributions in your account: you lose membership and service credit represented by the amount refunded; you lose the right to receive a lifetime monthly benefit at retirement; purchase of this service later (when you are re-employed in a covered position) is based on the amount of your withdrawn contributions plus interest at a rate of 6% per annum from the date of the withdrawal. Taxation of Withdrawals Any part of your account that consists of pre-tax contributions plus all interest earnings will be taxed as ordinary income the year you receive it. If you withdraw your contributions before age 59½, the IRS may also impose an additional 10% federal tax penalty on your distribution. 9

10 Taxes will be based on the federal and state tax laws in effect at the time of distribution. Currently, refunds not transferred directly to an Individual Retirement Account (IRA) or another qualified retirement plan will have 20% federal tax withheld and 4% state income tax withheld (if you live in Virginia when you take a refund). It is important that you understand the tax implications of taking a refund. It is recommended that you read the Refund Fact Sheet which is available from the Human Resources Department or on our website at Assignment of Benefits Your benefits under the plan cannot be assigned and are not subject to garnishment or attachment, except to the extent permitted by law for child and/or spousal support, for the division of marital property (Qualified Domestic Relations Orders QDRO), or for the payment of tax levies. 10

11 FULL-TIME VERSUS PART-TIME The following sections on how your retirement plan benefits are calculated and paid out apply to all eligible full-time employees. Most of these plan provisions also apply to part-time employees. However, a few terms are defined differently for part-time employees. If you are a parttime employee, refer to Benefits for Part-time Employees, starting on page 32, while you read the following sections. Note to Part-timers Working at Least 30 Hours Per Week If you are a part-time employee who worked 30 hours per week prior to June 22, 1986, and consequently were covered by the plan, the provisions on page 32 do not apply to you. The definitions of average final salary and credited service as they apply to full-time employees will continue to apply to you. 11

12 NORMAL RETIREMENT DATE Your normal retirement date is the date you attain the age of sixty-two (62) with the completion of five (5) years of service if you are not a police officer, firefighter or deputy sheriff. If you are a police officer, firefighter or deputy sheriff, your normal retirement date is the date you attain the age of fifty-two (52) with the completion of five (5) years of service. When You Are Eligible For Unreduced Benefits All members who are not police officers, firefighters or deputy sheriffs are eligible to retire with unreduced benefits when they meet one of the following age and service requirements: Age 62 with 5 years of service. Rule of 80: When age + years of service = 80. Completion of 30 years of service regardless of age Police officers, firefighters, and deputy sheriffs are eligible to retire with unreduced benefits when they meet one of the following age and service requirements: Age 52 with 5 years of service. Completion of 25 years of service regardless of age. 12

13 How Benefits Are Calculated Your retirement benefit is based on your age at retirement, your average final salary (the average of your 3 highest 12 consecutive months) and your years of service credit. If you are not a police officer, firefighter or deputy sheriff your benefit at your normal unreduced retirement eligibility equals: 1.7% x Average Final Salary x Credited Service (up to a maximum of 30 years) Your retirement benefit is limited to a maximum of 51% of your average final salary. For example, if you retire at age 62 with 20 years of service and an average final salary of $40,000, your annual benefit would be determined as follows: 1.7% x $40,000 x 20 = $13,600 You would receive $13,600 a year, or $1, a month at retirement. If you are a police officer, firefighter or deputy sheriff your benefit at your normal unreduced retirement eligibility equals: 2.5% x Average Final Salary x Years of Credited Service Prior to 1/4/2009 PLUS 2.7% x Average Final Salary x Years of Credited Service After 1/3/2009 Your retirement benefit is limited to a maximum of 81% of your average final salary. For example, if you retire at age 52 with 25 years of service and an average final salary of $40,000, your annual benefit would be determined as follows: 2.7% x $40,000 x 25 = $27,000 You would receive $27,000 a year, or $2,250 a month at retirement. NOTE: Any member hired on or before January 3, 2009 will have the option of choosing an alternate calculation using the Systems benefit formulas in place prior to January 4,

