Thinking About Retiring?
2014
Adventist Retirement Workshop
•
•
•
•
•
•
•
•
Introduction to Retirement Issues
The Financial Plan
Adventist Retirement Plan
The Healthcare Plan
The Legacy Pension Plan
Bridges Between Plans
You May Need These
Other Stuff
p. 2
p. 4
p. 10
p. 16
p. 23
p. 35
p. 37
p. 40
Introduction to Retirement
Issues
General Retirement Planning for the
Adventist Employee
A Whole New Chapter
SunAmerica Retirement Re-Set Study, 2012
Re-defining Retirement
SunAmerica Retirement Re-Set Study
Retiree Employment Patterns
Post-Retirement
Employment
38%
• Administrators more
likely to work postretirement
42%
•
20%
Volunteer
Part-Time
Occasional
Source: Retirement Plan Mini-Survey
Why People Retire Early?
SunAmerica Retirement Re-Set Study
Typical Retirement Asset Curve
• Growth of Tax
Deferred
Assets age 20
to 90.
1200
1000
800
600
400
200
Active
Retired
90
80
70
60
50
40
30
20
0
Typical Retirement Income Curve
140
60
40
0
Wages
SS
DB & DC
80
20
65
– 80% of Pre-Ret Pay
– 6% Investment Return
– Inflation 2.5%
80
50
• Assumptions
100
35
– SS
– Interest Income &
Pension Plan
– Principal Drawdown
120
20
• Retirement
Assets
How Much Income Do I Need?
•
•
•
•
•
Where are you going to live?
How Long do you plan to Live?
Are you planning on working?
Retirement Activities?
Early Retirement?
The Guru’s Say . . .
• You should have 70%-80% of your
employment income in Retirement
• Inherent weakness in these models
– Our Split Plan
– Overwhelming Targets
– Social Security non participation by some
– Retirement move
– Housing in retirement
– Our Retirement Healthcare Plan
Living Expenses Comparison
(The 70% Rule)
1.2
1
Tithe & Offerings
Income Tax
Retirement Savings
Commute Exp
Car Payment
Mortgage
General Living
0.8
0.6
0.4
0.2
0
Pre-Retirement
Retirement
Bequest Model
• Maintains your Retirement Asset Value
For Your Kids
• Withdraws Only 4% per Year from
Investment Asset
• Allows for Growth of Asset to Offset
Inflation Erosion
Annuity Model
• Maintains Standard of Living
• Fixed Monthly Income from your
Retirement Investments
• Over Time Inflation Will Erode Un-indexed
Annuity Income
• Asset may be Depleted upon Death
Lowered Expectations
• Reduced Standard of Living
• Target an Asset Required to Yield 80%
of Estimated Retirement Living
Allowance
• Result of:
– Low Years of Service
– No Homeowners Equity
Estimate Retirement Income
Requirements
$35,000
•
•
•
•
•
•
70% of Wages?
102% = $44,000
70% = $30,800
SS ~ $16,300
DB Pension ~ $9,000
Annual Income Gap ~
$5,500
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
Social Security
Pension
Gap
Plug the Income Gap
• Rule of 15 @ Age 65:
• Multiply Annual
Income Gap by ~15
for Fixed Annuity
• $5,500 x 15 =
$82,500
$35,000
$30,000
5500
$25,000
$20,000
9000
$15,000
$10,000
16300
$5,000
$0
Social Security
Pension
Gap
25 DB Years
Active
Wage
Other
SS
Pension
Spouse Allow.
$
$
Low ERI Model
Ret.
Active
49,920
4,800
High ERI Model
Ret.
$ 76,176
$ 4,800
$
$
$
16,800
8,100
1,800
$
26,700
$
$
$
16,800
8,100
1,800
$ 80,976
$
26,700
$
3,000
1,200
5,800
1,200
Total
$
54,720
Mortgage
Car Pmt
$
$
16,104
3,000
$
3,000
$ 25,767
$ 3,000
Taxes
Ret Svings
Prop Tax & Ins
HC/Life/etc
$
$
$
$
10,000
1,498
1,800
2,400
$
$
$
$
1,200
1,800
1,200
$ 15,000
$ 2,285
$ 5,800
$ 2,400
$
$
$
$
Total
$
34,802
$
7,200
$ 54,252
$
11,200
Discretionary
Replacement %
Shortfall
Requiring DC ~
$
19,918
$
100%
$
$
19,500
98%
418
10,460
$ 26,724
100%
$
15,500
58%
11,224
280,600
$
$
15 DB Years
Wage
Other
SS
Low ERI Model
Active
Ret.
$
49,920
$
4,800
$
16,800
Pension
Spouse Allow.
Total
Mortgage
$
$
54,720
16,104
Car Pmt
$
Taxes
Ret Svings
Active
$ 76,176
$ 4,800
High ERI Model
Ret.
