TACOMA EMPLOYES' RETIREMENT SYSTEM

2

Orientation OutlineOrientation Outline

I Sources of Retirement Income

II How the Plan Is Funded and Managed

III Service Retirement Benefits

IV Benefits Other Than Service

Retirement

V Recent Plan Enhancements

VI Calculating Your Retirement Benefit

VII Deferred Compensation

3

Sources of Retirement IncomeSources of Retirement Income

• RETIREMENT SYSTEM ANNUITY

• SOCIAL SECURITY

• DEFERRED COMPENSATION

• PERSONAL SAVINGS & INVESTMENTS

4

What is the Tacoma Employes’ What is the Tacoma Employes’ Retirement System?Retirement System?

The Tacoma Employes’ Retirement System is a defined benefit plan funded by employee contributions and employer contributions which are tax deferred, as well as investment return.

5

Plan FundingPlan Funding

• Employer Contributions - 7.56% of salary (effective 1/1/01)

• Employee Contributions - 6.44% of salary (effective 1/1/01)

• Investment Earnings

6

Who is responsible for the Who is responsible for the administration of the administration of the

Retirement Fund?Retirement Fund?

The Retirement Office is responsible for the administration of the Retirement

Fund as directed by the Retirement Board.

7

Who are the members of the Who are the members of the Board of Administration?Board of Administration?

William Baarsma Mayor and ChairmanRobert Biles Director of Finance

Secretary of the BoardRey Arellano Designee of the City ManagerTim Ross Designee of the Public

Utilities DirectorDiane Wetzel Employee RepresentativeRodney Croston Employee RepresentativeVacant Employee RepresentativeDavid Peterson Retired RepresentativeChris Webster Citizen RepresentativeKenneth Turner Alternate Board Member

8

When does the Retirement When does the Retirement Board meet?Board meet?

The Board of Administration conducts its monthly Retirement Board meetings on the second Thursday of the month. These Retirement Board meetings are held at 1:00 p.m. in Conference Room 16 on the 1st floor of Tacoma Municipal Building North and are open to the public.

9

Web Sites• Located at

http://:www.TacomaEmployesRetirement.com on the internet and intranet are the Retirement Booklet; Commonly Asked Retirement Questions; Standard Forms for both Active & Retired Members; Annual Report/Summary Annual Report; and the Retirement Board packets, including the minutes and agendas.

10

Service Retirement EligibilityService Retirement Eligibility• AGE 60, ANY NUMBER OF YEARS OF

SERVICE

• AGE 55 OR OLDER, 10 YEARS OF SERVICE (reduced)

• AGE 40 OR OLDER, 20 YEARS OF SERVICE (reduced)

• ANY AGE, 30 YEARS OF SERVICE

• RULE OF 80 (AGE & YEARS OF SERVICE = 80)

11

Determining Benefit AmountDetermining Benefit Amount• AVERAGE SALARY

• YEARS OF SERVICE

• UNREDUCED BENEFIT - - 30 YEARS OF SERVICE - AGE 60 - RULE OF 80 (AGE & SERVICE = 80 or MORE)

• REDUCED BENEFIT

12

RP-1

Age Creditable Service30 29 28 27 26 25 24 23 22 21 20 19-10 9-1

40 0.759 0.698 0.642 0.591 0.544 NA NA41 0.897 0.825 0.759 0.698 0.642 0.591 NA NA42 1.060 0.975 0.897 0.825 0.759 0.698 0.642 NA NA43 1.252 1.152 1.060 0.975 0.897 0.825 0.759 0.698 NA NA44 1.417 1.332 1.252 1.152 1.060 0.975 0.897 0.825 0.759 NA NA45 1.603 1.507 1.417 1.332 1.252 1.152 1.060 0.975 0.897 0.825 NA NA46 2.000 1.706 1.603 1.507 1.417 1.332 1.252 1.152 1.060 0.975 0.897 NA NA47 2.000 1.815 1.706 1.603 1.507 1.417 1.332 1.252 1.152 1.060 0.975 NA NA48 2.000 1.871 1.815 1.706 1.603 1.507 1.417 1.332 1.252 1.152 1.060 NA NA49 2.000 1.929 1.871 1.815 1.706 1.603 1.507 1.417 1.332 1.252 1.152 NA NA50 2.000 1.964 1.929 1.871 1.815 1.706 1.603 1.507 1.417 1.332 1.252 NA NA51 2.000 2.000 1.964 1.929 1.871 1.815 1.706 1.603 1.507 1.417 1.332 NA NA52 2.000 2.000 2.000 1.964 1.929 1.871 1.815 1.706 1.603 1.507 1.417 NA NA53 2.000 2.000 2.000 2.000 1.964 1.929 1.871 1.815 1.706 1.603 1.507 NA NA54 2.000 2.000 2.000 2.000 2.000 1.964 1.929 1.871 1.815 1.706 1.603 NA NA55 2.000 2.000 2.000 2.000 2.000 2.000 1.964 1.929 1.871 1.815 1.706 1.706 NA56 2.000 2.000 2.000 2.000 2.000 2.000 2.000 1.964 1.929 1.871 1.815 1.815 NA57 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 1.964 1.929 1.871 1.871 NA58 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 1.964 1.929 1.929 NA59 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 1.964 1.964 NA60 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000