14 What is Average Final Salary? This is the average of your three highest 12 consecutive months of creditable compensation. In most cases, this will be your last three years of employment. For example, assume you retire at the end of December 2009 and you received the most pay in 2007, 2008 and Your average final salary over those three years, based on the assumed earnings history shown below, would be: $35, $40, $45,000 Your average final salary is $40,000. $120,000 3 = $40,000 What is Credited Service? You will receive service credit for all time served as a member of the System. Generally, you are credited with one year of credited service for each year of full-time employment. No accrued leave (vacation, compensatory. or sick) can be used to help you qualify for retirement eligibility. Any period of employment while you are not a member of the System (as defined on page 6) will not count as credited service except in the following situations: 1.Service-connected disability: If you are absent from work due to an approved service-connected disability (see page 26), the period of your absence will count toward credited service. 2. Military leave A period of military leave starting while you are a member of the system counts as credited service as long as you return to work in accordance with the Uniformed Services Employment and Reemployment Rights Act (USERRA) under conditions other than dishonorable discharge. This membership service credit will be applicable to any active duty military absences for reasons other than training and will not exceed a cumulative total of five years. 3. Prior service If you terminate employment, withdraw your contributions and are rehired, your former membership may count as credited service. To receive credit for prior service, you must repay any contributions you received at the time of termination plus 6% annual interest on that amount from the date of the withdrawal to the date of repayment. 14

15 Additional Service Credit When you retire, your accrued, unused vacation and compensatory leave balances will be automatically paid to you in cash. Any paid vacation and compensation leave is used toward your retirement service credit. Employees hired prior to 1/1/2001 may elect to convert unlimited sick leave balances to service credit in lieu of any cash payment provided by the County for accumulated sick leave. This conversion is not available for deferred vested retirement benefits (see page 19). Employees hired after 1/1/2001 may only receive service credit for accumulated sick leave. Sick leave used toward retirement service credit will also reduce any early retirement penalty if you are retiring under the early retirement provisions. A period of membership in one of the other Arlington County Retirement Systems (Chapters 21 and 35 of the County Code), counts as credited service if you pay back the contribution rate in effect for this System based on your salary during the period of prior service plus 6% annual interest from the date of withdrawal to the date of repayment. The maximum number of years of credited service you may receive is 30 years. 15

16 EARLY RETIREMENT When You Are Eligible For Reduced Benefits If you are not a police officer, firefighter or deputy sheriff, you are eligible for reduced early retirement benefits when they meet one of the following age and service requirements: Age 55 with 5 years of service Age 54 with 17 years of service Age 53 with 19 years of service Age 52 with 21 years of service Age 51 with 23 years of service Age 50 with 25 years of service Police officers, firefighters and deputy sheriffs may retire as early as age 42 with five years of completed service. When Benefits Are Payable Your early retirement benefits may start as soon as you retire, but in a reduced amount or you may choose deferred vested retirement benefits that would begin at your normal retirement date (see page 12). The choice is yours. How Benefits Are Calculated If you choose early retirement, your benefit is calculated using the normal retirement formula (see page 13). If you begin receiving your retirement benefit at your early retirement date, your retirement benefit is reduced 6% for each year (1/2% for each month) that your retirement date precedes the earliest day you would have qualified for unreduced benefits if you had continued working. 16

17 EXAMPLE: (If you are not a police officer, firefighter, or deputy sheriff) Assume that you elect early retirement at age 52 with 20 years of credited service and an average final salary of $40,000. Your early retirement benefit is determined as follows: 1.7% x $40,000 x 20 = $13,600 If you continued working, you would be eligible for unreduced benefits at age 56 - when you would have had 24 years of service. Therefore, if you choose to receive immediate payments, your benefits at age 52 will be reduced by 24% (6% for the 4 years your retirement date precedes attainment of the Rule of 80). Unreduced Reduction Benefit ($14,280 x 24%) $13,600 -Less- $3,264 = $10,336 You would receive $10,336 a year, or $ a month, if you retire early and begin receiving benefits immediately. You will receive the unreduced $13,600 annually ($1, monthly) if you elect deferred vested benefits that begin at your normal retirement date (see page 19). EXAMPLE: (If you are a police officer, firefighter or deputy sheriff) Assume you elect early retirement at age 50 with 20 years of credited service and an average final salary of $50,000. Your early retirement benefit is determined as follows: 2.7% x $50,000 x 20 = $27,000 If you continued working, you would be eligible for unreduced benefits at age 52. Therefore, if you choose to receive immediate payments, your benefits at age 50 will be reduced by 12% (6% for each of the two years your retirement date precedes your 52nd birthday). Unreduced Reduction Benefit ($27,000 x 12%) $27,000 -Less- $3,240 = $23,760 You would receive $23,760 a year, or $1,980 a month. You will receive the unreduced $27,000 if you elect deferred vested benefits (see page 19) and begin receiving benefits at your normal retirement date. 17