$
16,800
$
$
$
4,877
831
22,508
$
$
$
4,877
831
22,508
3,000
$
3,000
$
3,000
$
3,000
$
$
10,000
1,498
$
$
1,200
-
$ 15,000
$ 2,285
$
$
1,200
-
Prop Tax & Ins
$
1,800
$
1,800
$
5,800
$
5,800
HC/Life/etc
$
2,400
$
1,200
$
2,400
$
1,200
Total
$
34,802
$
7,200
$ 54,252
$
11,200
Discretionary
Replacement %
$
19,918
$
100%
15,308
$ 26,724
$
11,308
Shortfall
Requiring DC ~
77%
$
4,610
$ 115,260
$ 80,976
$ 25,767
100%
43%
$
$
15,416
385,400
Filling the Income Gap
• Work Longer
– Increase DC Plan
– Increase SS Benefits
• Reduce Replacement Ratio
– Say From 70% to 50%
– By moving to Low-Cost Retirement Area
• Increase Retirement Savings
Annuity – How It Works
• $100,000 Lump Sum
• Invested at 5%%
• Withdrawals of $350
or $450 per month
• Withdrawal COLA
2.5%/year
Retirement Challenges Today
•
•
•
•
•
Home Values Falling
Interest Rates at ~0%
Failing Pension Plans
Healthcare Assistance Uncertainty
Employment Uncertainty
• If you are contributing less than 3% you are
walking away from money the church wants
to give to you.
• Is 3% enough for you?
Today’s Retirement Picture
“If
we take a late retirement
and an early death, we’ll just
squeak by.”
Struggling
Retirees/Survivors
• Ministers Opting out of Social Security
– Disability
– WEP
– Medical
• Divorce
• Death of Employee prior to Retirement
– Life Insurance
• Early Retirement
– SS
– Medicare
– Pension
• Short Career/Homeowner’s Equity
Advice from a Bored Retiree!
Have something in mind to do after you retire. After 90
days of doing all the little things needed doing around
the house, I needed something to do. I could wished the
church had some idea of things we could of chosen from
to continue to spread the message. . . . The conference
where retired could use some retired Pastors but no calls
I think that is a waste of 40 years experience. I offered
my time to the church first, no takers so I went to work
for the government and never felt so appreciated. Such
is life. All the best.
Adventist Retirement Workshop
•
•
•
•
•
•
•
•
Introduction to Retirement Issues
The Financial Plan
Adventist Retirement Plan
The Healthcare Plan
The Legacy Pension Plan
Bridges Between Plans
You May Need These
Other Stuff
40
p. 2
p. 4
p. 10
p. 16
p. 23
p. 35
p. 37
p.
Adventist Retirement Plan
Saving for Retirement
The ARP Contribution Model
Contributions
• ER Basic Contribution
– 5%
– Regardless of EE
contributions
• EE Voluntary
– Recommended Minimum 3%
– Usually Tax Deferred
– Should consider higher
• ER Match
– 100% up to 3%
Contributions
Dollar Cost Averaging
 Investment Bargains
 Invest $200 per month in Mutual Fund ‘A’
 @ $25 = 8 shares per month
 @ $15 = 13.33 shares per month
 More Shares = More Future Growth
Diversification
• The Enron Scenario
• ARP Requires Diversification
• Mutual funds invest in many companies.
– SDA Large Cap 467 companies
– Dreyfus Appreciation – 52 companies
– Dreyfus Emerging Leaders – 67 companies
The Risk Investment Cone
The Risk Investment Cone
Aggressive Growth
Columbia Small Cap
SDA Small Cap
Munder Midcap
Invesco Mid-Cap Core Growth
Growth of Principal
T Rowe Price International
Risk Return Continuum
Amer Funds Europac Dodge & Cox
International
SDA International
SDA Large Cap
Dreyfus Appreciation
Vanguard REIT Index
Dodge & Cox Stock
Growth & Income
American Century Equity Inc
Vanguard Growth & Income
PIMCO All Asset All Authority
Income
Vanguard Treasury
Vanguard Corporate
PIMCO Real Return
SDA Bond
Galliard Stable Value
What Helps Investments Grow?
Source: Financial Analysts Journal, May/June,
1991: By Gary Brinson, Brian Singer and
Gilbert Beebower.
INVESTING FOR GOOD
• All “SDA” funds are “Socially Screened” – Avoid
Companies with significant exposure to:
–
–
–
–
–
–
Pornography
Tobacco
Alcoholic Beverages
Gambling
Meat Packing
Caffeine Beverages
• Default Model: Socially Screened Age Appropriate
Target Maturity Funds
• Default Employees, ~ 60%
• Target Maturity Funds
– SDA Retirement 2010 Conservative
– SDA Retirement 2015 Moderately Conservative
– SDA Retirement 2040 Aggressive
• Incremental Re-balancing from aggressive to
conservative
• Socially Screened
• Age Appropriate Default
How Much
should I
contribute?
12%
10%
Employer
Match
8%
6%
Employee
Voluntary
4%
Employer
Basic
2%
July, 2011
0%
Retirement Asset as
Multiple of Wages
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
1
6
11
16
21
26
31
Denominational Employment Years
Basic
Voluntary
Match
36
Approximate Contribution Averages
• 3% Avg Cont. Rate
• However
– 25% are contributing 0%
– 30% are undercontributing
– Leaving Money on the Table
Investment Summary
• The Guru’s Say:
• As you approach retirement, you should
be moving into less aggressive positions
• Market swings can take years to ride out
• Discuss Your Asset Allocation Model
with a Guru today!
