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Lay Retirement Plan Changes

Lay DB Plan, Lay DC Plan, and RSVP Changes


As part of the revisions to the pension and other related plans offered by The Church Pension Fund, we are amending The Episcopal Church Lay Employees' Retirement Plan (Lay DB Plan), The Episcopal Church Lay Employees' Defined Contribution Retirement Plan (Lay DC Plan), and The Episcopal Church Retirement Savings Plan (RSVP). The changes to these plans will provide consistent definitions of compensation across all plans and, for the Lay DB Plan, simplify certain provisions as well as make them consistent with the revisions being made to The Church Pension Fund Clergy Pension Plan. Those provisions include the early retirement reduction, survivor benefit options, and the ability to split your pension with your former spouse using a separate interest qualified domestic relations order.

The changes to Lay DB Plan, Lay DC Plan, and RSVP are expected to take effect January 1, 2018.

Lay DC Plan and RSVP

Definition of Compensation

Compensation is used to determine:

  • Your employer’s contributions to the Lay DC Plan or RSVP, as applicable
  • Your own contributions to the Lay DC Plan or RSVP, as applicable

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Compensation for the purpose of calculating your own contributions is defined as your gross salary plus one-time cash payments, excluding severance. It does not include any cash housing allowance, employer-provided housing, or employer contributions to a qualified or non-qualified plan.

Compensation* for the purpose of calculating your employer’s contributions includes:

  1. Base salary (excluding housing) and scheduled taxable cash payments;
  2. Cash housing allowance and/or utilities;
  3. One-time payments; and
  4. The value of employer-provided housing, which equals 30% of the sum of #1 through #3 above.

* Any form of severance (including pay continuation following a termination of employment) should be excluded in all cases.

Lay DB Plan

Total Assessable Compensation

Total Assessable Compensation (TAC) is used to determine:

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TAC* is the annual sum of:

 

  1. Base salary (excluding housing) and scheduled taxable cash payments;
  2. Cash housing allowance and/or utilities;
  3. Employer contributions to a qualified or non-qualified plan;
  4. One-time payments; and
  5. The value of employer-provided housing, which equals 30% of the sum of #1 through #4 above, or, if higher, 30% of the Clergy Pension Plan's Hypothetical Minimum Compensation (HMC).
    1. The HMC is expected to be $18,000 per year beginning in 2018.

* Any form of severance (including pay continuation following a termination of employment) should be excluded in all cases.

Highest Average Compensation

The Lay DB Plan calculates your pension benefit using your Highest Average Compensation (HAC). This is defined as the seven highest-paid, non-overlapping, 12-month periods (using your monthly TAC) over your career during which Credited Service (CS) is earned.

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  • 12 consecutive months are used for one 12-month period, although months in which you earned $0 are excluded. The 12-month periods do not have to follow a calendar year.
  • The 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 CS is earned, your HAC will be determined using a career average of your TAC (i.e., all compensated months in which CS is earned will be counted).

If you have established a HAC as of December 31, 2017, your HAC under the new calculation cannot be lower than that established HAC.

Early Retirement Reduction Formula

The Lay DB Plan provides for early retirement. The normal retirement age is 65. However, you may retire prior to age 65 pursuant to the following rules:

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  • If you are vested, you may retire as early as age 55. Your monthly pension payment will be reduced by 5% per year, or 0.4167% per month, for each month that your early retirement date precedes age 65 (with a maximum total reduction of 50%).
  • If you have reached age 50 as of December 31, 2017, you may retire on or after age 55 under the current provision, which applies various reduction rates depending on your age at retirement (with a maximum total reduction of approximately 40%).

Joint & Survivor Option

If you are married when you retire, your spouse is entitled to a survivor benefit, unless he or she waives it:

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  • Your spouse receives a 50% survivor option, and your own benefit is actuarially reduced to pay for the cost of the 50% survivor benefit.
  • You and your spouse may choose from other options at retirement (your spouse must consent to certain of these choices).
    • Joint and Survivor (J&S) options are 0%, 75%, and 100% of your pension benefit
    • 15-year Certain & Life option

The survivor option is chosen at retirement and is irrevocable.

Options to Divide Your Pension Upon Divorce

If you divorce or legally separate prior to retirement, you may choose from two different types of qualified domestic relations orders (QDROs) to divide your pension with your former spouse:

  1. Separate interest QDRO
  2. Stream of payment QDRO

If you divorce or legally separate after retirement, you may only use a stream of payment QDRO to divide your pension with your former spouse.

Participant Status

The benefits you are eligible for under the Lay DB Plan are determined by your participant status. The statuses are Eligible, Active, Terminated, and Retired.

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Eligible
You will be eligible to participate in the Lay DB Plan if:

  • Your employer participates in the Lay DB Plan
  • Your are scheduled to work a minimum of 1,000 per year
  • Your employer has enrolled you in the Lay DB Plan

Active
You are considered Active, if you:

  • Are regularly employed at a participating Episcopal institution, have earned at least one month of Credited Service, and your assessments are no more than 24 months overdue

Terminated
You are considered Terminated if:

  • Are a former Active participant who is not an employee at a participating Episcopal institution; or
  • Are regularly employed at a participating Episcopal institution and assessments are more than 24 months past due

Retired
You are considered Retired if you have begun receiving a benefit from the Lay DB Plan.

 

Pensions Disclaimer

The Lay Defined Benefit Plan is a qualified plan under Section 401(a) of the Internal Revenue Code, but as a church plan, it is not subject to ERISA. The plan's financial condition is disclosed in the Church Pension Group Annual Report.

The Church Pension Fund, as sponsor of this plan, continues to monitor the funding status closely. Like many defined benefit plans, the Lay Defined Benefit Plan currently is not fully funded. The Church Pension Fund retains the right to amend, terminate or modify the terms of the Lay Defined Benefit Plan, including the employer assessment rate, without notice and for any reason.

Pensions Disclaimer

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