18 WORKERS' COMPENSATION REDUCTION The benefits you receive for service, early service and disability retirement will be reduced by any compensation awarded to you under the Virginia Workers' Compensation Act. 18

19 DEFERRED VESTED BENEFIT You are eligible for a deferred vested benefit if: you terminate employment before you retire; you have at least five years of service; and you leave your contributions in the system. Upon termination, you must submit your written election for a deferred vested benefit. This benefit will begin on your normal retirement date, age 62 (age 52 for police officers, firefighters and deputy sheriffs). Your deferred vested benefit is based on your years of credited service and your average final salary as of the date you left the system, and is calculated using the formula for normal retirement. You may withdraw your accumulated contributions anytime between terminating and your normal retirement date; however, you forfeit any previous election for deferred vested benefit. Employees who resign and elect a deferred vested retirement benefit are not eligible to continue their health insurance coverage through the County. You may be eligible for 18 months of continuation coverage (during the period immediately following your termination date) under a provision called COBRA by paying the full cost of health insurance premiums. For more information about your health insurance coverage and options County employees should contact the Human Resource Department (703) School system employees should contact the School Board Personnel Office at (703)

20 OPTIONAL FORMS OF RETIREMENT The benefit amounts described in the previous sections are the amounts you will receive from the plan if your benefits are paid for your lifetime only. There are also optional forms of benefit payments available to you. Although the monthly payments you will receive vary depending on the option you choose, all of the payment methods have the same overall value. Joint & Survivor Option You can elect a reduced monthly income during your lifetime in order to provide your beneficiary with an income following your death. You may choose to leave 50%, 66.67%, or 100% of the monthly benefit you were receiving at the time of your death. Joint & Survivor benefits paid to a spouse are payable for life, even if your spouse remarries. If you elect a beneficiary other than your spouse or you waive the election of a joint & survivor option, this election must have the written consent of your spouse at the time of your retirement. The amount of reduction to your benefit depends on your age and the age of your beneficiary when your payments begin, and on the percentage of your benefit that you want continued to your beneficiary after your death. If your beneficiary should die before you, your benefit would be increased to the monthly benefit you would have received if you had not elected an optional joint & survivor benefit, effective immediately following notification. Following retirement, you may cancel this option with the consent of the person nominated to receive the joint & survivor benefit. Your monthly benefit following the cancellation would be the same as if you had not elected the optional joint & survivor benefit. If your beneficiary is covered under your County health plan, you must elect a joint & survivor annuity in order for your beneficiary to continue to receive health benefits should you predecease your beneficiary. 20

21 Comparison of Payment Methods The table below illustrates the amounts payable under the different payment forms for an employee retiring at age 62 with 20 years of credited service and an average final salary of $40,000. For purposes of the example, we assumed the employee was a non-uniformed employee and the employee's beneficiary was also age 62 when benefits begin. Joint & Survivor Option Elected at Retirement Retirees Monthly Benefit Survivor s Monthly Benefit Upon the Death of Retiree Single Life $1, $ 0 50% Option $1,100 $ % Option $1,000 $ % Option $875 $875 The Human Resources Department can provide you with benefit estimates based on your individual circumstances. 21

22 Lump Sum Distribution If you have elected a normal, early or deferred vested retirement, you may elect to receive a lump sum payment equal to the lesser of 10% of the actuarial value of your annual retirement allowance, including expected cost-of-living adjustments, as determined by the actuary, of the benefits to be paid over your lifetime or $20,000. If the actuarial value of your benefits is less than $5,000, the entire benefit may be selected as a lump sum distribution. If you elect a lump sum payment, your monthly retirement benefit will be reduced by the lump sum distribution. This election must be made at the time you begin receiving retirement benefits and your lump sum distribution will be issued at the time of your first benefit payment. Social Security Leveling Option If you start receiving retirement plan benefits before Social Security retirement benefits begin, you may choose to receive a greater benefit from the plan until either your 62nd or 65th birthday and a smaller benefit thereafter. This payment option is intended to keep your total monthly retirement income from changing significantly when your Social Security benefits begin. For example: Assume that when you retire at age 55, your retirement allowance is calculated at $1,200 a month. Assume also that you choose your Social Security benefits to start at age 65 and that they are estimated at $1,100 a month. The following table shows the difference between the two methods of payment. The choice is yours. Regular Payment Method From Age Plan Benefits S.S. Benefits Total Benefits $1,200 $ 0 $1, Death $1,200 $1,100 $2,300 Social Security Leveling Option From Age Plan Benefits S.S. Benefits Total Benefits $1,740 $ 0 $1, Death $ 640 $1,100 $1,740 These figures do not include any cost-of-living adjustments. You must provide the Human Resources Department with a Social Security estimated benefit statement in order to determine your eligibility for this option. 22

