MONEY PURCHASE ANNUITY VS. A FORMULA ANNUITY
The Fund often receives inquiries regarding
how Money Purchase Annuities are calculated
and how they differ from Formula Annuities.
The following is a list of frequently
asked questions.
A: Generally, the word “retire” applies to members who have withdrawn from service having accrued a minimum of 20 years of service, becoming eligible for what is referred to as a “Formula Annuity.”
A: Yes, you would be eligible to receive what is referred to as a “Money Purchase Annuity.”
A: The “Formula Annuity” is equal to 2.5% of the average salary for the 4 highest consecutive years of the last 10 years of service for each completed year of service or fraction thereof, not to exceed 75%.
A: No. You must have completed 20 years of service; after all lost time is taken into consideration before becoming eligible for a Formula Annuity*.
A: The amount of the annuity is determined by taking the sum of accumulated Age and Service contributions (7% out of your pensionable salary) plus 10% of the city Age and Service Contributions for each year or partial year of service in excess of 10. The sum of the contributions are divided by a factor at your date of retirement (or age 50 if you terminated prior to that time) and are then converted into an annuity.
A: CURRENTLY, APPROXIMATELY $2,000 PER MONTH ($3,500 vs $1,500) PAYABLE FOR LIFE. In addition, if you are only eligible to receive a Money Purchase Annuity, you will NOT be eligible for future cost of living annual increases. You will, however, receive a refund of the amounts contributed for that purpose, which were ½% of your total pensionable earnings, without interest, contributed during your period of employment.
A: You are guaranteed a minimum of 30% of average salary for the 4 highest consecutive years of the last 10 years of service, plus 2% for each completed year of service or fraction thereof in excess of 10, not to exceed 48% of average salary.
Note:
Service, as listed above is always calculated after any reductions for lost time. Any lost time you incurred prior to January 1, 1993 may NOT be reflected in your current service. Prior to that date, service and contributions were reported on paper or microfilm records. If you are contemplating retirement within the next 90 days, please request that a manual review of your lost time be performed, BEFORE you submit your PAR form to the Department on the CLEAR system. Once you submit your CLEAR form, you MAY not be able to rescind your retirement. Please remember as previously noted, if you fail to satisfy the service requirement by as little as 1 day, your benefit amount may be $2,000/month lower than you anticipated. These circumstances may be the result of timing your retirement date too close to your anniversary date, only to find you incurred lost time that was not previously reflected in your service history. We recommend, at a minimum, that you work at least one full pay period past your anniversary date. If you have any questions regarding your lost time, please contact our office.Pension Portability
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