Are you considering adjusting the benefits offered to your employees? For many employers, this is the time of year when budgets are revised and benefit levels are re-considered.
Participating LAGERS employers can change several elements of their defined benefit structure to impact the retirement benefit amount, determine who shares the cost of funding employee benefits, and the age at which employees can begin drawing a benefit.
- To update the retirement benefit amount, employers can change the benefit multiplier or final average salary. These factors are part of the formula (Benefit multiplier x How much an employee makes x Length of service credit) used to calculate retirement, disability, and survivor benefits. Employers may choose a benefit multiplier ranging from 1% to 2.5%. The higher the multiplier, the larger the benefit.
- Changing who shares the cost of funding an employee’s retirement benefit can be determined through employee and employer contribution election. Employers can elect to have employees contribute 0%, 2%, 4%, or 6% of their salary towards their retirement benefit. Selecting 0% means that an employer will contribute 100% of the cost of an employee’s retirement benefit.
- Finally, employers can change the age at which employees can begin drawing a benefit. Typically, employees are eligible to draw a benefit once they have earned 60 months (five years) of service credit with a LAGERS employer. The service credit may be earned at a single or multiple LAGERS employers.
An employer can choose from two retirement age options: normal retirement or the Rule of 80. Normal retirement age is age 60 for general employees, and age 55 for police officers, fire fighters, and public safety personnel.
The Rule of 80 is an alternate retirement option that provides an early, unreduced retirement. If an employer offers the Rule of 80, employees can retire when their age plus length of service equals 80.
The process for changing the benefits offered to your employees:
- Request a cost study. A cost study is an official document detailing the impact of a benefit change on your employer’s monthly contribution rate and pension liabilities. An official representative of your employer must contact the LAGERS office to request a cost study. If you are not sure which benefit change you want to make, LAGERS staff can generate free estimates before you make your request for an official cost study from LAGERS actuary.
- LAGERS actuary completes the cost study. This takes approximately four weeks to complete.
- Post your cost study for public information. Once you receive your official cost study, it must be posted as public information for 45 calendar days.
- Adopt the change. Following the public information period, your governing body can adopt the benefit change through legislative action. LAGERS can provide sample resolution language.
- Send a photocopy of the resolution or ordinance. LAGERS must receive a copy of the resolution within 10 days.
Additional information about the process for changing benefits can be found at Changing Benefit Elections – Missouri LAGERS (molagers.org). For questions, please contact [email protected].
