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The Roman Catholic Archdiocese of Boston Pension Plan Changes and 401(k) Updates

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The Roman Catholic Archdiocese of Boston Pension Plan Changes and 401(k) Updates. Pension Plan Participant and 401(k) Communication Meetings. October - November 2012. Today’s agenda. Overview of the RCAB Pension Plan Outline of Pension Plan options for eligible participants - PowerPoint PPT Presentation
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  • The Roman Catholic Archdiocese of Boston Pension Plan Changes and 401(k) UpdatesPension Plan Participant and 401(k) Communication MeetingsOctober - November 2012

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    *Todays agendaOverview of the RCAB Pension PlanOutline of Pension Plan options for eligible participantsBrief overview of RCAB 401(k) PlanTime for questions

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    *The RCAB Pension Plan is an employer-funded defined benefit non-ERISA church plan started in 1963 whose assets are held by a charitable trustApproximately 8,000 participants, 60+ employersFunds held in Trust can be used only to pay:participants benefits Plan administrative expenses Additional information and financial reports are located online at www.catholicbenefits.org/pension

    RCAB Pension Plan: background and history

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    *RCAB Pension Plan Long-Term Goal Goal of the Trustees is to achieve full funding for the Plan in the next 20+ years through a combination of:Plan freeze Voluntary lump sum/in-service/monthly annuity optionsContinued employer contributions at levels set by TrusteesInvestment market returns that meet targets over the next two+ decades

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    *RCAB Pension Plan Long-Term GoalThe goal of full funding is defined to mean settlement of all liabilities through transfer of the risk to an insurance company (annuitization) at full value to all participants in the Plan at that time (20+ years from now). Achievement of this goal will require, in addition to ongoing employer contributions and investment market performance at targets:Improvement in annuity purchase ratesAdjustment of various actuarial assumptions to bring Plans liability profile more in line with insurance company requirements

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    Option: voluntary monthly in-service annuityCurrent employees age 55+ with vested benefits have a one-time opportunity to voluntarily elect to begin monthly annuity payments while continuing to work 1,000+ hours/year. Payments will begin in January 2013.Monthly in-service annuity payments that begin before age 65 (normal retirement date) include a reduction for early commencement, consistent with current Plan rules.Monthly in-service annuity payments also include an additional reduction to reflect the Plans average funded ratio for the four calendar quarters prior to the opening of the election period on September 28, 2012. The average funded status for that period was 79.8%.

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    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    Option: voluntary monthly in-service annuityMonthly in-service annuity payments do not change after an employee retires, reduces hours below 1,000 per year, and/or leaves employment.Monthly annuity payments are taxable (federal and state). For married employees, joint & survivor payment is the default payment option; can elect single life annuity with spouses consent.Monthly in-service annuity payments will include a death benefit ($5,000-$10,000, depending on length of service).

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    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    **Example: voluntary in-service annuity opportunitySharon Sullivan is 55 years old. She has a $6,000 annual benefit ($500 monthly benefit) if she stops working and begins payments at age 65. If she elects to begin in-service annuity payments at age 55, her benefit would be reduced by 60% to reflect her age and the additional 10 years of payments she will receive.$6,000 x 40% = $2,400 annual benefit ($200 monthly benefit)In addition, in-service annuity payments would also be reduced to reflect the Plans funded ratio (the average funded ratio for the four calendar quarters prior to the opening of the election period was 79.8%)$2,400 x 79.8% = $1,915 annual benefit ($166 monthly benefit)

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    Option: monthly annuity opportunityFormer employees with vested benefits regardless of age will be given the one-time opportunity to voluntarily elect a monthly annuity paymentEarly monthly annuity payment will reflect:Reductions for commencement before age 65; andIf under age 55 reduction to reflect the Plans average funded ratio for the four quarters calendar quarters prior to the opening of the election period on September 28, 2012 which was (79.8%).

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    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    *Option: voluntary lump sum paymentCurrent employees age 55+ with vested pension benefits have a one-time opportunity to voluntarily elect a current lump sum distribution in lieu of future monthly benefit payments. Each lump sum payment represents:The present value of the monthly payments that would have been made to a former employee if he began receiving payments at age 65 and continued receiving them until his death; andAn additional reduction to reflect the Plans average funded ratio for the four calendar quarters prior to the opening of the election period on September 28, 2012 (e.g., 79.8%) No death benefit is available for employees electing a lump sum.

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    **Option: voluntary lump sum payment Former employees with vested benefits regardless of age will be given the opportunity to voluntarily elect a lump sum distribution, payable January 2013, in lieu of future monthly benefit paymentsEach lump sum payment will represent:The present value of the monthly payments that would have been made to a former employee if he began receiving payments at age 65 and continued receiving them until his death; and An additional reduction to reflect the Plans average funded ratio for the four calendar quarters prior to the opening of the election period on September 28, 2012 (e.g., 79.8%) No death benefit is available for employees electing a lump sum.

