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%.
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.
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