13

PortabilityPortability• SYSTEMS INCLUDED:

TRS PERS SERS SCERS WSPRS LEOFF II SEATTLE, SPOKANE & TACOMA

• SERVICE REQUIREMENT

(Must be met for each system)

• AVERAGE FINAL SALARY (Highest base salary will be used

for all calculations)

• 2/1/97 Years of Service underPortability are used for purposes of

eligibility and benefit formula

14

15

16

Disability BenefitsDisability Benefits1.5% of AVERAGE SALARY X

YEARS OF SERVICE

MINIMUM BENEFIT = $1OO/MONTH

DISABILITY INSURANCE AVAILABLE THROUGH DISABILITY INSURANCE AVAILABLE THROUGH HUMAN RESOURCESHUMAN RESOURCES

SERVICE ALLOWANCE OPTIONS1/1/2001

17

Death BenefitDeath BenefitLUMP SUM OF CONTRIBUTIONS PLUS INTEREST (less than 5 years)

or LUMP SUM & INTEREST OR

MONTHLY PAYMENT FOR 10 YEARS HAVING 2 X VALUE OF LUMP SUM

(5 years or more of service)or

IF ELIGIBLE FOR SERVICE RETIREMENT AND SPOUSE AS BENEFICIARY,

RETIREMENT BENEFIT OVER SPOUSES LIFE EQUAL TO OPTION E

orDEFERRED DEATH BENEFIT

(5 years or more of service)

18

(Continued)(Continued)• Effective January 1, 2001, upon the death of

any member who has not retired but who, as of the date of his or her death, had five years’ creditable service, in lieu of the death benefit provided,the spouse may elect to defer payment of a death benefit, leaving the member’s accumulated contributions with interest, not including contributions on overtime with interest, in the Retirement Fund until a deferral date.

19

Termination of EmploymentTermination of EmploymentLUMP SUM EQUAL TO

REFUND OF CONTRIBUTIONS PLUS INTEREST (less than 5 years)

orLUMP SUM EQUAL TO

150% OF CONTRIBUTIONS PLUS INTEREST (5 years or more)

Both are taxable unless rolled directly to an Both are taxable unless rolled directly to an Individual Retirement Account.Individual Retirement Account.

20

Benefit ImprovementsBenefit Improvements• Effective January 1, 1997:

– The employees’ contribution rate was reduced from 8.89% to 7.68% and the employer’s contribution rate was reduced from 10.44% to 9.02%.

– Employees terminating from City service with at least 5 years of membership service may receive a refund equal to one and one-half times their accumulated contributions and interest (including overtime contributions and interest).

21

(Continued)(Continued)– Members retiring from City service are

entitled to a service pension equal to not less than 200% of the member’s contribution plus interest. This benefit is paid in a normal annuity form which will be the actuarial equivalent of the single sum.

– Maintain a minimum 50% of purchasing power for Cost of Living Adjustments for retirees.

22

(Continued)(Continued)

– Increase the Cost of Living Adjustment for retirees from 1.75% to 2% (effective 1/1/97) to 2.125% (effective 1/1/01).

– Improved early retirement benefits. The revised early retirement provisions allow employees to be eligible for early retirement sooner (age 55 rather than 57, with 10 years of service). Additionally, an individual may reach full “service retirement” eligibility sooner.

23

Benefit ImprovementsBenefit Improvements

• Effective January 1, 2001:

– The Annual July Cost of Living Adjustment for retirees increased to 2.125%.

24

(Continued)(Continued)– Employees retiring from City service

with at least 5 years of membership service may receive a refund equal to one and one-half times their overtime contributions and interest.

– After January 1, 2001, a member who retires under a disability retirement may elect optional retirement allowances..

25

(Continued)(Continued)

– The employees’ contribution rate was reduced from 7.68% to 6.44% and the employer’s contribution rate was reduced from 9.02% to 7.56%.

