Benefits at Retirement
The term “retirement” refers to the time at which a participant’s monthly pension benefits begin. Since its inception in 1967, the Plan has used a defined benefit formula to determine pension benefits. In 1997 GERP added an alternative method of computing benefits known as the money purchase pension. Participants receive the higher of the two benefit amounts. Both methods are described in detail below.
In addition to the annual statements provided to all participants, the GERP administrative staff can prepare estimates of benefit amounts to assist participants who are nearing retirement. A final review of pension computations is conducted by the Retirement Board, which must approve each pension prior to its start.
Regular Pension Benefit
There are two ways to calculate the regular pension benefit,
Defined Benefit Pension and Money Purchase Pension. Every participant who elects a monthly benefit will automatically receive the higher of the two calculations.
DEFINED BENEFIT PENSION:Your straight life defined benefit is based on three factors: (1) your final average monthly compensation; (2) the pension benefit multiplier which is 1.75%; and (3) your years of credited service. Other payment options that provide survivorship protection are available. If you choose to start your pension before reaching age 67 (the Plan’s normal retirement age) a reduction for early retirement may apply.
Participants who have at least 10 years of credited service may begin to collect a monthly benefit as early as age 50. However, an early retirement percentage reduction will be applied if, at the time the pension begins, the participant is less than 67 years old or the sum of the participant’s age and years of credited service is less than 80 (known as the “Rule of 80”). The reduction for early retirement is 6% for each year you are short of reaching either age 67 or the Rule of 80, whichever is less.
For a simpler way to estimate your defined benefit pension, the table linked below incorporates the defined benefit formula with the early retirement reductions to show what percentage of final average monthly compensation a participant could expect to receive as a straight life pension. The percentage increases the older a participant is when the pension begins (read across) and with the more years of credited service the participant has earned (read down). While the values in the table are rounded for illustration purposes, actual benefits are computed to the nearest one-thousandth of one percent. 2012 Table (PDF)
MONEY PURCHASE PENSION: The money purchase pension uses an annuity factor, based on a participant’s age at the start of his or her pension, to convert the participant’s lump sum amount (the participant’s contributions, interest and vested City contributions) into an actuarially equivalent monthly pension. Because the annuity factor takes the participant’s age into account, the early retirement reductions discussed above do not apply to the money purchase pension. A participant must still have 10 or more years of credited service and be at least 50 years old to start receiving a monthly benefit before reaching age 67.
The money purchase pension calculation provides some participants with a larger benefit than the defined benefit calculation described in the preceding section. Deferred vested participants as well as active employees subject to high early retirement reductions under the defined benefit formula will often have higher money purchase pension amounts.
COST OF LIVING ADJUSTMENTS: Regular pension benefits and supplemental benefits may be adjustedat the discretion of the Retirement Board. Both benefits may be increased (or decreased) by no more than 5 percent in any one year. In the event of a reduction in the cost of living, no benefit may be decreased below the initial level established at the time payments commenced.
DEFINED BENEFIT PENSION:Your straight life defined benefit is based on three factors: (1) your final average monthly compensation; (2) the pension benefit multiplier which is 1.75%; and (3) your years of credited service. Other payment options that provide survivorship protection are available. If you choose to start your pension before reaching age 67 (the Plan’s normal retirement age) a reduction for early retirement may apply.
Participants who have at least 10 years of credited service may begin to collect a monthly benefit as early as age 50. However, an early retirement percentage reduction will be applied if, at the time the pension begins, the participant is less than 67 years old or the sum of the participant’s age and years of credited service is less than 80 (known as the “Rule of 80”). The reduction for early retirement is 6% for each year you are short of reaching either age 67 or the Rule of 80, whichever is less.
For a simpler way to estimate your defined benefit pension, the table linked below incorporates the defined benefit formula with the early retirement reductions to show what percentage of final average monthly compensation a participant could expect to receive as a straight life pension. The percentage increases the older a participant is when the pension begins (read across) and with the more years of credited service the participant has earned (read down). While the values in the table are rounded for illustration purposes, actual benefits are computed to the nearest one-thousandth of one percent. 2012 Table (PDF)
MONEY PURCHASE PENSION: The money purchase pension uses an annuity factor, based on a participant’s age at the start of his or her pension, to convert the participant’s lump sum amount (the participant’s contributions, interest and vested City contributions) into an actuarially equivalent monthly pension. Because the annuity factor takes the participant’s age into account, the early retirement reductions discussed above do not apply to the money purchase pension. A participant must still have 10 or more years of credited service and be at least 50 years old to start receiving a monthly benefit before reaching age 67.