Investment Tools
• Experts Schwab brokerage window
• Learning – set up your own model within
vetted funds
• Don’t know, don’t care
– Financial 360
– Guided Portfolio Services
– Target Dated Models
So What Happens at
Retirement?
• Structured Withdrawal
–
–
–
–
Easy & Flexible
Minister Friendly
Low Fees
No Guarantee
• Purchase Annuity
–
–
–
–
–
Trouble Free
Guaranteed by Insurance Company
Minister UnFriendly
Moderate to High Fees
Loss of Control of Asset – Not Flexible
• Rollover to an Alternate Plan
– Minister UnFriendly
– Fees, flexibility, control depend on Plan
• Cashout
– Taxable Immediately
VALIC Can Help
• VALIC Advice Line
– 888-568-2542 > 0, “Advice Line”
• VALIC Web Site
– www.VALIC.com/adventist
• VALIC Representative
Decisions
P. 15
• Investing my Retirement Assets
– Investment Advisor
– Target Dated Funds
– Guided Portfolio Services
– Do it yourself
• How much to Contribute?
– Minimum, 3%, Maximum IRS Limits
– Contact Employer to change rate
www.PresentationPro.com
Decisions
p. 15
• Distribution
– Structured withdrawal – monthly, quarterly
– Annuitization
– Rollover to alternate plan (IRA etc)
– Leave it to grow
– Cash-out
www.PresentationPro.com
Questions?
Adventist Retirement Workshop
•
•
•
•
•
•
•
•
Introduction to Retirement Issues
The Financial Plan
Adventist Retirement Plan
The Healthcare Plan
The Legacy Pension Plan
Bridges Between Plans
You May Need These
Other Stuff
p. 2
p. 4
p. 10
p. 16
p. 23
p. 35
p. 37
p. 40
The Healthcare Plan
SHARP
Healthcare in Retirement
Supplemental
Healthcare, Adventist
Retirement Plan
SHARP is an Employer sponsored plan that
helps Retirees defray the health care costs
related to medical, prescription drugs, dental,
vision, and hearing aid expenses.
Isn’t Medicare Enough?
• Retirees Incur Expenditures Not Covered by
Medicare such as:
• Outpatient Prescription Drugs
• Dental, Vision, Hearing
• Medicare Outpatient 2014
– Co-Pay 20%
– Deductible $147.00
• Medicare Inpatient 2014
– $1,184/admission deductible
– $296/day co-pay, days 61-90
– $592/day co-pay, days 91+
To Be Eligible for SHARP
You must be:
• Beneficiary of Plan(s)
or
• Spouse of
Beneficiary under
Joint and Survivor
(J&S) and
• With 15+ Years of
Church Service Credit
Medicare ‘Premiums’
Reimbursement
• Reimbursement for Standard Medicare
Part B Premiums – 2014 = $104.90/mo
• Qualified retirees receive prorated
reimbursement (50%-90%)
• If J&S, same for spouse
• Added to monthly benefits
SHARP is like a Menu
Your flight’s been cancelled. You’ve been given a meal
voucher at the airport for a fixed dollar amount. There are
FOUR menu options. You can order ALL, SOME, or
NONE of them.
If you order them all, you will exceed the value of your
meal voucher and will have to pay some from your own
pocket. If you don’t spend the whole voucher, the
restaurant is going to keep the voucher: No change given.
SHARP MENU
Options
2014 PMPM
Base Option
OR (not both)
$35
MCx (Medicare Extension)
$145
DVH (Dental, Vision, Hearing)
$60
Rx (Prescription Drugs)
$115
The SHARP Menu Options
• Base Coverage $35 pmpm
– Dental, one annual checkup at 100%
– Foreign Travel Emergency Medical
• $1,000 deductible/$50,000 maximum
• 80%/20%
– Catastrophic Medicare After $2100 annual deductible
• OR,
• MCx (Medicare Extension) $145 pmpm
– Same as Base, except:
– Covers Hospital & Dr. Visit Deductibles
– Covers Dr. Visit Co-Pays
Hold The Phone!
• Do the Math!
– $145-$35 = $110 ‘luxury premium’, x 12
mo’s = $1,320,
– or 62% of deductible being saved
• Is This a Good Deal?
• Very Popular with Retirees
The SHARP Menu Options
• DVH (Dental, Vision, Hearing) $60 pmpm
– Dental 20% Coinsurance, up to$2,200/Yr
– Vision 20% Coinsurance, up to $400/Yr
– Hearing 20% Coinsurance up to $2,200/Yr
with 1 year ‘look-back’
The SHARP Menu Options
• Rx (Prescription Drugs Extension) $115 pmpm
– No Deductible, No Annual Cap
– Retail Co-pay = $12/$24/$40
– Home Delivery Co-pay = $29/$54/$90
– Cost Constraint & Safety Rules
• Effective 2014, this is a Medicare D plan. Joining
this plan may make it impossible to join a Medicare
Advantage Plan, according to Medicare. If you wish
to join a Medicare D Plan, do not sign up for Rx.
