PREPARING FOR THE NEXT PHASE OF LIFE

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PREPARING FOR THE NEXT PHASE OF LIFE

• Presented by
• Montgomery County
• Office of Human Resources
• Benefits Team

2
What Is Retirement To You?

• Your Golden Years
• Financial independence
• Life style changes
• Second careers
• New interests activities
• The New Retirementality

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Determining Needs Expenses

• The Big Items
• Mortgages payoff or move?
• Vehicles and large consumer items
• Consumer loans
• Basic Living Expenses
• Utilities gas, electric, phone, internet, water
• Fixed costs real estate taxes
• Variable costs auto expense, property expense,
  groceries, medical, entertainment travel

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Determining Cash Flow Income Sources

• Pension(s), Social Security
• Savings, investments, tax qualified plans
• Banks and credit unions
• IRAs, 401ks, insurance plans/policies
• Deferred Compensation 457 Plan
• Additional income
• Part time full time income from a job
• Business ideas second incomes
• Business ventures
• Investment real estate

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Identify Gaps Shortfalls

• Fixed recurrent too much month at the end of
  the money
• Extra ordinary events
• Medical expenses conditions
• Property damage and disasters
• Unexpected life events illness accidents
• Opportunities for wealth creation

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SOURCES OF INCOME

• Social Security
• Early, Normal, Enhanced
• Employees Retirement Plan
• DROP/DRSP Program - Fire/Police
• Deferred Compensation Plan
• ING Non-Represented Employees
• Hartford Represented Employees

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What is Social Security?

• Social Insurance FDR (1935)
• Retirement Insurance
• Disability Insurance
• Survivor Insurance
• Medicare Insurance (1965)
• Social Security intended as supplemental income
  only, designed to replace part of the monthly
  earnings during retirement

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Social Security Eligibility

• Retirement (qualify with 40 quarters)
• Age 62 with reduced benefits 0.6 per month
  reduction
• Age 65-67 with full benefits
• Age 65 for Medicare benefits
• Age 70 with enhanced benefits

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Begin to Get a Handle Now!

• Identify expenses
• Use your checkbook and bank statements
• Use your credit card statements
• Save as much as you can
• Hold expenses level when possible
• Dont waste time!!

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Employees Retirement System (ERS)

• Defined Benefit Plan
• BIT (Board of Investment Trustees) is responsible
  for investment choices and paying your retirement
  benefit

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Montgomery County Employees Retirement
SystemERS

• Pension based on Credited Service
• Sick Leave
• Average Final Earnings
• Survivor benefits to spouse/children
• Disability retirement benefit
• DRSP/DROP program Fire/Police only

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What is your Retirement Membership Group?

• If you are a non-public safety employee who is
  not in a bargaining unit position You are in
  Group A
• If you are a non-public safety employee who is
  in a bargaining unit position (including any
  probationary employee) You are in Group H
• If you are public safety - Police Group F (P
  DRSP)
• Fire Group G (Q DROP)
• Correction/Sheriffs Group E
• If you enrolled before July 1, 1978, you are in
  the Optional Non-Integrated Plan Group A, H, E,
  F or G
• If you enrolled before July 1, 1978, and
  integrated, you are in the Optional Integrated
  Plan Group AZ, HZ, EZ, FZ or GZ
• If you enrolled on/after July 1, 1978, you are in
  the Mandatory Integrated Plan, Group AK, HK, EK,
  FK or GK

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WHEN CAN YOU RETIRE

• Normal retirement UNREDUCED BENEFIT
• Varies by plan based on age and years of
  service
• Early retirement REDUCED BENEFIT
• Varies by plan based on age and years of
  service
• If your age plus credited service equals 85
  (with at least 35 years of credited service), you
  may elect early retirement without receiving a
  reduction in benefits
• Benefits if found to be disabled
• Vesting/Termination prior to eligibility age
• Contributions plus 4
• Eligible for IRA rollover

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Employees Retirement System (ERS)

• Average Final Earnings (AFE)
• Enrolled on/after 7/1/1978 Highest consecutive
  36 months of earnings (divided by 3).
• Enrolled before 7/1/1978 Highest consecutive 12
  months of earnings.
• Phantom General Wage Adjustment 7/5/09 7/3/10
• Credited Service consists of
• County Service while in ERS
• minus LWOP periods
• plus Transfers or Purchases
• plus Sick Leave up to 2 years 4,136 hours

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PAYMENT OPTIONS

• All payment options provide the retiree a monthly
  pension payment for life.
• The differences between the payment options and
  the amount of your payment is the degree of
  protection offered to your beneficiary.
• Generally, the higher the protection for your
  beneficiary, the lower the payment amount to the
  retiree.
• The date you begin receiving Social Security from
  the Federal Govt does not impact your pension.
  The reduction date is based on your birth date.

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PENSION AMOUNTS

• The amounts shown on your estimate are gross
  amounts and do not reflect deductions for any of
  the following which may or may not be applicable
  to you
• Federal Income Tax
• State Income Tax
• Group Insurance Premiums (after tax)
• We cannot tell you what the net amount of your
  pension check will be.
• PLEASE CONSULT WITH YOUR TAX ADVISOR.

