Lisa was ordained at age 30 and took a position as a bilingual leader for an innovative youth outreach program at an Episcopal camp. There was little salary at first but Lisa has enough in savings from an earlier job and can initially support herself.
She continues to work for the outreach program, but budget difficulties reduce her salary. She finds part-time work in another parish, and works at both jobs.
Lisa marries Eduardo, also a priest and a participant in the Clergy Pension Plan, and they foster, and then adopt, two children. Neither child is disabled.
As Lisa’s parents age, she needs to take unpaid time off to care for them. Initially she takes time off using the Family Medical Leave Act (FMLA) to provide the care and support they need, but she realizes that she needs to spend more time with them. As a result, when Lisa turns 57, she decides to take early retirement.
Key events during Lisa’s career related to her pension
What this means for Lisa
Lisa will be eligible to participate in the Clergy Pension Plan (the Plan) once she is “regularly employed” and compensated by an Episcopal employer for five or more consecutive months.
Lisa will earn Credited Service (CS) if her employer pays the full assessment on her Total Assessable Compensation (TAC) each month. After Lisa has earned five years (or 60 months) of CS, she will be vested in the Plan.
- If the monthly income Lisa earns from the youth outreach program is below 1/12th of the Hypothetical Minimum Compensation (expected to be $1,500 per month in 2018) in effect under the Clergy Pension Plan, the CS she earns will be applied toward her pension and life insurance benefits, but not her eligibility for the Medicare Supplement Health Plan subsidy. Lisa has the option to pay personal assessments on the difference between her monthly TAC and the $1,500 per month to earn CS for the Medicare Supplement Health Plan subsidy. She must earn at least 10 years (or 120 months) of CS towards the Medicare Supplement Health Plan subsidy to earn a partial subsidy. For more information on make-up assessments, see Andrew’s story.
- When Lisa works part-time for two parishes, each employer pays assessments on the respective TAC that she earns from each of them. If the total monthly TAC from both employers is still less than 1/12th of the Hypothetical Minimum Compensation (HMC), then Lisa will earn CS toward pension and life insurance benefits, but not the Medicare Supplement Health Plan subsidy. She still has the option to pay personal assessments on the difference between 1/12th of the HMC and her total monthly TAC in order to earn CS toward the Medicare Supplement Health Plan subsidy.
Eduardo, Lisa’s spouse, and her children are eligible for certain survivor benefits when Lisa becomes a participant in the Clergy Pension Plan. As long as Lisa remains an Active participant, she is also eligible for a life insurance benefit equal to six times her TAC, up to $150,000.
- A preretirement survivor benefit is available if Lisa’s death occurs while she is an Active participant or after she is vested. The amount of the benefit varies depending on Lisa’s status under the Clergy Pension Plan and whether she was eligible to retire at the time of her death. In addition, because Lisa has been employed in low-paying positions, a minimum preretirement survivor benefit may be payable.
- The preretirement survivor benefit payable to Eduardo will be a monthly benefit payable for his lifetime, whereas the benefit payable to Lisa’s eligible children will stop once they reach age 25.
- If Lisa dies while fostering her two children, they must be her tax dependents in order to be eligible for the preretirement survivor benefit. If Lisa dies after she has adopted them, her children will be eligible for the preretirement survivor benefit even if they are not her tax dependents. In either case, however, her children must be under the age of 25.
- If Lisa and Eduardo’s children are eligible for the preretirement survivor benefit (as described above), they also will be eligible for a child benefit. The maximum child benefits payable to both her eligible children are limited to Lisa’s Highest Average Compensation (HAC). Because of Lisa’s low-paying positions, she may have a low HAC, and the maximum limit might apply to the child benefits. If it does, then the maximum amount will be split equally between her two eligible children.
- If both Lisa and her husband pass away, and they are both Active participants (or otherwise vested) at the time of their deaths, their children may receive a doubled child benefit on behalf of each of them because they are both participants in the Clergy Pension Plan. Their children must be eligible children (as described above).
When Lisa takes the unpaid leave of absence to care for her parents, her employer will stop making assessment payments since she is not earning a salary. As a result, she will stop earning CS and, after a period of time (see below), will lose some benefits.
- If Lisa continues to be employed during her unpaid leave of absence, and she has earned less than 25 years of CS, she will be considered Inactive after 24 months, and will lose benefits, such as:
- Life insurance benefit
- Projected CS for the preretirement survivor benefit
- Resettlement benefit
- Short term disability and long term disability coverage
- If Lisa’s employment ends at some point during her unpaid leave of absence, then she will be considered Inactive after six months have passed since her last day of employment, and she will lose the benefits listed above.
- If she takes her unpaid leave of absence after she has earned 25 years of CS, she will continue to be considered Active and will not lose benefits.
- In order to continue earning CS during her unpaid leave of absence and, if applicable, maintain her status as an Active participant in the Plan, Lisa has the option to pay assessments personally for up to 24 months from the start of the unpaid leave. She can choose to pay the assessments on either her HAC or the HMC.
- If she pays the assessments on her HAC, she will earn CS for pension and life insurance benefits, but if 1/12th of her HAC is lower than 1/12th of the HMC (expected to be $1,500 per month in 2018), then she will not earn CS toward the Medicare Supplement Health Plan subsidy.
- If Lisa chooses to pay assessments on the HMC, then at the current assessment rate of 18% and the expected 2018 monthly HMC amount of $1,500, she could expect to pay $270 a month in personal assessments.
Lisa is eligible for an early retirement benefit since she has earned at least five years of CS and is 55 or older. Assuming that Lisa earned CS throughout her career and paid personal assessments when she took the unpaid leave of absence, she will have earned 27 years of CS toward pension and life insurance benefits. Because Lisa was employed in low-paying positions, the CS that she earned toward the Medicare Supplement Health Plan subsidy may be less if she did not pay personal assessments on the difference between 1/12th of the HMC and her monthly TAC, or if she did not personally pay assessments on the HMC during her unpaid leave of absence.
- If Lisa takes early retirement at age 57, with 27 years of CS, her basic retirement benefit will be reduced by 5% per year, or 0.4167% per month, that her early retirement date occurs prior to age 65. For Lisa, this will result in a 40% reduction (96 months x 0.4167%) in her monthly benefit. See Josh’s story to see details on how the early retirement benefit is calculated.
- If Lisa waits until she is age 60 and retires with at least 30 years of CS, her monthly retirement benefit will not be reduced. In addition, she will receive a monthly bridge benefit to assist with the cost of healthcare until she is Medicare-eligible at age 65.