Working with the Annual Caps
•
•
•
•
Straddle Plan Year – Jan to December
Look-back Provision, Audiology Only
Pitfalls – Single Code Procedure
Appeals
– Administrative
– SHARP Committee
– Board Appeals Committee
Earned Credit
(The amount the Plan pays)
• Monthly Credit for
– Retiree
– J&S Spouse
– Dependent Child up to age 26
• Eligibility
– SHARP Eligible – 15 qualifying years, and
– Retiree is age 65, or
– Retiree has 40 years of service
– If Retiree is Eligible for Earned Credit, then
J&S spouse also, even if younger
The Earned Credit
Years of
Church Service
Credit under
both DB & DC
Plans:
Retiree
Category
2013 Earned
Credit
PMPM
15 to 19 Years
E
$125
20 to 24 Years
D
$145
25 to 29 Years
C
$170
30 to 34 Years
B
$190
35 plus Years
A
$210
SUPPLEMENTAL HEALTHCARE, ADVENTIST RETIREMENT PLAN
Required
Enrollment Form
Church Service Only
Retiree
DOB
SS#
000-00-0000
J&S Spouse
000-00-0000
Earned Credit Eligible? Y or N
Retiree
Spouse
Base Option (Y/N)
Monthly Cost
$35
Dental/Vision/Hearing (Y/N)
$60
Prescription Drugs (Y/N)
$115
Medicare Extension (Y/N)
$145
Total Cost
Standard Earned Credit:
Personal Cost per Month
Pre-Medicare Option (Y/N)
Dependents - Name Below
$399
DOB
SS#
$138
$138
Total Pre-Medicare Costs
Pre-Medicare Earned Credit
Non-Medicare Earned Credit - First Child
Non-Medicare Earned Credit - Second + Children
Personal Pre & Non Medicare Cost
Retiree Cost
y
Spouse Cost
SUPPLEMENTAL HEALTHCARE, ADVENTIST RETIREMENT PLAN
Enrollment Form
Church Service Only
Retiree
J&S Spouse
DOB
Joe Bozinski
3/2/1948
Tina Bozinski
3/17/1948
Earned Credit Eligible? Y or N
Retiree
Spouse
Y
Y
Base Option (Y/N)
Dental/Vision/Hearing (Y/N)
Y
Prescription Drugs (Y/N)
Y
Monthly Cost
$35
Y
$60
Y
$115
Medicare Extension (Y/N)
000-00-0000
y
Retiree Cost
Spouse Cost
$35
$35
$60
$60
$115
$115
$210
$210
$170
$40
$170
$40
$40
$40
$145
Total Cost
Standard Earned Credit:
SS#
000-00-0000
26 Years
Personal Cost per Month
Pre-Medicare Option (Y/N)
Dependents - Name Below
$399
DOB
SS#
$138
$138
Total Pre-Medicare Costs
Pre-Medicare Earned Credit
Non-Medicare Earned Credit - First Child
Non-Medicare Earned Credit - Second + Children
Personal Pre & Non Medicare Cost
Total Personal Monthly Cost
Pre-Medicare Healthcare
• If Employee Retires prior to Medicare
Eligibility (age 65),
– Not eligible for healthcare assistance unless
• 40+ years of service credit, or
• Eligible to retire prior to 2003
– However you CAN purchase bridge
coverage until Medicare age eligible for you
and spouse
– See Retirement Plan for details
– Examples Follow.
SUPPLEMENTAL HEALTHCARE, ADVENTIST RETIREMENT PLAN
Enrollment Form
Church Service Only
Retiree
J&S Spouse
DOB
John Bozinski
3/2/1945
000-00-0000
Heather Bozinski
Retiree
Base Option (Y/N)
Y
Y
Y
Dental/Vision/Hearing (Y/N)
Prescription Drugs (Y/N)
Spouse
Y
Y
Medicare Extension (Y/N)
Monthly Cost
$35
$60
$115
6/30/1948
Earned Credit Eligible?
Y or N
y
Retiree Cost
Spouse Cost
$35
$60
$60
$115
$115
$210
$175
$210
$0
$175
$0
$145
Total Cost
36 years
Standard Earned Credit:
Personal Cost per Month
Pre-Medicare Option (Y/N)
DOB
Dependents - Name Below
Jennifer Bozinski
SS#
000-00-0000
3/17/1995
Y
SS#
000-00-0000
$399
$138
$399
$138
$138
Total Pre-Medicare Costs
$138
Pre-Medicare Earned Credit
Non-Medicare Earned Credit - First Child
$399
$399
$138
Non-Medicare Earned Credit - Second + Children
Personal Pre & Non Medicare Cost
$0
$0
Total Personal Monthly Cost
$0
$0
SUPPLEMENTAL HEALTHCARE, ADVENTIST RETIREMENT PLAN
Enrollment Form
Church Service Only
Retiree
J&S Spouse
DOB
John Bozinski
3/2/1945
000-00-0000
Heather Bozinski (when she turns 65)
Retiree
Base Option (Y/N)
Y
Y
Y
Dental/Vision/Hearing (Y/N)
Prescription Drugs (Y/N)
Medicare Extension (Y/N)
Spouse
Y
Y
Y
Monthly Cost
$35
$60
$115
36 years
Personal Cost per Month
Pre-Medicare Option (Y/N)
y
Retiree Cost
Spouse Cost
$35
$60
$60
$115
$115
$210
$145
$320
$210
$0
$210
$110
$399
DOB
Dependents - Name Below
Jennifer Bozinski
6/30/1948
Earned Credit Eligible?
