The following will help you understand the key components of the plan and how your retirement benefits are calculated.
A Closer Look at Your Retirement Benefit
Credited Service
Beginning January 1, 2018, you will receive a month of Credited Service for each month that you are enrolled in the plan and for which your participating employer pays the monthly Assessment (including interest, if applicable) in full. If your participating employer only partially pays (or does not pay) the Assessment due, you will not earn any Credited Service for that month.
Credited Service will vary depending on the length of your service while a member of the plan. Service as an ordained Episcopal cleric or as an employee of the Church Pension Group Services Corporation does not count toward Credited Service under this plan.
Highest Average Compensation
If you earn Credited Service on or after January 1, 2018, Highest Average Compensation is generally the average of the seven highest-paid, non-overlapping, 12-month periods during which you have earned Credited Service over your entire career. (The seven 12-month periods do not need to be consecutive; however, they cannot overlap.)
If you have less than seven years of compensated employment during which you earned Credited Service, then all of the months in which you earned compensation and Credited Service will be used to determine your "career average." This amount may fluctuate until a Highest Average Compensation is established.
Prior to January 1, 2018, the plan used other definitions to determine Highest Average Compensation. If you established a Highest Average Compensation on or before December 31, 2017, then it can never be lower than that established amount.
Earnings
Earnings are used to calculate pension Assessments for your employer and your Highest Average Compensation.
Earnings* are the sum of the following annualized amounts:
- Base salary (excluding housing) and scheduled taxable cash payments; plus
- Cash housing allowance and/or utilities; plus
- Employer contributions to a qualified and/or non-qualified plan; plus
- One-time payments (applies to month when paid); plus
- The value of employer-provided housing, which equals 30% of the sum of the four bullets above. However, if the sum of the four bullets above is less than the Clergy Pension Plan’s Hypothetical Minimum Compensation ($18,000 per year beginning on January 1, 2018), the value of employer-provided housing equals 30% of the Hypothetical Minimum Compensation.
* Earnings do not include: (1) any form of severance (including pay continuation following a termination of employment), or (2) Earnings above the Internal Revenue Code annual compensation limit.
Note that, if the only type of compensation that your participating employer provides is housing, then your Earnings equal 30% of the Clergy Pension Plan’s Hypothetical Minimum Compensation.
A Note About Housing
The types of compensation included in the definition of Earnings are consistent with the types of compensation that are assessed on behalf of clergy under the Clergy Pension Plan. As such, the terms “housing” and “cash housing allowance” are used in the definition of Earnings. However, CPF defines such terms as cash payments that are paid on a regular basis and are excludible from an employee’s gross income for income tax purposes. As such, lay employees generally should not have any housing to exclude from their base salary or any cash housing allowance to report.
When You Can Retire
Once vested, you can retire at one of the following times:
Early retirement:
- On or after age 55 but before age 65; and
- When you are longer employed by a participating employer
Normal retirement:
- On or after age 65; and
- When you are no longer employed by a participating employer or are scheduled to work less than 1,000 hours per year for a participating employer.
IRS Required Beginning Date: If you are vested, have not yet retired under the plan, and are no longer working for a participating employer, the Internal Revenue Service requires that you must begin receiving your retirement benefit after you reach your IRS required beginning date. See A Guide to the Lay Defined Benefit Plan for more information.
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