The money purchase pension calculation provides some participants with a larger benefit than the defined benefit calculation described in the preceding section. Deferred vested participants as well as active employees subject to high early retirement reductions under the defined benefit formula will often have higher money purchase pension amounts.
COST OF LIVING ADJUSTMENTS: Regular pension benefits and supplemental benefits may be adjustedat the discretion of the Retirement Board. Both benefits may be increased (or decreased) by no more than 5 percent in any one year. In the event of a reduction in the cost of living, no benefit may be decreased below the initial level established at the time payments commenced.
Benefit Options
GERP offers six payment options that will provide income for a retiree's entire lifetime. If a joint and survivor or a period certain and lifetime option is chosen, the Plan continues to provide income for a spouse or other beneficiary after the retiree’s death.
Before benefits can begin, you must choose one of the following payment options. Once selected, the form of payment may not be changed, nor may the beneficiary of a joint and survivor benefit be changed. Option 4 is the normal option for married participants. Spousal consent is required when selecting any other option.
1. Straight Life: Monthly payments are made for the lifetime of the retiree only, and end upon his or her death. This option provides the highest monthly payment.
2. 100% Joint and Survivor with Pop-Up Feature: Monthly payments are made for the lifetime of the retiree and continue in the same amount to the retiree’s beneficiary upon the retiree’s death. The monthly payment is reduced from the Straight Life benefit, because it covers two lifetimes. In the event that the beneficiary dies before the retiree, the retiree’s pension will increase (“pop-up”) to the original straight life benefit amount, plus cost of living adjustments.
3. 75% Joint and Survivor with Pop-Up Feature: Monthly payments are made for the lifetime of the retiree and 75% of the pension continues to the beneficiary upon the death of the retiree. If the beneficiary dies before the retiree, the pension will increase to the original straight life amount, plus cost of living adjustments.
4. 50% Joint and Survivor with Pop-Up Feature: Similar to the 75% Joint and Survivor, except that 50% of the pension continues to the retiree’s beneficiary.
5. 10 Year Certain and Lifetime: Monthly payments are made for the lifetime of the retiree. In the event that the retiree dies before receiving 120 monthly payments, his or her beneficiary will receive the remaining payments, until the total number of payments is 120. At that point monthly payments would end.
6. 15 Year Certain and Lifetime: Similar to the 10 Year Certain and Lifetime, except the guaranteed number of monthly payments is 180.
Partial Lump Sum Option: A participant may elect to receive up to 20% of the actuarial equivalent value of his or her accrued benefit in the form of a lump sum which is paid upon pension commencement. The participant must then choose one of the six other forms of payment listed above for the remaining portion of the accrued benefit. The amount of the monthly pension is reduced to reflect the value of the lump sum payment received.
No matter which payment option is chosen, the Plan guarantees that the total benefits paid to a retiree and beneficiary together (including regular, supplemental and partial lump sum benefits) will be at least as much as the lump sum amount (the contribution accumulation, plus vested City contributions) that the retiree had earned up until the time of his or her pension commencement.
Employees nearing retirement age should reach out to the GERP administative staff to request estimates related to all of the options available to them prior to making any decisions related to their retirement.
Before benefits can begin, you must choose one of the following payment options. Once selected, the form of payment may not be changed, nor may the beneficiary of a joint and survivor benefit be changed. Option 4 is the normal option for married participants. Spousal consent is required when selecting any other option.
1. Straight Life: Monthly payments are made for the lifetime of the retiree only, and end upon his or her death. This option provides the highest monthly payment.
2. 100% Joint and Survivor with Pop-Up Feature: Monthly payments are made for the lifetime of the retiree and continue in the same amount to the retiree’s beneficiary upon the retiree’s death. The monthly payment is reduced from the Straight Life benefit, because it covers two lifetimes. In the event that the beneficiary dies before the retiree, the retiree’s pension will increase (“pop-up”) to the original straight life benefit amount, plus cost of living adjustments.
3. 75% Joint and Survivor with Pop-Up Feature: Monthly payments are made for the lifetime of the retiree and 75% of the pension continues to the beneficiary upon the death of the retiree. If the beneficiary dies before the retiree, the pension will increase to the original straight life amount, plus cost of living adjustments.
4. 50% Joint and Survivor with Pop-Up Feature: Similar to the 75% Joint and Survivor, except that 50% of the pension continues to the retiree’s beneficiary.
5. 10 Year Certain and Lifetime: Monthly payments are made for the lifetime of the retiree. In the event that the retiree dies before receiving 120 monthly payments, his or her beneficiary will receive the remaining payments, until the total number of payments is 120. At that point monthly payments would end.