Y or N
$145
Total Cost
Standard Earned Credit:
SS#
000-00-0000
3/17/1995
SS#
000-00-0000
$138
$138
$138
Total Pre-Medicare Costs
$138
Pre-Medicare Earned Credit
Non-Medicare Earned Credit - First Child
$138
Non-Medicare Earned Credit - Second + Children
Personal Pre & Non Medicare Cost
$0
$0
Total Personal Monthly Cost
$0
$110
Changing Your Options?
• Significant Limits to Change:
– Initial Open Enrollment
– 3-Year Anniversary Open Enrollment
• From Retirement effective date, not
SHARP enrollment.
– Other Discretionary Changes
• Age 65
• Loss of Coverage
– Rx Exception – Medicare D Plan has
annual Open Enrollment
Affordable Care Act
• Option for a non-J&S Spouse to join.
– No earned credit for such a spouse
• Child up to age 26 with earned credit
www.PresentationPro.com
Decisions
Option
Base or
Retiree
p. 22
J&S Spouse Child
MCx
DVH
Rx*
PreMedicare
NonMedicare
*Rx precludes joining a Medicare Advantage plan.
www.PresentationPro.com
Questions on SHARP
Adventist Retirement Workshop
•
•
•
•
•
•
•
•
Introduction to Retirement Issues
The Financial Plan
Adventist Retirement Plan
The Healthcare Plan
The Legacy Pension Plan
Bridges Between Plans
You May Need These
Other Stuff
p. 2
p. 4
p. 10
p. 16
p. 23
p. 35
p. 37
p. 40
The Frozen DB Plan
Estimating Your Monthly Benefits
DB Monthly Benefits
• Monthly Pension Plan
• Benefits Depend on:
– Vesting
– Total service credit
– Level of earnings
– Eligibility for spousal benefits
– “Old” Plan or “New” Plan
Years of Service Credit
• Pre-2000 Years Only
• Employment by a ‘Participating Employer’
• Exceptions:
– Approved graduate study for MDiv/PhD
– Qualifying Military Service
– Chaplain of Prison etc.
• Not Counted:
– Years with less than 1000 hours in year
– Volunteer Work
– Paid directly by church or church school
– Years Lost to Breaks in Service unless Recovered
(25 years full service)
The Single Life Benefit
• Basic Formula for all Retirees:
• Service credit x Benefit Rate Factor x Pension
Factor
• Single Life rate provides benefits for participant
ONLY
Joe Bozinski’s Single Life Benefit
• Pay rate = Pastor
• 25 years service credit
• 2014 Church Pension
Factor, $2,339
• 25 years x 1.3% x
$2,339 = $760.18/mo
$1,200
$1,000
$800
$600
$400
$200
$0
Monthly Benefit
Karen Bozinski’s Single Life
Benefit
• Pay rate =
Administrative
Assistant
• 25 years service credit
• 2014 Church Pension
Factor, $2,339
• 25 years x 1.06% x
$2,339 = $619.84/mo
$1,200
$1,000
$800
$600
$400
$200
$0
Monthly Benefit
The Joint & Survivor Benefit
• Reduced Monthly Benefit:
• Eligible Spouse Receives:
– Healthcare Assistance
– Death benefit
– Survivor benefits
• Single Life rate is usually less 10% per month
• Participant may opt for higher Single Life Rate,
no spouse benefits
• Election is irreversible
Example: Joe Bozinski
$1,200
• Single Life = $760.18/mo.
$1,000
• Within 5 years in age
• Joint & Survivor = 90% x
$800
$760.18 = $684.16
• If spouse dies, no reversion $600
to Single Life Benefit.
$400
$200
$0
Single Life
J&S
The Spouse Allowance
• Additional “welfare” benefit granted to
participant if Spouse has no retirement
plan provided by any employer.
• Recognition of career-uprooting moves.
• Reduced by employer-provided
retirement benefits.
Spouse Allowance Eligibility
•
•
•
•
•
•
20+ years of service credit
Married at least 1 yr prior to effective date
SA is reduced by the amount of any ER benefit
Social Security does not count against SA
Discontinued at death of spouse or divorce
Does not restart at Re-Marriage
Example: Joe Bozinski
• Bozinski is SA
eligible (20 yrs etc)
• Formula: Years SC
x .0125 x Single Life
benefit
• 25 x .0125 x
$760.18 = $237.56
• SA is reduced by
any retirement
benefits of spouse.
