Clip and save: 2013 Retiree Payment Schedule

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1 Orange County Employees Retirement System Volume 12 Number 1 Magazine for all Members January 2013 Personalized 1099-R s to be mailed in January Clip and save: 2013 Retiree Payment Schedule

2 Board of Retirement election update Members of the Board of Retirement Thomas Flanigan, Chair Frank E. Eley Shari L. Freidenrich Raymond Geagan Robert Griffi th Roger Hilton Wayne Lindholm Charles E. Packard Chris Prevatt Reed L. Royalty Chief Executive Officer Steve J. Delaney Chief Investment Officer Girard Miller CFA Assistant Chief Executive Officer, External and Legal Operations Julie Wyne Assistant Chief Executive Officer, Finance and Internal Operations Brenda Shott At Your Service is published for members and retirees of the Orange County Employees Retirement System Comments and suggestions should be directed to: Robert Kinsler, Public Relations Analyst OCERS 2223 E. Wellington Ave., Ste. 100 Santa Ana, CA Telephone: (714) Toll-free within California: (888) Web site: At Your Service is edited and designed by Robert Kinsler and Jayne Ritchey Board of Retirement Meetings: All regular business meetings are held in OCERS Board Room at 9:00 a.m. January 22, 2013 February 19, 2013 March 18, 2013 April 15, 2013 May 20, 2013 June 17, 2013 July 15, 2013 August 19, 2013 October 21, 2013 November 18, 2013 December 16, 2013 General Members voted to elect Chris Prevatt to serve a 3-year term on OCERS Board of Retirement to begin on January 1, An election was conducted among the active General Members and the votes were tallied on October 23, 2012 at the Registrar of Voters offi ce. Mr. Prevatt brings a wide range of experience to his position on the Board, including his full-time postiion as a Program Supervisor with the Health Care Agency, and as both Treasurer and a member of the OCEA Board of Directors. The Board of Retirement is responsible for establishing policies governing the administration of OCERS, disability determinations, assuring benefi t payments, establishing investment policy and investing assets for the system and monitoring execution of its policies. The Board of Retirement consists of nine members and one alternate. Four members are appointed by the Board of Supervisors of the County; four members are elected by active members of the system of which one is the alternate member; one member is elected by the retirees; and the Treasurer of the County is an ex-offi cio member. For more information on the Board of Retirement, visit OCERS Web site and click on the About OCERS button and then click on the Board of Retirement link. Follow us on Twitter OCERS is now on Twitter. Go to the OCERS Web site and click on the Twitter link to You can get news and important updates on OCERS. 2

3 Retiree Payment Schedule for 2013 As part of an ongoing effort to provide better customer service to our members, OCERS will continue to bring relief to retirees when the fi rst of the month falls on a weekend or holiday. When the fi rst of the month falls on a weekend or holiday, your monthly benefi t will be deposited the prior business day. The only exception to this is the January 1st benefi t payment, which will continue to be paid the fi rst business day of the year in order to avoid paying 13 checks in the year and causing tax issues for our members. The payment schedule below affects only those members who receive their monthly benefit via Electronic Fund Transfer ( EFT ). Please note: for those who receive an actual check, they will continue to be mailed out on the last business day of the month via the United States Postal Service regardless of what day the fi rst of the month might fall. Retirees who want to receive their retirement allowance in the most prompt way should sign up for EFT also known as Direct Deposit or Automatic Deposit. This provides retirees with the fastest delivery of their monthly retirement payment possible. Payroll Month Payment Day Payment Date January 2013 Wednesday January 2, 2013 February Friday February 1, 2013 March 2013 Friday March 1, 2013 April 2013 Monday April 1, 2013 May 2013 Wednesday May 1, 2013 June 2013 Friday May 31, 2013 July 2013 Monday July 1, 2013 August 2013 Thursday August 1, 2013 September 2013 Friday August 30, 2013 October 2013 Tuesday October 1, 2013 November 2013 Friday November 1, 2013 December 2013 Friday November 29,