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Payment Options

• Monthly pension benefits can be paid as
• Modified Cash Refund Annuity option
• Ten Year Certain and Continuous option
• Social Security Adjustment option age 62/65
• Joint and Survivor Annuity option
• Joint and Survivor Annuity Pop-up option
• Social Security Adjustment option combined with
  Joint and Survivor Annuity option age 62/65
• Social Security Adjustment option combined with
  Joint and Survivor Annuity Pop-up option age
  62/65
• YOUR CHOICE OF PAYMENT OPTION IS A ONE-TIME
  IRREVOCABLE CHOICE AT RETIREMENT.

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EMPLOYEE SELF-SERVICE
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Modified Cash Refund Annuity Option

• Normal payment option for Mandatory Integrated
  AK/HK/EK/FK/GK plan members
• The guarantee for the Modified Cash Refund
  Annuity option is an amount equal to your
  contributions and interest as of your date of
  retirement. If you die after you have received
  pension payments which equal or exceed your
  contributions and interest, there will be no
  payment to your beneficiary. If there are monies
  due to your beneficiary, they will be paid out as
  a lump sum. (Typically, the guarantee period is
  from 18 to 36 months.)

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MODIFIED CASH REFUND
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Ten Year Certain and Continuous Option

• Normal payment option for Optional A/H/E/F/G
  and Optional Integrated AZ/HZ/EZ/FZ/GZ plan
  members
• The guarantee to your beneficiary is for 10 years
  (120 months). If you die before you receive 10
  years (120 months) worth of payments, your
  monthly pension payments will continue to your
  named beneficiary until the end of the 10 years
  then payment to your beneficiary stops.

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10 YEAR CERTAIN AND CONTINOUS
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Joint and Survivor Annuity Option

• If you choose this payment option, you will also
  choose the percentage of your monthly pension
  (100, 70, 50, 30 or 20) that your joint
  annuitant will receive if he or she survives you.
  If he or she does not survive you, your payment
  remains the same.
• At your death, your joint annuitant will begin
  receiving a lifetime benefit based on the
  percentage you have chosen.
• You must name your joint annuitant at retirement
  and it cannot be changed to anyone else (divorce/
  remarriage).
• The guarantee to a beneficiary (other than your
  Joint Annuitant) for this option is the same as
  your Normal payment option, Modified Cash Refund
  or Ten Year Certain Continuous.

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JOINT SURVIVOR OPTIONBEFORE SSNRD
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JOINT SURVIVOR OPTIONAFTER SSNRD
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Joint and Survivor AnnuityW/Pop-up Option

• If you choose this payment option, you will also
  choose the percentage of your monthly pension
  (100, 70, 50, 30 or 20) that your joint
  annuitant will receive if he or she survives you.
• If he or she does not survive you or you divorce,
  your pension will pop-up to the Modified Cash
  Refund Annuity payment amount plus any applicable
  COLAs.

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Joint and Survivor AnnuityW/Pop-up Option Before
SSNRD
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Joint and Survivor AnnuityW/Pop-up Option After
SSNRD
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Social Security Adjustment Option

• This option may give you a larger initial monthly
  benefit until either age 62 or 65 (you choose
  which age) and smaller monthly payments
  afterwards.
• The date you begin receiving Social Security does
  not impact your pension. The reduction date is
  based on your birth date.
• The guarantee for this option is the same as your
  Normal payment option.

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Social Security Adjustment Option
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Social Security Adjustment with Joint and
Survivor Annuity Option

• This option may give you a larger initial monthly
  benefit than the JS Option until either age 62
  or 65 (you choose which age) and smaller monthly
  payments afterwards.
• If you choose this payment option, you will also
  choose the percentage of your monthly pension
  (100, 70, 50, 30 or 20) that your joint
  annuitant will receive if he or she survives you.
  If he or she does not survive you, your payment
  remains the same until you reach age 62 or 65.

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Social Security Adjustment With Joint Survivor
OptionAge 62
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Social Security Adjustment With Joint Survivor
OptionAge 65
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Social Security Adjustment Option combined with
Joint and Survivor Annuity Pop-up Option

• This option may give you a larger initial monthly
  benefit than the JS Option until either age 62
  or 65 (you choose which age) and smaller monthly
  payments afterwards.
• If you choose this payment option, you will also
  choose the percentage of your monthly pension
  (100, 70, 50, 30 or 20) that your joint
  annuitant will receive if he or she survive you.
• If he or she does not survive you or you divorce,
  your pension will pop-up to the Modified Cash
  Refund Annuity payment amount plus any applicable
  COLAs
• This payment option must be sent to the Board of
  Trustees actuary to be calculated.

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How are COLAs determined?

