In considering your retirement and/or long-range future planning, it is beneficial to understand exactly how benefits are determined.  For those nearing retirement, it is helpful to compare what your benefit at age 62 through age 65 will provide for you (early retirement versus the normal retirement age of 65).  Any time you would like to see a retirement benefit estimate, feel free to contact Human Resources.

The Defined Benefit Pension Plan offers benefits to each participant based on a predetermined (defined) formula. Monthly payments are the sum of the following:

• Multiply $7.50 times the number of years of credited service prior to January 1, 1981. A participant may not claim more than 20 years pre-1981 of service.
• Determine the average monthly income from the five highest consecutive years of employment. This is the "final average compensation."
• Multiply the final average compensation by 1.85 percent (.0185).
• Multiply the product of the above amount times the number of years credited after December 31, 1980. The minimum benefit is $17 per credited service year.

Example:

Michael Smith retired in 2001 at age 65 after 36 years of service. Fifteen of those years were prior to January 1, 1981 and 21 years were after December 31, 1980. His salary (average monthly compensation from the five highest consecutive years of his employment) was $2,253 per month. His monthly lifetime benefit was calculated as follows:

$7.50 x 15 years = $112.50
.0185 x $2,253 = $41.68
$41.68 x 21 years = $875.28
$112.50 + $875.28 = $987.78
Accrued benefit at age 65: $987.78

If Michael Smith took early retirement at age 62, another step is required to arrive at his monthly benefit.

The early retirement benefit is calculated by multiplying the amount of the accrued benefit by 1/180. This amount times the number of months prior to age 65 will equal the amount deducted from the accrued benefit at age 65.

Michael Smith's early retirement would be calculated this way:

$7.50 x 15 years = $112.50
.0185 x $2,253 = $41.68
$41.68 x 18 years = $750.24
$112.50 + $750.24 = $862.74
Accrued benefit at age 65: $862.74
$862.74 x 1/180 = $4.79 per month
$4.79 x 36 months = per-month deduction of $172.44
(36 months based on number of months between ages 62 and 65)
Accrued benefit at age 62: $690.30