4 Financial Strategies Seminars set for 2013 According to recent study completed in December 2012, most Americans (88%) ages 55 and older are growing more cautious regarding their long-term retirement strategy. The AIG Retirement Re-Set Study found 72% of respondents said the recent economic uncertainty provided a fi nancial wake-up call. Understanding steps you can take to help enhance your overall fi nancial health is a key reason to enroll in the Financial Strategies Seminar that will be held at OCERS twice this fall. The seminar teaches members worthwhile tools to: Create a path to follow and make appropriate fi nancial decisions Know when you can retire and how much you will need Identify factors that can positively or negatively impact your plan to retire Make appropriate investment selections for your short, mid and long-term goals Locate resources for further education and planning SCHEDULED DATES for three-session workshop: Workshop Wednesdays February 6, 13 and 20, :30 p.m. Workshop Wednesdays March 6, 13 and 20, :30 p.m. Workshop Wednesdays April 3, 10 and 17, :30 p.m. Members will also learn income tax planning, estate planning, proper benefi ciary designations, calculating Social Security benefi ts, and an explanation of the OCERS pension, among other things. The class is small, interactive, presented in a supportive environment, and the instructors do not spend time on self-promotion, or discussing specifi c products. Lastly, members will have an opportunity to meet with the fi nancial advisor after the class is completed at no cost on a oneon-one basis to have specific questions answered and create a personalized fi nancial plan with recommendations for the best steps to achieving their fi nancial goals. Attendees have found this individualized planning to be extremely valuable. Financial Strategies Seminars are held in OCERS Training Room, 2223 E. Wellington Avenue, Santa Ana, CA The three-session workshop seminars are free, but reservations are required. To make your reservation to attend this seminar, please log on at www. ocers.org and click on Retirement Seminars. For more information on upcoming Financial Strategies for Retirement Planning Seminars, please call Robert Kinsler at (714)

5 Personalized 1099-R copies to be mailed Jan. 31 OCERS will send personalized copies of Internal Revenue Service Form 1099-R to all retirees on January 31, The 1099-R form provides each retiree with detailed information on his or her income for the previous year. Retirees may also view copies of their R statement online, effective February 1, 2013, by logging into the Member Information Center (please note that OCERS online copies cannot be used to submit with your 2012 Federal/State tax returns). Detailed instructions are located on the reverse side of the 1099-R form. The following is an easy-to-use guide on how to read your 1099-R: Box 1 - Gross Distribution. This is the total amount of benefi ts paid to you by OCERS during the previous calendar year. Box 2a - Taxable Amount. This is the taxable amount of your income. If you retired after January 1, 1993, the amount is reported less the Safe Harbor exclusion. If you retired prior to January 1, 1993, OCERS did not calculate nor report the taxable amount because of the multiple recovery methods. Box 2b - Taxable Amount Not Determined. Box 2b is only checked if OCERS is unable to determine the taxability of the amount reported. Box 3 - This box is left intentionally blank and is not applicable. Box 4 - Federal Income Tax Withheld. This box shows any federal income tax withheld from your check during the year. Box 5 - Employee Contributions. If there is an amount in box 5, it is not a deduction or an amount paid for an insurance premium. The amount in box 5 is the portion of your benefi t that is non taxable. (If you subtract the amount in box 2a from box 1, you will have the amount shown in box 5) This was after tax money you contributed to OCERS. For retirees, this is the annual amount of your Safe Harbor tax recovery. Box 6 - This box is left intentionally blank and is not applicable. Box 7 - Distribution Code. IRS code identifying the distribution you received. These codes are explained on the back of the 1099-R Form. Boxes 8, 9a, 9b, 10 and 11 - These boxes are left intentionally blank and are not applicable. Box 12 - California State Income Tax Withheld. Any California State income tax deducted from your checks is shown in this box. Boxes 13 through 17 - These four boxes are left intentionally blank and are not applicable. 5

6 PEPRA (Public Employees Pension Reform Act) Enough about you, what about me? In September, Governor Brown signed Assembly Bill 340 which created the Public Employees Pension Reform Act (PEPRA). Since September, retirement administrators and their counsel throughout California have been discussing how PEPRA impacts public employers and employees that are members of public retirement systems, like OCERS. There are some things most of us agree on, and some things we don t, but one thing we all agree on is the importance of getting information out to our employers and employees on how it will impact them. Current employees For current employees, PEPRA will not change how OCERS calculates a retirement benefi t. This means we will continue to include the same elements of compensation and use the same rules to determine the correct measuring period for that compensation, (generally one year for those hired before September 21, 1979, and three years for those hired after that date), that we use as of December 31, 2012, no matter when a current employee retires. For an explanation of the compensation OCERS currently includes in retirement benefi t calculations, you may check the OCERS Web site at under Forms and Publications for the brochure entitled Compensation Earnable for General or Safety Members. The annual Cost of Living Adjustment (COLA) for retirement and survivor allowances will not change, no matter when a current employee retires. PEPRA adds language addressing an employee s payment of their employee contributions, and for current employees reinforces the employer s right to bargain for employees to pay at least 50% of the normal cost of the retirement plan. The normal cost of the retirement plan is the cost to provide each member with an additional year of service. Under current law, employee contributions are set using each employee s age when they entered OCERS membership. Added together, these contributions are supposed to equal 50% of the normal cost of the plan. The employer pays the other 50%. PEPRA does not change how these contributions are calculated for current members. It provides the employer with the ability on or after January 1, 2018, to require represented employees (those covered by a collective bargaining agreement), to pay 50% of the normal cost of the plan if they are not already contributing at that amount. Retired employees For retired employees, PEPRA does not change their retirement benefi t, or their COLA. It does change a retired employee s ability to come back to work for an OCERS covered employer and still receive their retirement allowance. It requires the retired employee to wait 180 days from their retirement date before returning to an OCERS covered employer for either the prevention of public service stoppage in an emergency situation or because the retired person has special skills needed to perform work of limited duration. The retired employee is limited to 960 hours per fi scal year. Certain exceptions apply to the 180 day waiting period, for example the employer can certify that the employment is necessary to fi ll a critically needed position, or the retiree is a public safety offi cer or fi refi ghter. Story continued on next page 6

