The A&R Representative Assembly voted to accept the tentative agreement which would enhance the pension plan for Tier 2/2A/3. Final ratification of the tentative agreement could come at SEBAC’s January meeting. A majority vote of SEBAC Unions present and in good standing will be required to ratify the agreement.
The pension changes would increase the ‘below breakpoint multiplier’ from 1.333% per year of service to 1.4% per year of service. The ‘above breakpoint multiplier’ will remain at 1.833% and the ‘above 35 years of service’ multiplier will remain at 1.625%. These changes will apply to all years of service for active employees and anyone who retired on or after July 1, 2013.
As an example: retirement after 30 years of service with an Average High Salary of $90,000 and a breakpoint of $69,200…
Using Current Formula:
(($69,200 [breakpoint] x .01333) + ($90,000 [high avg wage] - $69,200 [breakpoint]) x .01833)) x 30 [years of service] = $39,111 annually
Using Proposed Formula:
(($69,200 [breakpoint] x .014) + ($90,000 [high avg wage] - $69,200 [breakpoint]) x .01833)) x 30 [years of service] = $40,502 annually
The breakpoint will increase by 6% to $69,200 on January 1, 2014. It is expected that in January 2015, the breakpoint will shift away from the annual 6% increase and revert to a second calculation based on the 35 Year Average of the Social Security Maximum. The 35 Year Average formula should lower the annual breakpoint increase to roughly 4% to 4.25% annually rather than the current rate of 6% increases.