6. 15 Year Certain and Lifetime: Similar to the 10 Year Certain and Lifetime, except the guaranteed number of monthly payments is 180.
Partial Lump Sum Option: A participant may elect to receive up to 20% of the actuarial equivalent value of his or her accrued benefit in the form of a lump sum which is paid upon pension commencement. The participant must then choose one of the six other forms of payment listed above for the remaining portion of the accrued benefit. The amount of the monthly pension is reduced to reflect the value of the lump sum payment received.
No matter which payment option is chosen, the Plan guarantees that the total benefits paid to a retiree and beneficiary together (including regular, supplemental and partial lump sum benefits) will be at least as much as the lump sum amount (the contribution accumulation, plus vested City contributions) that the retiree had earned up until the time of his or her pension commencement.
Employees nearing retirement age should reach out to the GERP administative staff to request estimates related to all of the options available to them prior to making any decisions related to their retirement.
Supplemental Benefit
Retirees with 20 or more years of service receive an additional payment
of $176.00 per month, which is intended to assist them with their health care expenses. Those with between 5 and 20 years of service receive a pro-rated portion of this benefit.
This benefit may be adjusted at the discretion of the Retirement Board by no more than 5% in any one year.
| Full Years of Credited Service Completed | Monthly Supplemental Benefit Amount (effective 1/1/2018) |
| 20 Years or More | $176.00 |
| 19 | $167.20 |
| 18 | $158.40 |
| 17 | $149.60 |
| 16 | $140.80 |
| 15 | $132.00 |
| 14 | $123.20 |
| 13 | $114.40 |
| 12 | $105.60 |
| 11 | $96.80 |
| 10 | $88.00 |
| 9 | $79.20 |
| 8 | $70.40 |
| 7 | $61.60 |
| 6 | $52.80 |
| 5 | $44.00 |
| Less then 5 | none |
Disability Pension
When a participant’s employment terminates by reason of disability and the participant receives long term disability insurance payments from the City, he or she is considered a disabled participant in GERP.
Credited service under the Plan continues to accrue for disabled participants until either they no longer qualify for disability insurance payments under the City’s long term disability plan or they reach their normal retirement age.
If the participant’s benefits under the City’s long term disability plan cease prior to normal retirement age and he or she is not reemployed by the City, credited service ceases accruing and the participant can elect to receive a refund, a rollover, or a monthly pension at a later date. If the participant continues to receive benefits under the City’s long term disability plan until normal retirement age, he or she becomes eligible for a disability pension at that time.
In computing the pension amount for a disabled participant, his or her final average monthly compensation is multiplied by accrued years of credited service and by 1.75% to determine the monthly benefit amount. The final average monthly compensation for a disability pension is defined to be the higher of (1) the monthly rate of compensation on the date of disablement or (2) the average of the highest consecutive 36 months of pensionable earnings within the last 10 years worked. If a disabled participant elects to begin receiving a disability pension before reaching normal retirement age, a reduction for early retirement may apply.
If the participant’s benefits under the City’s long term disability plan cease prior to normal retirement age and he or she is not reemployed by the City, credited service ceases accruing and the participant can elect to receive a refund, a rollover, or a monthly pension at a later date. If the participant continues to receive benefits under the City’s long term disability plan until normal retirement age, he or she becomes eligible for a disability pension at that time.
In computing the pension amount for a disabled participant, his or her final average monthly compensation is multiplied by accrued years of credited service and by 1.75% to determine the monthly benefit amount. The final average monthly compensation for a disability pension is defined to be the higher of (1) the monthly rate of compensation on the date of disablement or (2) the average of the highest consecutive 36 months of pensionable earnings within the last 10 years worked. If a disabled participant elects to begin receiving a disability pension before reaching normal retirement age, a reduction for early retirement may apply.
Death Benefits
The benefits payable upon a participant’s death depend on his or her employment status at the time of death and the length of credited service completed. The tables below outline the benefits available.
GERP provides forms for the designation of beneficiaries and encourages participants to periodically review the information on file to ensure that it is current.
Death Prior to Receiving Retirement Benefits
If a participant dies before the start of a monthly pension benefit,
his or her surviving spouse is automatically entitled to the participant’s death benefits. A surviving spouse may elect to waive any death benefit in favor of an alternative beneficiary previously designated by the participant.
An unmarried participant may designate one or more persons to receive death benefits. If more than one beneficiary is named, the benefits may only be paid in the form of a lump sum distribution of the participant’s contribution accumulation and vested City contributions.