23 DEFERRED RETIREMENT OPTION PROGRAM (DROP) The Deferred Retirement Option Program is a voluntary program that provides a way for you to continue to work, earn a salary, and receive your retirement benefits at the same time. Once you qualify for unreduced retirement benefits (see page 12), you qualify for the DROP. Your retirement benefit will be equal to the unreduced benefit you would be eligible for at the time you enter DROP. Your monthly retirement benefit will be credited to a separate DROP account within the 401(a) plan provided by your employer. The DROP period will last a maximum of three years. You may end your participation in the DROP and retire before the end of three years. If you leave the DROP early, your employment will end as of the date you leave the DROP. When you terminate employment and leave the DROP, you will begin to receive the monthly retirement benefit that was previously paid into the DROP. You may also receive the accumulated value of your DROP account distributed in the manner that you elect. Prior to exiting DROP, you must contact the Human Resources Department regarding direct deposit, state and federal tax withholding, and the continuation of any health, dental and/or life insurance deductions. You should also contact your 401(a) provider regarding the distribution options for your accumulated DROP account. REEMPLOYMENT AFTER DROP If you elect to participate in DROP, you agree to leave employment within three years. However, under certain circumstances, you may be reemployed in a short-term temporary assignment. If this occurs, you will be paid at a rate appropriate to the assignment, not a rate based on your pre-retirement pay. Also, you will not be eligible for employee benefits and will not contribute to the Retirement System. 23

24 ORDINARY DISABILITY BENEFITS When You Are Eligible For Benefits You are eligible for ordinary disability retirement if: you become disabled while a member of the System with at least two years of service; the disability prevents you from performing any gainful employment; the Medical Advisor certifies that you are disabled; you apply for and receive Social Security disability benefits. If there is a delay in receiving a decision from the Social Security Administration, the Human Resources Department will grant you a temporary, ordinary disability retirement for six months or until the Social Security Administration decides your case, whichever occurs first. These temporary benefits may be continued beyond six months if the Social Security Administration still has not reached a decision on your case. How Your Benefit Is Calculated Your ordinary disability retirement benefit is based on your average final salary and years of service credit at the time you retire. Refer to the formula for normal retirement on page 13. There is no reduction to a disability benefit because of your age at retirement. Your benefit is payable for as long as you remain disabled. 24

25 If You Return To Work If you return to any gainful occupation before your normal retirement date, your ordinary disability benefits may be reduced. If you begin to earn more than the difference between your disability benefits and your average final salary, your benefits will be reduced to keep your total income equal to your average final salary. For example, if your average final salary was $40,000 and you are receiving disability benefits of $15,000, you may earn up to $25,000 with no reduction in benefits ($40,000 - $15,000 = $25,000). If you begin to earn $30,000, however, your disability benefits will be reduced to $10,000 to keep your total income at $40,000 ($30,000 + $10,000 = $40,000). If the Medical Advisor determines that you are able to earn more than the difference between your benefits and average final salary, but you have refused employment, your benefits may be stopped, unless the County Manager rules that your refusal was justified. Retirees on ordinary disability who have not reached their normal retirement date must submit copies of their income tax returns to the Human Resources Department by May 1, of every year following a year in which disability benefits are paid. 25