Spouse Allowance Reduction
Don’t Confuse SA with J&S
• Joint & Survivor
• Available to all married
(1 yr) retirees
• ‘Paid for’ by monthly
benefit reduction
• Provides healthcare and
survivor benefits to
spouse
• Spouse Allowance
• Requires 20 yrs credit & 1
yr of marriage prior to ret.
• Provides additional
‘welfare’ benefit
• Reduced by amount of
spouse’s employerprovided benefit
• Belongs to Retired
Employee, Not Spouse.
Normal Retirement Age
• NRA for Plan and SS
goes from 65 to 67 from
2003 to 2025.
• “Early Retirement” will
result in Benefit
Reduction of 1/2% per
month prior to NRA or 40
years.
• Tina & Joe
– Same Pay
– Same Years of Service
– She’s 2 years younger
Parsonage Allowance
Exclusion
Qualifying Housing Exp.
• No annual report
required
• 1099-R is marked
“Taxable Amount Not
Determined”
• Retiree determines
how much of the
benefit is taxable by
documenting
allowable housing
expenses.
Post-Retirement Church
Employment
• Maximum of 75% of Full Time
• Exception: Those age 70 ½ by Dec 31,
1997 may work FT for Church
• Suspend benefits, including healthcare
• Dollars amount not determining factor
• Can work for a non-denominational
employer without penalty.
Retirement Denominational
Employment Pitfalls
• ‘Top-up’ stipend
• Full-time expectation for Part-time pay
• Part-time denominational employment should be
negotiated without reference to your income.
• AD&D Insurance
The Death Benefit
• A death benefit is provided if you have:
– At least 10ysc in Church Plan
– Spouse also eligible if you elected Joint &
Survivor benefit
Calculating the Death Benefit
• 40ysc=100% of
current Pension
Factor
($2,339 in 2014)
• Less than 40ysc,
Pro-rate
• Example: 25 years
service credit
• $2,339 x 25/40 =
$1,462
Independent Transfers
• In order to qualify:
– ITR effective date prior to 2000
– Retirement after 1999
– Vested in NAD = 10+ years
• Includes both DB & DC Years, not pre-NAD years
– Working for NAD employer on 12/31/1999
• Benefit
– Pre-NAD Years added to NAD years at NAD Rates
– Adjusted by any benefit from pre-NAD plan
Interdivision Employee
• IDE to US Prior to 2000
– At least 10 years in NAD, or
– Until Retirement, and
– Retires with US Residency
• Retirement Benefits at higher of
– NAD rate or
– Home Division rate
– No residency requirement
• IDE to US after 1999
– Home Div or NAD DC plan
Mixed Service – Church & Hsp
•
•
•
•
•
May have separate benefit effective dates
Lump sum option for Hospital service
Cash benefit in lieu of healthcare
No death benefit on Hospital service
Post-1991 CH service counts toward vesting in
Hsp Plan
• Post-1991 Hsp service cannot count toward
vesting in CH Plan
The Survivor Benefit
What Happens to my Benefits if I Die?
Joe Bozinski, Retiree, Dies
$1,200
• Tina Bozinski shared 30 of
30 ysc, and receives no
personal pension:
• Survivor Benefits to Tina
Bozinski:
– ½ the participant’s J&S rate
– Continuation of healthcare
assistance @ same rate
– 30/30ths of Spouse Allowance
• Benefits continue even if
Surviving Spouse remarries
$1,000
$800
$600
$400
$200
$0
Retiree
J&S
Surv Surv 2/3
SA
Joe Bozinski, Pre-Retiree Dies
$700
• Tina Bozinski shared 25 of 25
ysc, and receives no personal
pension:
• Survivor Benefits to Tina
Bozinski:
– ½ the participant’s J&S rate
– Continuation of healthcare
assistance @ same rate
– 25/25ths of Spouse Allowance
• Pro-rated if less
– Tina’s choice when to receive
benefits. Early Retirement
Penalty.
• Benefits continue even if
Surviving Spouse remarries
$600
$500
$400
SA
J&S
$300
$200
$100
$0
Regular Surv Surv 2/3
Joe’s Wife Dies, Joe Survives
$1,200
• Full monthly J&S benefit
continues
• Continuation of healthcare
assistance @ same rate
• Spouse Allowance ceases
• If Retiree re-marries, the New
spouse is NOT eligible for
– Survivor Benefits
– Death Benefit
– Healthcare Assistance
$1,000
$800
SA
$600
J&S
$400
$200
$0
Regular
Alone
Joe Dies with Single Life Benefit
• Single Life Benefits Cease
• Sp Allow continues if
– At least 10 years ‘shared
service’
– Pro-rated based on ‘shared
service’
• No Survivor Benefits
• No Survivor Healthcare
• Death Benefit to Spouse or
Estate
$1,200
$1,000
$800
SA
$600
Single
Life
$400
$200
$0
Regular
Survivor
The Retirement Allowance
The Retirement Allowance
• One-Time Lump Sum Benefit
• Available At Retirement
• Based on Years of Service and Last
Wages
• Do Not Confuse with Monthly Retirement
Benefits
Calculating The
Retirement Allowance
• Eligibility:
– At least half-time employment for past two years
– Go Directly from Employment to Retirement
– Limited Exceptions within 36 months
• Calculation: 12.5% x monthly pay x years SC
• Split Benefit
– For service prior to 2000 – Retirement Benefit
– For service after 1999 – Employee Benefit directly
from Employer
Example: Joe Bozinski
• 22 Years Pre-2000
– Can be rolled over into tax
deferred IRA
– Not Subject to FICA
• 13 Years Post-1999
– Cannot be rolled over into IRA
– Subject to FICA
– May be Tax Deferred
• Last Monthly Wages $5,200
• 35 x .125 x $5200 = $22,750
$25,000
$20,000
$15,000
Emp
Benefit
$10,000
Ret
Benefit
$5,000
$0
Retirement
Allowance
“Special Pay” Resolution
• All employer RA (post 1999 portion) is
sent directly to ARP Account – No
exceptions
• Fewer IRS contribution limits
• No payroll taxes (FICA/SECA)
• Still accessible to Retiree
• Adopted Special Pay in Columbia &
Southern Unions:
– Carolina, Gulf States
– GC, NAD, New Jersey, Ohio,
Pennsylvania, Potomac, WAU
– Check with your employer if not on this list.
