FPPA's proposal for the 2022 legislative session would affect members, employers, and other stakeholders differently depending on their associated retirement plan. This page details the specific impacts for members of different FPPA plans.
Without action, the lack of new enrollment in the SWH Plan will increase the risk of certain problems in the future. By merging the SWH plan with the Statewide Defined Benefit plan, FPPA is ensuring strong and reliable benefits for members of both the Statewide Hybrid and Statewide Defined Benefit plans going forward. Members of the Statewide Hybrid Plan can rest easy knowing that this action will increase the long-term stability of their retirement plan.
Current retirees, terminated-vested and active members also will receive a one-time multiplier adjustment as a result of this legislation. In order to reduce the funded ratio at the time of the merger (currently 127%, but subject to change with future evaluations) to 100% to match the Statewide Defined Benefit Plan, FPPA will allocate a one-time benefit adjustment to retired, terminated vested and active members, at a rate calculated to bring the funded ratio down to 100%. Essentially, this means that affected members will receive a one-time 27% benefit adjustment to benefits accrued prior to the merger. This increase will also apply to purchased service credit.
Additionally, the bill will increase the required minimum contributions into the Statewide Hybrid Plan by 2% over the eight years following the merger. The current required minimum contribution is 16% (8% member / 8% employer), and the new minimum contribution after full implementation will be 18% (9% member / 9% employer). This will help to stabilize the plan for the long term and fund for the new Rule of 80, detailed below. As a result, a small number of members and employers will see a slight contribution increase over an eight-year period. It is important to note, however, that many departments already pay a combined 18%, or more, in contributions. These departments will not be required to make changes, as long as the member and employer portions are at least 9% each.
With this bill, SWH members will also see the introduction of the Rule of 80. This new definition of Normal Retirement is a popular feature of the SWDB Plan, and allows qualified members to retire with a full, unreduced benefit as early as age 50.
Last, but certainly not least, It’s important to note that members in the Hybrid Component of the Statewide Retirement Plan will not subsidize the benefits of members in the other components of the Plan, or vice versa. The proposed legislation has been specifically constructed to ensure that the required contributions and benefits for Hybrid Component members will be completely funded by the members and employers of the Hybrid Component.
For SWDB and SWDB-SS members, his change is mostly symbolic. Instead of membership in the Statewide Defined Benefit Plan, members will now be enrolled in the Defined Benefit or Social Security Component of the Statewide Retirement Plan. But, merging the Plans together will bring greater financial stability, and less confusion for stakeholders.
Benefits and required contributions will remain the same. DROP, Deferred Retirement and the Rule of 80 will remain available just as they are now. But, these members and/or their employers will have the added opportunity to increase contributions into the plan, with the excess being deposited in the Money Purchase component in the member’s name. This will effectively act as an additional retirement savings vehicle for these members.
Last, but certainly not least, It’s important to note that members in the Defined Benefit or Social Security Components of the Statewide Retirement Plan will not subsidize the benefits of members in the other components of the Plan, or vice versa. The proposed legislation has been specifically constructed to ensure that the required contributions and benefits for Defined Benefit and Social Security Component members will be completely funded by the members and employers of those Components.
House Bill 22-1034 provides no significant impact for members of this Plan. However, note that Statewide Hybrid Plan members will still no longer be eligible for disability benefits if/when they meet the requirements for Normal Retirement, which would now include the Rule of 80.
Senate Bill 22-36 would help the Statewide Death & Disability Plan regain fully funded status faster, meaning greater benefit security for Plan members.
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