26 SERVICE CONNECTED DISABILITY BENEFITS When You Are Eligible For Benefits You are eligible for a service-connected disability retirement if: you become disabled while a member of the system; your disability is caused by a job-related accident or disease, as determined by the County Manager; and the disability prevents you from performing the duties of the job classification you held at the time of the accident or illness. You are not eligible for service-connected disability benefits if you become disabled due to a condition you had when you were hired. (If you have a specific disability when you begin work, you must waive your right to any benefits from a service-connected disability related to your pre-employment disability before you are eligible to join the retirement system.) You will be provided with a copy of the disability procedures at the time you apply for disability retirement. How Your Benefit Is Calculated Your service-connected disability retirement benefit is equal to: % X Average Final Salary Minus Workers Compensation Benefits EXAMPLE: SERVICE-CONNECTED DISABILITY Assume you have become disabled and meet the eligibility requirements for service-connected disability benefits. Assume again that your average final salary is $40,000. If you were not eligible for disability income payments from other sources, your annual service-connected disability benefit would be determined as follows: $40,000 x 66.67% = $26,668 26

27 How Long Benefits Continue Your service-connected disability benefits will continue until the earliest of the following dates: the day on which you fail to submit proof of continuing disability or refuse to submit to a medical examination when requested by the Human Resources Department. the day of your death (unless joint & survivor benefits were elected) What Happens At Normal Retirement Age If you were a general employee, upon the attainment of your normal retirement age, age 62, your service connected disability benefit will be reduced to 45% of your average final salary. If you were a police officer, firefighter or deputy sheriff, upon the attainment of your normal retirement age, age 52, your service connected disability benefit will reduce to 60% of your average final salary. Upon receiving Social Security benefits, but no later than age 65, your service connected disability benefit will reduce to 52% of your average final salary. Note: A firefighter's service connected disability allowance will never be less than 66.67% of average final salary. 27

28 COST OF LIVING ADJUSTMENTS Each July 1, your pension may be increased to reflect increases in the costof-living. Cost-of-living (COLA) increases apply to any benefits you are receiving under the plan. The COLA increase is based on the increase, if any, in the U.S. Average Consumer Price Index (CPI-Urban) for the year preceding the increase in benefits. The amount of the COLA is equal to the first 3% of the increase in the Consumer Price Index (CPI-Urban) plus half of each percentage increase from 3% to 12% up to a maximum COLA increase of 7.5%. Example: If the CPI is 3.6%, the COLA increase would be 3% + (1/2 x.6) = 3.3%. You will receive your first benefit increase on the July 1 following the first anniversary of your retirement. For example, if you retire on December 31, 2007, the first anniversary of your retirement will be December 31, 2008, and you will be eligible for a benefit increase on July 1, Your first COLA increase will be included in your July 31, 2009 benefit payment. 28

29 DEATH BEFORE TERMINATION OF EMPLOYMENT Survivor's Benefit In the event of your death before retirement, your survivors may be entitled to a monthly benefit from the plan if your death occurs after you have completed two years of credited service (this qualification will not apply if you die as the result of an accidental, on-the-job injury). You may designate one or all of the following as your beneficiary for this benefit: your spouse as long as he or she remains unmarried, your dependent parents, and your children under age 18. The benefit is equal to 50% of an amount calculated under the normal retirement formula based on average final salary and credited service at the time of your death (see page 13). In no case, however, will the death benefit be less than 5% of your average final salary. If however, you are eligible for normal retirement, we encourage you to complete a Joint and Survivor designation form, even if you are not ready to retire. By completing this form, your surviving annuitant would be eligible for a joint and survivor benefit of 50%, 66.67%, or 100% of the monthly benefit you would have received if you had retired on the date of your death. Joint & Survivor benefits paid to a spouse are payable for life, even if your spouse remarries (see page 20). If your death is the result of an accidental on-the-job injury and your beneficiary is receiving a line of duty death benefit (see page 31), the 2 year service qualification will be waived and the retirement benefit will be 100% of the amount calculated under the normal retirement formula. If you have designated more than one beneficiary, they will share the benefit equally. Your dependent parents will receive the benefit for life; your spouse until he or she remarries or dies; your children until they reach age 18. Your beneficiary may also waive the monthly payments and instead receive your accumulated contributions, plus interest, in a single payment. If you have named more than one eligible beneficiary, they must all agree to such a waiver and apply for the single payment within 90 days of your death. If you are eligible for normal retirement and pass away prior to retiring, your beneficiary could be eligible for a monthly joint and survivor benefit. In order for this 29

