In his late 50s, after his children were grown, Taylor decided that serving as a parish priest was his calling and entered seminary. Taylor was a widower, so he did not have any financial responsibilities for a spouse or dependent children.
Called as priest for a parish with a soup kitchen, Taylor, at age 61, begins his ministry. However, the salary does not provide the necessary support that Taylor needs and he takes a second job outside the Church.
At 65, Taylor marries Nancy. At age 67, he retires.
Key events during Taylor’s career related to his pension
What this means for Taylor
Taylor will be eligible to participate in the Clergy Pension Plan if he is “regularly employed” and compensated by an Episcopal organization and will start earning Credited Service (CS) when pension assessments are paid. If he is Active, he will become vested when he reaches age 65 (even though he will have only four years of CS).
Since Taylor will be working for less than seven years, his Highest Average Compensation (HAC) will be calculated using his average earnings over his career.
Taylor will earn a full month of CS for each month his church employer pays the full assessments due based on Taylor’s Total Assessable Compensation (TAC ). His position outside the Church will not impact his eligibility for the Clergy Pension Plan or earning CS in the Clergy Pension Plan.
- If Taylor’s monthly TAC is below the Hypothetical Minimum Compensation (HMC) (expected to be $1,500 per month in 2018), the CS he earns will be applied towards his pension and life insurance benefits, but not his eligibility for the Medicare Supplement Health Plan subsidy.
- Since Taylor is planning on retiring at 67, he will not earn ten years (120 months) of CS before retirement and, therefore, will not be eligible for the Medicare Supplement Health Plan subsidy. As a result, paying personal assessments between his TAC and the HMC would not earn him eligibility for the Medicare Supplement Health Plan subsidy, but could increase his HAC.
- However, as a vested participant, Taylor will have unsubsidized access to the Medicare Supplement Health Plans.
- After retirement, Taylor’s job outside the Church will not affect his retirement benefits from the Clergy Pension Plan.
Once Taylor earns at least one year of CS during his marriage to Nancy, she will be eligible for a subsidized 50% joint and survivor benefit at retirement and will have unsubsidized access to the Medicare Supplement Health Plans.
- While he is Active, Taylor is eligible for a life insurance benefit equal to six times his TAC, up to $150,000. If he retires Active, he will be eligible for a life insurance benefit equal to six times his HAC, up to $50,000.
- A preretirement survivor benefit is available to Nancy if Taylor dies while he is Active or when he becomes vested. The amount of the preretirement survivor benefit depends on whether Taylor dies before or after he is eligible to retire and whether he is Active on his date of death. Depending on the amount of the calculated benefit, Nancy may be eligible for a minimum pension benefit instead. In addition to the preretirement survivor benefit, Nancy would also receive a Christmas benefit, a resettlement benefit (if he dies while Active), and, once Taylor is vested, unsubsidized access to the Medicare Supplement Health Plans.
- Upon retirement, if Taylor does not receive a lump-sum payment for small benefits (see below), he will be entitled to a monthly pension benefit and may be eligible for a minimum pension benefit. The default survivor benefit option is a 50% joint and survivor benefit (80% if Taylor is eligible for a minimum pension).
- Taylor and Nancy can select an optional form of payment. The options include a survivor benefit equal to 0%, 50% (if the 80% minimum applies), 75%, or 100% of Taylor’s monthly benefit, as well as a 15-year certain and life benefit. Once the survivor benefit option is chosen, it is irrevocable.
- If Taylor predeceases Nancy, she would receive a Christmas benefit in addition to the monthly survivor benefit, and unsubsidized access to the Medicare Supplement Health Plans.
When Taylor retires at age 67, he will have earned six years of CS. His retirement benefit will be calculated using the normal retirement formula based on his CS and Highest Average Compensation (HAC). See Mary’s story for details on calculating the retirement benefit.
- Taylor’s HAC will be calculated using his career average compensation, since his CS is below seven years. See Highest Average Compensation for details.
- Since Taylor’s earnings during his career were low and potentially below the HMC, he may be eligible for a lump-sum payment of his retirement benefit, a minimum pension benefit, or both. If Taylor is eligible for the lump-sum payment, the value of Nancy’s survivor benefits will be included in the lump-sum amount paid to Taylor. He will still be eligible to receive the Resettlement benefit and retiree life insurance if he retires from Active status and will have unsubsidized access to the Medicare Supplement Health Plans.