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Variable Annuity Adjustment
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PERS will change the way Money Match retirements are calculated for members who participated in the variable account program and retire on or after July 1, 2004. The change is a result of the City of Eugene vs. PERS settlement. To avoid the variable calculation change, a member must have retired no later than June 1, 2004.
In the City of Eugene vs. PERS case, Judge Lipscomb ruled that doubling the interest on a member's variable account at retirement was not the correct method to use.
The administrative rule, (PDF) adopted by the PERS Board at its June 4, 2004 meeting, includes a process to calculate a Money Match retirement for a member who participated in the variable as if the member had only been in the regular account. The new method will mean that members whose allowances would increase because their variable accounts outperformed the regular will not receive as much of an increase, and those whose allowances would have decreased because their variable accounts under-performed the regular account will not be subject to as much of a decrease.
Variable account contributions before January 1, 1982, are not included in the calculation, and the rule does not apply if a member selects the total lump-sum option.
The following table shows if a member would have a positive or negative result from variable participation and applies only to a member that did not start and stop participation. A negative result means the monthly benefit amount will be lower; a positive result means the monthly retirement benefit will be higher. This is based on 2003 earnings crediting, and crediting in future years will change the results. The examples are for a Tier One member.
Clicking on a year shows an example.
Assumptions:
- Annual salary of $35,000
- Annual contributions of $2,100 (6 percent of assumed salary)
- Member elected a 50 percent variable participation rate
- Member’s salary, contribution rate, and variable participation rates remained constant
- Member retires on July 1, 2004, at the age of 65
- Member is Tier One, retirement benefit is calculated under Money Match, and member elects benefit payment Option 1
- Sick leave, vacation hours, and member purchases are not used
- 2004 annual variable rate projected at 10 percent
Key:
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Positive change in monthly benefit
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Negative change in monthly benefit
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