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    **Voluntary lump sum payment calculationCalculation based on present value factors (posted online) and Plans interest rate. Factors are based on:Age (as of December 31, 2012)Actuarial assumptions about life expectancy Assumed interest rate of 6.5%Greatest present value assigned to individuals at age 65 to align with Plans normal retirement dateIndividual view of the desirability of a lump sum payment will vary depending on age, life expectancy, and decisions on investment of lump sum

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    **Example: voluntary lump sum payment Sharon Sullivan has a $6,000 annual benefit ($500 monthly benefit) if she waits until she turns 65 to take her pension.If she elects a lump sum payment at age 55, the estimated amount of her lump sum payment would be $6,000 multiplied by a present value factor which takes into account her current age and the number of years payments will likely be made to her over her lifetime and expected interest returns over that payment period. $6,000 x 5.41 (PV factor for age 55) = $32,460In addition, the lump sum would also be reduced to reflect the Plans funded ratio (the average funded ratio for the four calendar quarters prior to the opening of the election period was 79.8%) $32,460 x 79.8% = $25,903.08

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    **Option: Voluntary Lump Sum PaymentLump sum payments made as direct payments to plan participants are subject to taxes, including an automatic 20% federal tax withholding, state tax withholding, if applicable (amounts vary by state of residence) and may be subject to other taxes and/or tax penalties, including a 10% excise tax if you are under age 59 . . Lump sum payments can generally be rolled over to the RCAB 401(k) Plan (if applicable) or to an IRA in order to defer taxes and allow for continued retirement savings. Participants electing a lump sum are strongly encouraged to roll over their payments into a tax-deferred account.Participants have the opportunity to elect a lump sum payment. No future opportunity to elect a lump sum payment will be available. Payments will be made in July 2012.

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    **One-time opportunitiesParticipants have the opportunity to elect an in-service annuity or a lump sum payment during a defined window between September 28, 2012 and November 30, 2012. No future opportunity to elect an in-service annuity or a lump sum payment from the Plan will be available. Payments will be made in January 2013.

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    Option: Elect not to participate decline in-service annuity and lump sumCurrent employees with vested benefits remain eligible to begin taking future monthly annuity payments from the Plan upon termination of employment/reduction of hours below 1,000 per year at a date in the future, based on Plan provisions in effect at that time.Select Election Not to Participate option on Election Form and return to the Benefits Office.

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    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    Additional information: voluntary optionsElection forms and additional background information should be reviewed (with your spouse, if any) carefully prior to making your election.Contact the Benefits Office with any questions.Return signed and notarized election forms (all four pages) by November 30, 2012.

    **

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

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    Questions?

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    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

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    RCAB 401(k) Plan

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    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    RCAB 401(k) Plan HighlightsThe RCAB 401(k) will:Allow rollovers from the RCAB Pension Plan (and other employer retirement plans)Allow employee pre-tax deferrals (or Roth contributions) up to annual legal maximumsFor employees with at least one year of service, provide a 2% of basic annual earnings employer contribution: 2012: 2% core contribution 2013 and 2014: 1% core contribution + a matching contribution equal to 50% of the first 2% of compensation contributed 2015 and beyond: matching contribution equal to 50% of the first 4% compensation contributedAllow loans, hardship withdrawals, and full access to rolled-over amounts (taxes and penalties may apply)

    **

  • RCAB 401(k) Plan InvestmentsMorgan Stanley/Graystone Consulting is the Plans Registered Investment Advisor Fiduciary to the Plan Recommends and monitors Plan investments based on fund performance and expense ratiosAvailable for guidance to Plan participants with specific questions about investment optionsTIAA CREF is the Plan Recordkeeper

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    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    Contact usPension Information Susan Delfeld, Pension Project Manager [email protected]

    Kerri Bessette, Benefits Consultant [email protected]

    (617) [email protected]/pension

    401(k) Plan InformationCarol Gustavson, Plan Administrator [email protected](617) 746-5830www.catholicbenefits.org/401k*

    2011 Roman Catholic Archdiocese of Boston. All rights reserved. Proprietary and Confidential.

    *

    Questions?

    *

    Introduce self

    Thank you for coming

    Many of you have already received a letter from the Trustees about the changes to the Pension Plan. If not or need another copy, located at the back.

    ***While Plan is active (not frozen), Employer contributions just barely cover the increase in liability caused by every current employee earning another year of accruals. With Plan frozen, contributions (and investment returns on the assets) can help make a dent in the liability.

    Employers have been notified that they will need to continue to pay into the Plan for the foreseeable future.

    Current discount rate is 6.5%. For the past few decades, this target has been met. Trustees continue to monitor this rate and determine if it is the right rate for the Plan. *As mentioned before, Plan does not have insurance either through a government agency or through a private insurer. The goal of the Trustees is to fully insure the benefits for those remaining in the Plan by purchasing insurance contracts to cover the individual liability of each vested participant. If this were attempted today, the Plan would need to be approximately 125% to 130% funded, using current assumptions, to purchase these contracts. This equals $130 million that the Trustees would need to obtain to complete these purchases. ****Lump sum amount payable in January, 2012 is shown on line a in the Pension Plan Benefits section of your election form.**Lump sum amount payable as of January, 2012 is shown on line a in the Pension Plan Benefits section of your election form.*********

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The Roman Catholic Archdiocese of Boston Pension Plan Changes and 401(k) Updates Pension Plan Participant and 401(k) Communication Meetings October - November 2012
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