Effective August 1, 2005, the Central Pension Fund’s Board of Trustees has adopted several amendments to the Plan of Benefits. Listed below is a description of each amendments and examples of how each will apply.
It is important to understand that these amendments will not diminish or in any way affect the benefits of active participants accrued through July 31, 2005; nor will they diminish or in any way affect the existing benefits being paid to pensioners and beneficiaries.
Elimination of 60-Payment Guarantee Feature
For all retirement benefits accrued on and after August 1, 2005, such benefits will be paid in the form of a lifetime annuity for the participant, participant and spouse, or participant and contingent annuitant, depending upon the option selected. However, there will no longer be a guarantee of at least 60 minimum monthly payments.
- Assume that, as of July 31, 2005, Participant A has an accrued monthly benefit of $1,000, and then accrues an additional benefit of $300 between August 1, 2005 and reaching his/her Normal Retirement Age.
- And assume that, at retirement, Participant A chooses a benefit that, prior to August 1, 2005, had a 60-Payment Guarantee feature.
- Because of this amendment, if Participant A dies before receiving 60 monthly benefit payment, his/her spouse, designated beneficiary, or contingent annuitant will receive the remainder of 60 payments of only that portion of the benefit that had been accrued prior to August 1, 2005.
- Therefore, in this example, Participant A’s spouse or designated beneficiary would receive payment of the remainder of 60 payments of $1,000 a month – the portion of Participant A’s benefit accrued prior to August 1, 2005 – but would receive no payment(s) for the remainder of the $300 a month that had been accrued after August 1, 2005.
Change in Disability Benefit
For participants with a disability onset date on or after August 1, 2005, the amount of the Disability benefit will be equivalent to the participant’s accrued Early Retirement benefit, instead of the accrued Normal Retirement benefit. Furthermore, the Disability benefit will be converted to an Early Retirement benefit at age 55, instead of converting to a Normal or Special Retirement benefit at Normal Retirement Age. Finally, Disability benefits will not be paid to participants who are otherwise eligible to being receiving Early, Normal or Special Retirement benefits.
- Assume that, Participant A becomes disabled on or after August 1, 2005, and meets all of the eligibility requirements to receive a Disability benefit from the Fund.
- And assume that, at the time of the disability, Participant A has less than 25 years of Credited Service, meaning that his/her Normal Retirement Age is 65. (Normal Retirement Age is 62 for those with at least 25 years of Credited Service.)
- And assume that, at the time of the disability, Participant A is younger than age 55, has an accrued Normal Retirement benefit of $1,000 payable at age 65, and an accrued Early Retirement benefit of $700 payable at age 55. (Early Retirement benefits are equal to the Normal Retirement benefit reduced by 3% per year for each year younger than Normal Retirement Age, with the earliest retirement at age 55.)
- Because of this amendment, Participant A’s Disability benefit will be $700 a month – the amount of the Early Retirement benefit that would otherwise have been payable at age 55.
- By further example, if Participant A is 55 years old on that date of the disability, no Disability benefit would be available, because Participant A would be eligible to begin receiving a $700 a month Early Retirement benefit.
It is important to note that all those who receive Disability benefits from the Fund, also receive disability benefits from the Social Security Administration.