30 Return Of Contributions If your beneficiary is not eligible for the survivor's benefit, he or she will receive your contributions and interest earnings in a single payment. If you do not designate a beneficiary, or your beneficiary is not living at the time of your death, your account will be paid to your estate. DESIGNATING A BENEFICIARY When you join the System, you will be asked to name one or more beneficiaries to receive benefits in the event of your death. You may name anyone you wish. If you name more than one person, each person will share equally in the total amount payable. You can change your beneficiary designation at any time by giving written notice to the Human Resources Department. The Forms for naming or changing beneficiaries are available from Human Resources or on our website at 30

31 LINE OF DUTY DEATH BENEFITS If you die in the line of duty, your beneficiary will receive a benefit of two times your base salary, up to a maximum of $150,000. Beginning 7/1/04, the $150,000 maximum shall be increased by the cost-of-living adjustment approved by the County Board for County Employees. If you have named more than one beneficiary, the benefit will be divided among your beneficiaries in the same manner you designated for your life insurance policy. Your beneficiary will also receive a benefit equal to the normal retirement benefit (see page 13) as if you had worked 30 years and retired. At the time you would have reached age 62, age 52 for police officers, firefighters and deputy sheriffs, this benefit will equal the benefit you would have been entitled to had you retired and elected a 100% joint & survivor benefit. In addition, any surviving children, or their legal guardian, will receive undergraduate tuition assistance equal to in-state tuition, room and board at the University of Virginia, plus 33%, until the child reaches 23. The benefit will be payable on a semester-by-semester basis by submitting documentation as required by the County Manager. 31

32 BENEFITS FOR PART-TIME EMPLOYEES How System Benefits Are Calculated Your benefits are calculated in the same way as a full-time employee's, except for service connected disability benefits, which are discussed later in this section. The terms "average final salary" and "credited service" are defined differently for part-time employees. Average Final Salary: Average final salary is computed in the same way described on page 14. However, for plan purposes, your pay for a given year is brought up to the level you would be receiving if you were a full-time employee. This is accomplished by multiplying your pay by 2080, and then dividing this figure by the total number of hours you worked during the year. For example, if you have been working 1040 hours per year (20 hours per week) and received an annual salary of $20,000, your pay for purposes of figuring average final salary will be determined as follows: $20,000 x 2080 = $41,600,000 1,040 $ 40,000 Assume you retire at the end of 2007 and received the most pay in 2005, 2006 and 2007, and worked 1040 hours in each of those years, your average final salary, based on the assumed earnings history shown below, would be: $19,500 x 2080 = $39, $20,000 x 2080 = $40, $20,500 x 2080 = $41, $120,000 3 = $40,000 Your average final salary is $40,000 Credited Service: Credited service is the total number of hours worked, divided by For example, if you worked 1040 hours a year for 15 years, your total hours would equal 15,600 (1040 x 15), and your credited service would be determined as follows: 15, = 7.5 You will receive credited service for a period of military leave. Service in this case will be pro-rated based on your average annual credited service before beginning a leave. 32

33 How Service-Connected Disability Benefits Are Calculated Service-connected disability benefits for part-time employees are calculated as follows: 66.67% X Average Final Salary X Average Annual Credited Service -Minus- Workers Compensation benefits "Average final salary" and "credited service" are defined on page 32. "Average annual credited service" equals credited service divided by total years you worked part-time. For example, if your credited service is 7.5 following 15 years of service (see example under "Credited Service"), your average annual credited service would be: =.5 Example: Assume you have become disabled and meet the eligibility requirements for service-connected disability benefits. Assume again that your average final salary is $40,000 and your average annual credited service is.5. Your annual disability retirement benefit would be calculated as follows: 66.67% x $40,000 x.5 = $13,334 or $1, a month This is the benefit you would receive if you are not eligible for disability income payments from other sources. Note: Please refer to page 27 regarding how long benefits continue and what happens at normal retirement age. 33

34 OTHER BENEFITS FOLLOWING RETIREMENT After retirement, you may remain in any health, dental, and life insurance plans in force at the time of your retirement. Add more here. For more information County employees should contact the County Human Resource Department, at (703) School system employees should contact the School Board Personnel Office at (703) SOCIAL SECURITY BENEFITS You may receive benefits from Social Security in addition to any benefits payable to you from the System. The County contributes to your Social Security account, as you do through your payroll deductions. Your actual Social Security benefits are based on the amount of your earnings that are subject to Social Security taxes. You may ask your local Social Security office for a record of your past wages that were subject to such taxes. You may also request a booklet, which explains how to figure your Social Security benefits. Social Security benefits do not start automatically; you must apply for them. It usually takes about two or three months to process your application. To obtain information on Social Security benefits, you should contact the Social Security Administration at or visit their website at 34