Decisions
p. 34
• Select an Effective Benefits Date
• Select Annuity Type
– Single Life, or
– Joint & Survivor
• Select option for Lump Sum Retirement
Allowance
– Cash it out, or
– Rollover to IRA or DC Plan account
Questions?
Adventist Retirement Workshop
•
•
•
•
•
•
•
•
Introduction to Retirement Issues
The Financial Plan
Adventist Retirement Plan
The Healthcare Plan
The Legacy Pension Plan
Bridges Between Plans
You May Need These
Other Stuff
40
p. 2
p. 4
p. 10
p. 16
p. 23
p. 35
p. 37
p.
Bridges Between Plans
Transitional Enhancement
• Pastor John Bozinski
– 20 DB Pre-2000 Years of US Service Credit
– 15 DC Post-1999 Years of US Service
• Retires at age 66
• Let’s say that in 13 DC years his ‘default’
moderate plan would have grown to an
employer provided account of $76,500.
Pastor Bozinski’s TE
Freeze
Scenario
No-Freeze
Scenario
Single Life Benefit
$602
DC Estimated Annuity
$425
Total Combined Single Life
benefit
Transitional Enhancement
$1,027
Total Estimated Single Life
benefit
$1,053
$1,053
$1,053
$26
$1,053
Vesting Reciprocity
•
•
•
•
Benefits vesting reciprocity
Healthcare Eligibility
Spouse Allowance Eligibility
Early Retirement Eligibility
Adventist Retirement Workshop
•
•
•
•
•
•
•
•
Introduction to Retirement Issues
The Financial Plan
Adventist Retirement Plan
The Healthcare Plan
The Legacy Pension Plan
Bridges Between Plans
You May Need These
Other Stuff
p. 2
p. 4
p. 10
p. 16
p. 23
p. 35
p. 37
p. 40
You May Need These . . .
Documents to Consider
• Estate Planning Documents
– Will
– Trust
– Living Will/Advance Directive
• “Your voice if you are alive, but not able to
speak or act for yourself”
– Financial Power of Attorney
See your Conference or Union Trust Services
Department.
Do I Need Insurance?
P.37
• Why?
– Mortgage or Special Needs Dependent
• Long Term Care
– ARM has arranged this with LTC Financial
Partners.
– 866 862 1457 or visit www.benefitsLTC.com
• Life Insurance
– Life Conversion for employer’s Basic Life only
– Retiree Supplemental Life Insurance
• Requires prior to retirement coverage
– http://www.adventistrisk.org/EmployeeBenefits
/LifeDisabilityForms.aspx
Decisions
•
•
•
•
•
p. 39
Update Will
Do I need a Trust?
Update Advance Directive
Do I need a Power of Attorney?
What Insurance Products do I Need?
– Life Insurance?
– Long Term Care?
Adventist Retirement Workshop
•
•
•
•
•
•
•
•
Introduction to Retirement Issues
The Financial Plan
Adventist Retirement Plan
The Healthcare Plan
The Legacy Pension Plan
Bridges Between Plans
You May Need These
Other Stuff
40
p. 2
p. 4
p. 10
p. 16
p. 23
p. 35
p. 37
p.
Other Stuff
When To Retire?
• As Soon As Possible?
• At Constituency? When Forced by Health
Concerns? As Part of a Plan?
• Critical Items to Remember:
–
–
–
–
NRA = Normal Retirement Age
No Tuition Assistance in Retirement
40 Years Service For Pre-Medicare Eligibility
Age 59 ½ Earliest Benefits Eligibility under
Pension Plan
• Early Retirement Penalty
• No Pre-Medicare Healthcare
The Old Testament Model
• Numbers 8:24 “This is what
applies to the Levites: from
twenty-five years old and
upward they shall enter to
perform service in the work of
the tent of the meeting. But at
the age of fifty years they
shall retire. . . They may,
however, assist their brothers in
the tent.”