An unmarried participant may designate one or more persons to receive death benefits. If more than one beneficiary is named, the benefits may only be paid in the form of a lump sum distribution of the participant’s contribution accumulation and vested City contributions.
| If the participant dies while actively employed, or while on a paid or unpaid leave of absence... | ||
| …with less than 5 years credited service and under age 67: | A surviving spouse or, if the participant was unmarried, his or her designated beneficiary(ies), would receive the lump sum amount that the participant would have been eligible to receive on his or her last day of employment. | |
| …with 5 or more years credited service, but before attaining age 50 and completing 10 years of credited service: | A surviving spouse must wait until the participant would have reached his or her earliest retirement date to receive a monthly benefit, or could chose an immediate lump sum distribution. The monthly benefit would be the higher of (i) 60% of the straight life defined benefit that the participant would have been eligible to receive on that date, adjusted for the payee's age or (ii) a full money purchase benefit based on the lump sum that the participant would have been eligible to receive.
An unmarried participant's sole beneficiary could elect to receive an immediate lump sum distribution or the monthly benefit described in the preceding paragraph. In the event the participant named more than one beneficiary, the beneficiaries would share in the lump sum distribution. |
|
| …after attaining age 50 and completing 10 years of credited service, but younger than age 67: | A surviving spouse could elect to receive a monthly benefit or a lump sum distribution in the month following the participant’s death. The monthly benefit would be the higher of (i) 60% of the straight life defined benefit that the participant would have been eligible to receive on that date, adjusted for the payees age or (ii) a full money purchase benefit based on the lump sum that the participant would have been eligible to receive.
An unmarried participant's sole beneficiary could elect to receive an immediate lump sum distribution or the monthly benefit described in the preceding paragraph. In the event the participant named more than one beneficiary, the beneficiaries would share in the lump sum distribution. |
|
| …at age 67 or older: |
The surviving spouse could elect to receive a monthly benefit or a lump sum distribution in the month following the participant’s death. The monthly benefit would be the higher of (i) the 100% Joint & Survivor defined benefit that the participant would have been eligible to receive on that date, with the payee as the joint annuitant, or (ii) a full money purchase benefit based on the lump sum that the participant would have been eligible to receive.
An unmarried participant's sole beneficiary could elect to receive an immediate lump sum distribution or the monthly benefit described in the preceding paragraph. In the event the participant named more than one beneficiary, the beneficiaries would share in the lump sum distribution. |
|
| If the participant is a former employee who dies before receiving any benefits from GERP (this would include deferred vested participants and disabled participants who received long term disability payments through the City's insurance program up until the time of death)... | ||
| …with less than 5 years credited service: | A surviving spouse or, if the participant was unmarried, his or her designated beneficiary(ies), would receive the lump sum amount that the participant would have been eligible to receive on his or her death. | |
| …with 5 or more years credited service: | The surviving spouse must wait until the participant would have reached his or her earliest retirement date to receive a monthly benefit, or could chose an immediate lump sum distribution. The monthly payment would be the higher of (i) 60% of the straight life defined benefit that the participant would have been eligible to receive on that date, adjusted for the payee's age or (ii) a full money purchase benefit based on the lump sum that the participant would have been eligible to receive.
An unmarried participant's sole beneficiary could elect to receive an immediate lump sum distribution or the monthly benefit described in the preceding paragraph. In the event the participant named more than one beneficiary, the beneficiaries would share in the lump sum distribution. |
|
Death Occurring After Retirement
Monthly benefits may continue to a beneficiary after the death of a retiree depending on the form of payment that the retiree chose at the time the pension began. Each retiree has the right to designate one or more persons as beneficiaries to receive a one-time $6,250 lump sum death benefit, to be paid when the retiree dies. This amount is separate from, and in addition to, any other benefit to which the beneficiary may be entitled. If no beneficiary is designated, or the beneficiary predeceases the retiree, the $6,250 lump sum death benefit is paid to the estate of the retiree.
Contributions, Refunds & Rollovers
General Information
Any participant who terminates employment has the option to
receive a lump sum distribution of his or her contributions, interest and vested City contributions. A participant who plans to take a lump sum distribution should carefully consider the Special Tax Notice Regarding Plan Payments.
GERP mails a "Request for Lump Sum Distribution" form to each participant whose employment has ended. This form must be completed, signed and returned to GERP with the participant's instruction on how the distribution should be paid. GERP is able to process most distributions within 4 to 6 weeks after the written request is received.
* If you have earned less than 5 years of credited service you are required to take a lump sum distribution within 90 days from the date your employment ends. If a participant does not file a "Request for Lump Sum Distribution" form with GERP and
* the benefit payable is less than $1,000, a cash refund will be processed and a check mailed to the participant's last known address.
