When asked, new LAGERS employers are likely to say the reason they joined LAGERS was to increase their ability to recruit and retain quality workers. By providing a LAGERS benefit that grows larger as an employee continues to work, the benefits help recruit quality employees, retain them throughout their most productive years, and allow a dignified exit from the workforce when their productivity begins to decline. Employees who stay on the job longer than expected, because they cannot afford to retire, are among the most costly and often least productive. A well-structured retirement plan can help an employer efficiently manage personnel throughout the employee’s life cycle.
LAGERS was created by the Missouri General Assembly in 1967 to provide local government employers with a solution to recruit, retain and retire local government workers. LAGERS provides defined benefit plans for Missouri’s local subdivisions with locally elected benefits levels and funding based on each subdivision’s personnel group.
Defined benefit plans provide a pre-determined payment amount for the remainder of an individual’s lifetime. LAGERS benefit calculation incorporates a participant’s salary, time worked, and an employer elected benefit program. This formula is designed to incentivize employees to continue working in LAGERS covered employment and grow their LAGERS benefit along the way.
Any local governmental subdivision that has the power to tax (except public school districts) and governed by an independent board is eligible for LAGERS’ coverage.
The process to join includes requesting an initial valuation, a 45 day public information period and passage of a resolution or ordinance adopting LAGERS coverage.
One-Time Elections:
- Election to Provide Coverage:
- Under current state statutes, there is no exit provision once an employer adopts LAGERS coverage.
- Annual Hours for Coverage:
- An employer elects the number of hours an individual must work to be eligible for LAGERS coverage as 1,500, 1,250, or 1,000 hours annually.
- Departments Covered
- At a minimum, an employer must cover a General department. In addition, it may cover police, fire, and/or public safety department(s).
- Amount of Prior Service Coverage
- An employer may cover 100%, 75%, 50%, or 25% of employees’ time worked prior to joining. Prior service may be impacted by an employer’s current retirement plans.
Flexible Elections
- Benefit Program
- An employer elects a program which has a correlated multiplier applied to the benefit calculation ranging between 1.0% and 2.5%.
- Final Average Salary
- An employer elects as either the average of highest consecutive 36 or 60 months of salary from the last 120 months of LAGERS credited service
- Retirement Eligibility
- An employer elects as either normal retirement or the rule of 80.
- Normal retirement provides retirement ages of 60 for general employees and 55 for police, fire, and public safety
- Rule of 80 provides an early unreduced retirement when the sum of an employee’s age and service equals 80
- An employer elects as either normal retirement or the rule of 80.
- Employee Contributions
- An employer may choose to require 0%, 2%, 4% or 6% to assist with funding the employer’s benefit elections
An employer’s cost to join LAGERS is determined by an initial actuarial valuation completed by LAGERS’ actuary. An initial valuation includes the cost for an employer to join at LAGERS’ various benefit levels.
A fee is assessed for completion of an initial valuation. The fee is dependent on the number of departments and employees the employer is looking to participate in LAGERS.
Employers seeking LAGERS membership may already have a retirement plan in place for their employees. Employers with existing plans may have multiple options for converting to LAGERS so long as employee benefits are not duplicated as prohibited by Missouri state statute.
When seeking to onboard with LAGERS, part of the process will involve a review of the employer’s current retirement plan to ensure it is not providing duplicate benefits as provided by LAGERS. If so, there may be impacts to some of the options an employer may choose for its employees.
LAGERS also offers professional pension administration for LAGERS participating employers who have closed or frozen pension plans. Choosing LAGERS as the administrator of the plan means LAGERS will handle all matters related to investments, administration, fiduciary duty, compliance and legal.
Employer Spotlight
The City of Webster Groves, MO switched from a 401(k)-style retirement plan (called a defined contribution plan) to LAGERS’ defined benefit plan in 2013 after the city’s senior staff recognized the employees’ retirement prospects could be better.
In addition to improving the retirement security of their employees, city leaders were also concerned with being able to attract and retain the best possible workers to serve the citizens in their community.