35 SERVICES TO MEMBERS The Human Resources Department publishes this handbook, newsletters and an annual benefit statement. The annual benefit statement shows the amount of service credit you have and the total contributions plus interest in your account. The statement also includes projected retirement benefits. The forms necessary to apply for retirement are available on the website at Human Resources Department staff is also available from 8:00 a.m. to 5:00 p.m. Monday through Friday. 35

36 OFTEN ASKED QUESTIONS How Are Benefits I Receive From the System Taxed? Any part of your account that consists of contributions you made before December 23, 1984 has already been taxed. You will owe no taxes on these contributions when they are returned to you, either in benefit payments or when you leave employment. The remainder of your account - including employee contributions, employer contributions, and investment earnings - is subject to federal tax as it is paid to you. In addition, your tax liability depends on whether you are receiving retirement benefits from the plan or a withdrawal of your contributions before retirement. Retirement Benefits- Each retirement payment is made up of both employee and employer contributions. This means at least a portion of your benefit will be subject to federal tax starting with your first benefit check. Withdrawal of Contributions Before Retirement- If you withdraw your contributions before reaching age 59½, you will have to pay regular income tax plus an additional 10% early withdrawal penalty. The early withdrawal penalty will not apply if the money is distributed due to early retirement, disability, or death. The penalty will also not apply to Public Safety members who separate from service after attainment of age 50. You can postpone paying taxes on a withdrawal of contributions by rolling over the taxable portion of the payment into an Individual Retirement Account (IRA) or, if available, into the tax-qualified plan of another employer within 60 days of receiving payment. In this case, you will be required to pay taxes only when you receive the money from your IRA or the other employer's plan. Because tax laws are complicated and change frequently, you should talk with a professional tax advisor before you request a refund from the plan. If you live in Virginia, a portion of your benefit may be subject to state income tax. If you live outside Virginia, you should contact the state and local tax agencies where you live to determine if your retirement benefits are taxable. 36

37 How Can I Find Out How Much My Account Is Worth? Annually, you will receive a detailed statement of your account. It will show your total account balance as of a specified date, including earnings on your contributions. You can contact the Human Resources Department at any time for more information on the value of your account. Can I Borrow From My Account? No. When Should I Apply for My Retirement Benefits? You should apply for retirement benefits no more than 90 days and no less than 30 days from your planned retirement date. How Do I Apply for Disability Benefits? You must file a complete application with the Human Resources Department The application is available from the Human Resources Department along with written procedures on how to apply for benefits. You can also obtain forms directly from our website at 37

38 Can I Retire After My Normal Retirement Date? Yes. Is There a Mandatory Retirement Age? No. How Is Interest on My Contributions Credited? Interest on the contributions you make each year is credited each January 1 at an annual rate of up to 6% starting with the year after the contributions are made. Is Benefits Counseling Available? Yes. As your retirement date nears, you will be faced with many decisions. Even though the various retirement options are described in this handbook, nothing can help you in your decision making as much as a personal interview with one of the Human Resources Department staff. An interview will provide you with benefit estimates and help you select the retirement option that is best for you. You are welcome to phone or write for an estimate anytime; however, your estimate will be more accurate closer to your retirement date. Once I Retire, How Long Will It Be Before I Get My First Payment? Benefit payments are electronically deposited to your bank on the last working day of the month. If your retirement date is between the first and 15th of the month, you will receive your first check 38

39 at the end of that month. If you retire between the 15th and the last day of the month, you will receive your first check at the end of the following month. For example, if you retire on June 2, your first payment will be deposited on June 30; if you retire on June 18, your first payment will be deposited on July 31. It is important to mention that your first payment may not reflect your actual benefit. Because processing your retirement takes time, the System may pay you an estimated benefit at first. Once the process is complete; you will receive an adjustment if your estimated benefit is different from your final benefit. Can I Work After Retiring? Yes, however, if you return to work for an employer who participates in the Arlington County Retirement System, your retirement benefits will cease and you will again become a member of the System. If you return in a short-term temporary position, your retirement benefits may continue. 39