7 New employees/new members For employees hired on or after January 1, 2013, that do not have prior public retirement system membership, or did not move between two reciprocal public retirement systems in California within 180 days, they are subject to a new retirement benefi t formula, new compensation rules and new retirement eligibility criteria. The retirement benefi t formulas for most general members will be 2.5% at 67 and for safety members will be 2.7% at 57. There is a possibility that some of OCERS participating employers will retain the 1.62% at 65 plan for general members, as that plan passes the PEPRA test that requires a lower age factor at normal retirement age and a lower normal cost than the PEPRA general member plan. That decision rests with the governing bodies of the employers. The compensation used to calculate retirement benefi ts for new employees/new members will be base pay plus hourly skills or shift based pay paid to similarly situated employees, like bilingual pay, night shift differential pay or hazardous duty pay. OCERS will no longer consider payoffs of annual leave, vacation or sick time or any type of pay for an allowance, like uniform or automobile. Additionally, compensation for retirement system calculations is limited to 120% of the Social Security limit, which would be $136,440 presently. OCERS will not collect contributions on compensation in excess of that limit since we can t use it to calculate retirement benefi ts. The eligibility requirements for retirement, which are currently age 50 with ten years of service, will change for new employees/new members to age 52 with fi ve years of service. Other provisions, like COLA and the ability to defer membership when terminating employment have not been impacted by PEPRA. For more information on how PEPRA affects you, you can visit the OCERS Web site at and click on the Public Employees Pension Reform Act (PEPRA) Update, or you can call OCERS at and speak to the Member Services Division. Pre-Retirement Seminars update While it s easy to live for today, the transition into retirement requires plenty of advance planning. To help fi ll this need for those nearing retirement, OCERS offers Pre-Retirement Seminars. These daytime seminars are held at OCERS, 2223 E. Wellington Ave., Suite 100, Santa Ana, from 8 a.m. to 2:30 p.m. The one-session seminar is free, and there is plenty of free on-site parking for those attending. Various topics are covered. A Social Security representative will discuss Social Security and Medicare benefi ts; a representative from Deferred Compensation will discuss the County of Orange 457 plan; a representative from the County of Orange retiree medical program will discuss the County s retiree medical benefi t options; and an OCERS Retirement Specialist will focus on your OCERS retirement benefi ts. Seminar dates: January 2 and 16; February 6 and 20, 2013; March 6 and 20, No registration is necessary for the Pre-Retirement Seminars. Members are welcome to take this seminar as often as they like. It is important to note that members are free to attend the seminar all day, or sit in on only those topics of interest to them. For more information visit www. ocers.org. 7

8 Orange County Employees Retirement System 2223 E. Wellington Avenue, Ste. 100 Santa Ana, CA Presorted First-Class Mail U.S. Postage Paid Santa Ana, CA Permit # 4833 Revised assumptions impact contributions At a December 2012 meeting, OCERS Board of Retirement revised several economic assumptions used by OCERS actuary to help establish contribution rates for both members and employers ( plan sponsors ). The newly-approved assumption changes will impact both employee and plan sponsor contribution rates beginning in July Here are the key changes that will be used by The Segal Company in the December 31, 2012 Annual Actuarial Valuation: Investment return: The assumption rate for the investment portfolio was lowered from 7.75% to 7.25% Inflation rate: The price infl ation rate was lowered from 3.50% to 3.25% Real across-the-board salary increase assumption: The 0.25% real across-the-board salary increase assumption was increased to 0.50% While the economic assumption changes will increase the contribution rates for members and plan sponsors, the Board of Retirement also voted to use a two-year phase in to help mitigate the impact. OCERS Board of Retirement, experienced consultants and staff continue to work at positioning the investment portfolio to earn positive returns with a minimum of risk to help maintain OCERS ability to pay out all promised benefi ts. Even though OCERS has met its current actuarial assumptions in the last year and over the last 10 years, the investment rate of return assumption was reduced from 7.75% to 7.25%, explained Chief Investment Offi cer Girard Miller. These new assumptions refl ect changes in the capital markets, especially the lower interest rates on bonds and the slower rate of economic growth in the U.S. and world economies which affect many investments. Other public pension plans have been making similar adjustments to their expected rates of return. The actuarial assumption must be forward-looking and refl ects reduced expectations in the capital markets, in light of what has been called the New Normal economy. If economic conditions strengthen in future years, the investment return assumptions will be revisited.