Provision: Hybrid Defined Benefit Component Adjustment Multiplier

Reduces existing 129.4% funding level to 100% by awarding a one-time benefit adjustment on all service accrued prior to the date of merger to current retirees, deferred vested and active members enrolled in the Component

What Does This Provision Do?

As of 1/1/2021, the funded status of the Statewide Hybrid Plan was 129.4%. In order to merge the Statewide Hybrid Plan and the Statewide Defined Benefit Plan in a way that treats all members fairly, FPPA will take action to reduce the funded status of the Hybrid Plan to approximately 100%, to match the Defined Benefit Plan’s funded status at the time of the merger.

To do this, FPPA will apply a one-time multiplier adjustment to current retirement benefits, and benefits for active and deferred vested members accrued at the time of the merger.

As laid out in the Plan brochure, benefits in the Statewide Hybrid Plan are accrued at 1.5% per year, meaning a member retiring at 55 years of age with 25 years of service would receive a monthly retirement benefit of 37.5% of their Highest Average Salary:


25 years of service x 1.5% per year = 37.5% benefit


This action would apply a one-time multiplier adjustment to that benefit percentage, increasing the established multiplier by a rate equal to the funded status at the time of the merger, currently expected to be around 129.4%. This means the normal 1.5% multiplier will become approximately 1.9% for all years of service prior to the merger:


1.5 x 129.4% = ~1.9


In the example above, this translates to a member at 55 years of age and 25 years of service receiving a 47.5% benefit


25 years of service x 1.9% per year = 47.5% benefit


Put another way, current and future retirees will receive a one-time benefit increase of 29% for benefits earned before the merger’s effective date.

Current retirees who have received past benefit adjustments will see the one-time multiplier adjustment applied to their existing benefit at the time of the merger. Active and deferred vested members will receive this adjustment of ~1.9% for all service accrued before the merger’s effective date, with benefits for service after the merger calculated at the normal rate of 1.5%.

Why is this action necessary?

This action ensures that components of the new Statewide Retirement Plan will be merged equitably. By reducing the funded status of the Statewide Hybrid Plan to match the Statewide Defined Benefit Plan at the time of the merger, both plans will enter the merger on an even playing field, without the need for one Plan to support the other.This action ensures that components of the new Statewide Retirement Plan will be merged equitably. By reducing the funded status of the Statewide Hybrid Plan to match the Statewide Defined Benefit Plan at the time of the merger, both plans will enter the merger on an even playing field, without the need for one Plan to support the other.

BOTTOM LINE: We’re ensuring that all affected members get a fair shake during the merger and receive their expected retirement benefits.

Note: The legislative provisions are concepts and are discussed herein are proposed for the 2022 Legislative session. A draft bill has not been prepared at this time and is not available. These provisions are based on recommendations made by the Statewide Hybrid Plan Task Force after careful review and analysis. The Task Force is made up of members and employers from across the state. The FPPA Board seeks your feedback on these proposals prior to proceeding to bill drafting and legislative hearings scheduled for summer 2021.

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