Jeff Pabst, CRC
LAGERS is a state-wide pension plan that provides defined benefit plans to more than 800 local government subdivisions in Missouri. LAGERS employers range from rural special districts to larger urban cities. Each with their own set of challenges, goals and budgets. This is why a flexible system like LAGERS is a good solution for LAGERS’ employers.
Each LAGERS employer has the ability to change their benefit levels up or down to best suit their recruitment, retention, and budgetary goals. Generally, the higher the benefit levels elected by an employer, the higher their cost will be. However, the higher the benefit levels, the higher likelihood of employee recruitment, retention and retirement at the appropriate times.
What Can My Employer Change?
There are 4 components to the LAGERS benefit structure that an employer may change once every two years.
- Benefit Programs determine the multiplier used in your LAGERS benefit formula. Multipliers range from 1-2% for Social Security participating departments. Upgrades to the benefit program are retroactive and downgrades only impact the employees’ future service.
- Final Average Salary can be either the highest consecutive 60 or 36 month average from the employee’s last 120 months of LAGERS credited service. Generally, the 36 months yields a slightly higher average and, therefore, a slightly larger benefit. Upgrades to the final average salary are retroactive and downgrades only impact the employees’ future service.
- Employee contributions can be either 0% or 4%. When an employer requires contributions, those contributions are used to offset some of employer’s cost. Member contributions are guaranteed and after-tax.
- Retirement eligibility can be either Normal Retirement Ages (60 / 55) or the Rule of 80. The Rule of 80 allows employees to retire early without reduction when the sum of their age and service equals 80. Changing from Normal Retirement Ages to the Rule of 80 gives all active employees the ability to draw their benefit under the Rule of 80. When removing the Rule of 80, current employees are “grandfathered” and only new hires are impacted.
How Do I Start the Process?
There are a few steps that must be completed for an employer to make a benefit change:
- Request a Supplemental Valuation. This valuation will reflect the difference in cost for the proposed benefit change.
- Supplemental Valuation must be made public information for 45 calendar days. This can be done via your subdivision’s board minutes.
- Governing body adopts change via resolution or ordinance
- Copy of resolution or ordinance must be sent to LAGERS office within 10 days of it passing.
If you have any questions or are interested in looking into changing your subdivision’s benefit levels, please contact us at 1-800-447-4334 or info@molagers.org