* the benefit payable is $1,000 or more, the Plan Administrator will open an IRA rollover account on behalf of the participant at Citywide Banks in Aurora, and the benefit will be transferred to that account.
In the event of a cash refund, there is a mandatory 20% withholding for federal income tax on the taxable portion of the distribution.
If you were employed for 5 or more years you can either take a lump sum distribution or leave your account balance with the Plan and collect a pension benefit at a later date.
Please note that your distribution amount is not equal in value to the future monthly benefits you could receive from GERP. You should seek advice from a pension or financial planning expert before deciding to withdraw your account balance.A married participant who elects to receive a lump sum distribution is required to provide his or her spouse's notarized, written consent. Once GERP makes a distribution, the participant (and spouse) forfeits the right to receive a monthly pension or any other benefits from GERP.
GERP mails a "Request for Lump Sum Distribution" form to each participant whose employment has ended. This form must be completed, signed and returned to GERP with the participant's instruction on how the distribution should be paid. GERP is able to process most distributions within 4 to 6 weeks after the written request is received.
* If you have earned less than 5 years of credited service you are required to take a lump sum distribution within 90 days from the date your employment ends. If a participant does not file a "Request for Lump Sum Distribution" form with GERP and
* the benefit payable is less than $1,000, a cash refund will be processed and a check mailed to the participant's last known address.
* the benefit payable is $1,000 or more, the Plan Administrator will open an IRA rollover account on behalf of the participant at Citywide Banks in Aurora, and the benefit will be transferred to that account.
In the event of a cash refund, there is a mandatory 20% withholding for federal income tax on the taxable portion of the distribution.
If you were employed for 5 or more years you can either take a lump sum distribution or leave your account balance with the Plan and collect a pension benefit at a later date.
Please note that your distribution amount is not equal in value to the future monthly benefits you could receive from GERP. You should seek advice from a pension or financial planning expert before deciding to withdraw your account balance.A married participant who elects to receive a lump sum distribution is required to provide his or her spouse's notarized, written consent. Once GERP makes a distribution, the participant (and spouse) forfeits the right to receive a monthly pension or any other benefits from GERP.
Vesting in City Contributions
Participants become entitled to an increasing share of City contributions the longer they work. Vested City contributions are defined to be 50% of the participant’s contribution accumulation (employee contributions plus interest) after 5 years of credited service are completed, increasing by 5% for each additional year of service. Participants are always 100% vested in the contributions they have made to GERP and interest earned on them. They become 100% vested in City contributions after 15 years of credited service.
| Years of Credited Service Completed | Participant’s Contribution Accumulation (Employee Contributions & Interest) | Vested City Contributions (Matching Percentage) | Total Distribution (Percentage of Employee Contributions & Interest Refundable) |
| less than 5 | 100% | none | 100% |
| 5 | 100% | 50% | 150% |
| 6 | 100% | 55% | 155% |
| 7 | 100% | 60% | 160% |
| 8 | 100% | 65% | 165% |
| 9 | 100% | 70% | 170% |
| 10 | 100% | 75% | 175% |
| 11 | 100% | 80% | 180% |
| 12 | 100% | 85% | 185% |
| 13 | 100% | 90% | 190% |
| 14 | 100% | 95% | 195% |
| 15 or more | 100% | 100% | 200% |
Direct Rollovers
GERP can “rollover” your distribution by issuing a check directly to an
Individual Retirement Account (IRA), a 403(b) plan, a governmental 457(b) plan or to another qualified plan that you designate.
When you are setting up your new account, please inform that plan’s administrator or recordkeeper that you will be making a rollover contribution from GERP. You may choose to rollover part or all of your lump sum distribution. The funds that you rollover will not be taxed in the current year and no income tax will be withheld. Your distribution will be taxed later as you make withdrawals from the new IRA or qualified employer plan. Please refer to the Special Tax Notice Regarding Plan Payments for further guidance.
A participant who takes a direct rollover distribution forfeits the right to a monthly pension and all other GERP benefits.
A participant who takes a direct rollover distribution forfeits the right to a monthly pension and all other GERP benefits.
Cash Refunds
There is a mandatory 20% withholding for federal income tax on the taxable portion of a distribution whenever a participant chooses to receive a cash refund.
Please refer to the Special Tax Notice Regarding Plan Payments for further guidance. Refund checks are generally issued within 4 to 6 weeks after a written request is received.
A participant who takes a cash refund distribution forfeits the right to a monthly pension and all other GERP benefits.
A participant who takes a cash refund distribution forfeits the right to a monthly pension and all other GERP benefits.