Scott Adam’s Retirement
Philosophy
Starting the Process: DB Plan
• Current Employer Human
Resources Office
• Give at Least Four Months for
Paperwork
Starting the Process: DC Plan
At Retirement or anytime at or after 59 ½
– Employer Sends Term. Code to VALIC
– You Contact VALIC for Termination
Documents
– Inservice Distribution at 59 ½
• Decisions You Will Make:
– Cash-out
Creates ‘Tax Incident’
– Rollover
Protect Tax Deferred Nature
– Leave It
Continue to Manage
– Annuitize
Guaranteed Flow till Death
The Last Three Years
• Your Last 3 Years Paychecks,
• Discretionary Income &
• Preparation for Retirement
Go Into Retirement Prepared
• You probably will have more
discretionary income at R – 3 years than
ever again
• Consider Where You Want To Be Re:
– Consumer Debt
– Retirement Automobile
– Major Household Equipment
– Housing
Consumer Debt
• Goal: Don’t Go Into Retirement With
Consumer Debt
• You Can’t Consistently Earn Credit Card
Finance Charge Rates (16% to 22%)
D
The Retirement Vehicle
• Goals: Low Mileage Paid For Retirement
Vehicle
• Vehicle Unreliability is a Major Stressor
• CarMax and similar entities have large
inventories of low-mileage cars for
~$14,000.
Major Household Equipment
• Goal: New Major Appliances
• Examples are mostly from Sears’
Kenmore products – Mid-Range
Products
• You can spend more or less!
Major Household Equipment
Appliance
Washer
Dryer
Refrigerator
Freezer
Stove/Range
Dishwasher
Microwave
TV/Audio
Computer
Totals
Est. Mid-Range Yours?
$500 to $650
$400 to $500
$500 to $1300
$300 to $600
$500 to $1300
$300 to $600
$300 to $650
$500 to $1000
$600 to $1200
$3900 to $7800
3-Year Savings Plan
Estimated Pre-Retirement
Expenditures
Consumer Debt
Yours
Example
$
$6,000
Automobile
$
$14,000
Household Equipment
$
$6,000
Total
$
$26,000
Divided by 36 Pay Periods
Divided by 78 Pay Periods
$
$722
$333
The Dream Home
• Many Retirees Move Out of their Dream Home
within a Few Years of Retirement
– Health Care Proximity
– Roots
– Proximity to Children
• Many Retirement Dream Homes
are not Market Dream Homes
– Retiree takes a bath on sale
• In addition to location criteria in popular books
(America’s 100 Best Places),
consider roots, family, lifestyle.
Advice from Retirees!
• Don't buy too much land around your home. In a few
years it gets too much to take care of and then the need for
another move.
• If you are moving, rent at first, and if you are moving to
be with your kids, don't plan on them staying there
forever!
• You will need to have your house paid for, car paid for and
look for low cost of living areas where you want to retire.
• Try very hard to pay off your home mortgage before you
retire. Life is comfortable in retirement when you do not
have a mortgage to deal with.
Where Adventist Retirees Live
Home Ownership Survey
• Most Responding
Retirees Own
Outright!
• ‘Avoid Debt like
Smallpox’
• Tax Implications
• Retiree Advice “Have
your home paid for!”
9%
9%
21%
61%
Rent
Mortgage
Own Outright
Other
Retirement Move
• Eligibility: If denomination has moved you during
career
• If 30+ years of service credit, a full move of
reasonable(?) household goods & travel expense
within NAD
• Employer has significant discretion
• Taxable to retiree
A Transition Point
• Social Security
– Medicare
– Monthly Benefits
• Frozen Defined Benefit Plan
– Monthly Pension
– Healthcare & Welfare Supplement
• Defined Contribution Plan
– Retirement Savings Plan
• Countdown Thoughts
Questions?
Closing Thoughts
p.46
“The history of John affords a striking illustration of the way in
which God can use aged workers. When John was exiled to
the Isle of Patmos, there were many who thought him to be
past service, an old and broken reed, ready to fall at any time.
But the Lord saw fit to use him still. Though banished from the
scenes of his former labor, he did not cease to bear witness to
the truth....
And it was after John had grown old in the service of his Lord
that he received more communications from heaven than he
had received during all the former years of his life.
The most tender regard should be cherished for those whose
life interest has been bound up with the work of God. . . .They
have borne test and trial, and though they have lost some of
their vigor, the Lord does not lay them aside. He gives them
special grace and wisdom.”{AA 571-572}
Closing Thoughts
It is my joy to send along greetings to you from my fellow
officers of the North American Division. If you are reading this,
it means that you are on the brink of another of life's transition
points - retirement. You are at a point of looking back over your
years of service to the Lord and to the Seventh-day Adventist
Church. I hope that you can clearly see the impact that has
been made through your service in the lives of people all over
this division and around the world. Thank you for your
commitment, dedication and sacrifice. Only in eternity will you
know the full extent of your impact in service. May you be
blessed as you look forward to a new phase in your life as a
disciple of Jesus Christ.
Your Brother in Christ
Dan Jackson
President, North American Division
Closing Thoughts
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