26

Calculating Your Retirement Calculating Your Retirement BenefitBenefit

• Retirement Options

• Pension Calculator

• Purchase of Time

• Portability

27

Unmodified OptionUnmodified Option The maximum allowance you can receive is the

unmodified monthly form of payment.

The Unmodified Option provides a guaranteed pension for life, but makes no provision for a beneficiary after your death.

28

Option AOption A Provides that at your death, your estate or

beneficiary will receive a lump sum refund of the difference between your total accumulated contributions and interest at the date of retirement and the annuity payments you have received since retirement.

Annuity payment refers to that portion of the retirement benefit that is considered payable from the member’s accumulated contributions.

29

Option BOption B Provides that at your death your estate or

beneficiary will continue to receive monthly annuity payments until the total of them equals your total accumulated contributions and interest at the date of retirement.

Annuity payment refers to that portion of the retirement benefit that is considered payable from the member’s accumulated contributions.

30

Option COption C Provides for the payment of a retirement

allowance for a guaranteed period of years. If you live beyond the guaranteed period, the allowance is continued to you for life, but if you die before the expiration of the period, the allowance will be continued to your estate or beneficiary for the balance of the time. You have an option of five or ten years for the guaranteed period.

31

Option DOption D Provides a modified monthly allowance for life

and after your death your spouse, at the time of retirement, will receive one-half of this amount each month for life. * ∞

Option EOption E Provides a modified monthly allowance for life

and after your death your spouse, at the time of retirement, will receive the same monthly allowance for life. * ∞

* See Pop-Up Provision.∞ See Divorce Pop-Up Provision.

32

Option FOption F

If a member at the time of retirement has no spouse, a modified monthly allowance for life is provided and after death, the beneficiary will receive one-half of this amount each month for life or will receive the same monthly allowance for life.*

*See Pop-Up Provision.

33

*Pop-Up Provision*Pop-Up Provision

Provides for those members retiring on or after January 1, 1999, and selecting a joint and survivor Option D or E, or Option F, to have a pop-up when the spouse of the member (Option D or E) or the named beneficiary (Option F) predeceases the member subsequent to the members retirement. The benefit is increased to the Unmodified retirement allowance calculated under Sections 1.30.580 through 1.30.620.

34

∞ Divorce Pop-Up Provision A member retiring on or after January 1, 2008, selecting Option D or E and divorced thereafter and have satisfied Section 1.30.690.C of the Tacoma Municipal Code, the benefit payable to the member effective as of the first day of the month following the entry of the Order, shall be increased to the Unmodified retirement allowance. Provided further, that in the event the member is divorced and later remarries, within three months of remarriage the member will have the option to irrevocably designate the member’s new spouse as the wife or husband under Options D or E, subject to the same conditions as provided in Options D or E for a member who remarries after the death of a husband or wife.

35

Social Security ModificationSocial Security Modification• A member retiring from service, who has not

reached the age of 62, may elect to receive an additional pension allowance that will continue until he or she reaches the age of 62.

• At age 62, the member’s pension will be permanently reduced by an amount that is the actuarial equivalent of the additional pension paid the member.

• If the member dies leaving a beneficiary entitled to an allowance, the allowance shall be the same as the beneficiary would have received had the member not selected this modification.

36

Purchase of TimePurchase of TimeIndividuals may purchase up to 5 years of service

effective January 1, 2002 and may also transfer money from a 457 or 403 (b).

Effective September 1, 2002, repayment may also be made by a direct rollover to the Retirement

Fund from an IRA qualified under Internal Revenue Code Section 408.

Purchase of time must be made at the time of retirement or to become eligible for retirement.

37

Pension CalculatorPension CalculatorThe pension calculator will allow you to calculate

retirement benefits or allow you to calculate the purchase of time.

The pension calculator is located at:

• http://www.TacomaEmployesRetirement.com under Member Tools/Benefit Calculator on the internet and intranet.

38

39

40

41

42

PORTABILITY with 2 x Value and no Pro-Ration (If Combined 30 Years or > may = Proration)Member Information

PORTABILITY with 2 x Value and no Pro-ration

43

PORTABILITY with 2 x Value and no Pro-Ration (If Combined 30 Years or > may = Proration)Calculation

44

PORTABILITY with 2 x Value and no Pro-Ration (If Combined 30 Years or > may = Proration)

Options

45

Deferred CompensationDeferred Compensation• Tax-deferred – current tax deduction for

contribution and tax-deferred growth

• Several investment options

• Upon separation from service, funds can remain in deferred compensation or transferred to another employer-sponsored salary deferral plan (401(k) or deferred comp) and an IRA, without income tax.

• Funds can be withdrawn at separation from service without tax penalty. Ordinary income tax will be paid whenever funds are withdrawn.