• If you belong to the optional non-integrated
  A/E/F/G/H or optional integrated
  AZ/EZ/FZ/GZ/HZ plan, your benefit is 100 of
  the change in the Consumer Price Index for the
  Washington Metro Area.
• If you belong to the mandatory integrated
  AK/EK/FK/GK/HK plan, your benefit is 100 of
  the change in the Consumer Price Index for the
  Washington Metro Area up to 3 and 60 of any
  change in the Consumer Price Index greater than
  3, not to exceed a total of 7.5. The maximum
  7.5 does not apply to disability retirees or
  retirees over age 65.
• The COLA applies to both the initial retirement
  amount and the reduction amount.

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Post Retirement Health Life Insurance

• It is the same coverage as that offered to active
  employees with a few exceptions
• Caremark High Option Rx Plan has 5/10 copays
  instead of 4/8.
• You cannot take the NVA vision plan into
  retirement. You can continue it for 18 months
  through COBRA or you may elect the Retiree
  Discount Vision Plan (see vision benefits
  comparison sheet in your folder).
• Optional Life insurance and Dependent Life
  insurance continue. Optional Life Insurance
  ceases at age 70.
• Dental DHMO is not available to retirees only
  the Dental PPO plan.
• Flexible Spending accounts are also not available
  to retirees

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How Much Will I Pay For My Insurance?

• Your premium cost share with the County depends
  on your date of hire
• If you were hired on or after January 1, 1987,
  you will automatically receive the lifetime cost
  sharing with the County. The percentage you pay
  will depend upon your actual length of County
  service. For each whole year between 5 (50) and
  15 (30) years, the Countys share increases 2
  up to a maximum of 70.
• If you were hired before January 1, 1987, you
  have the choice of continuing the same cost share
  you pay now (80 County 20 you) for the length
  of time you were eligible for group insurance.
• NOTE The premium cost share election is a
  one-time irrevocable choice at retirement.

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Can My Spouse Keep My Insurance Upon My Death?

• YES! Your spouse will be offered the option to
  continue group insurance for life.
• The cost share percentage that you choose when
  you retire remains the same for your surviving
  spouse.

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Retiree Health Insurance and Medicare

• Part A of Medicare is mandatory covers
  hospitalization benefits. (effective the month in
  which you turn 65).
• Part B of Medicare is optional covers
  physicians benefits. However, when you reach
  age 65, Carefirst BCBS and United Healthcare will
  process your claims as if you had elected Part B,
  whether you elect Part B or not.
• You cannot continue in the Kaiser plan unless you
  elect Part B and enroll in the Kaiser Medicare
  Plus Plan.
• After you apply for Medicare, Social Security
  will send you an enrollment card approximately 3
  months before your 65th birthday. If you do
  nothing, you will be enrolled in Parts A and B.
  Only return the enrollment card if you do not
  want Part B.

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Life Insurance

• As an active employee, the face value of your
  life insurance policy is two times your annual
  salary if you are full-time and one time your
  annualized salary if you are part-time or
  non-represented.
• The face value at retirement is calculated
• Active life ins. amount x years of service (up
  to 20 years) x 5 (20 x 5 100 of active life
  amount)
• 183,000 x 20 x 5 183,000.00
• Years of service is the number of years and
  months that you were eligible for group insurance
  coverage NOT credited service used for your
  retirement calculation

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Life Insurance

• Here is an example of a life insurance reduction
  schedule
• 8/1/11 183,000
• 8/1/16 164,700
• 8/1/17 146,400
• 8/1/18 128,100
• 3/1/19 45,750
• 65th birthday is 3/1/19 so reduction to 25
  would occur on 65th birthday.

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Montgomery County DeferredCompensation Plan

• Administered through ING or Hartford
• Allows additional savings on a pre tax basis
• Offers numerous investment options
• Enroll at any time
• Contributions may be stopped at any time
• Contributions may be changed at anytime
• Investment choices may be changed at any time

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Montgomery County Deferred Compensation Plan

• Payroll deduction with pre tax dollars of
  eligible compensation or IRS limit
• 16,500 per year
• Catch up provisions at age 50 -5,500 per year
• Last three years also offers additional catch up
  provisions

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Montgomery County Deferred Compensation Plan

• Eligible to rollover to IRA
• Beneficiary must be named
• Continues to accumulate tax deferred
• Distributions mandatory at age 70 ½ based on IRS
  life expectancy tables
• Fully vested contributions
• Taxed as ordinary income at distribution
• No penalty at distribution regardless of age

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Annual Compensatory Leave Payout

• Paid approximately 4 6 weeks after date of
  retirement.
• Two options on payout
• Leave paid to you minus approx. 42 taxes
  (Federal, State, FICA and FICA Medicare).
• Leave payout to be a contribution in to your
  Deferred Compensation account. You need to
  contact Hartford or ING to change your 457
  contribution for the 7/2/09 paycheck.
  Contribution subject to annual 457 maximums

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Required Retirement Documentation

• We will need to verify your date of birth.
  Appropriate documentation is birth or baptismal
  certificate, passport, or military records.
• If you choose a payment option that provides a
  lifetime benefit to your spouse or domestic
  partner, we will need proof of age for that
  individual. We will also need proof of marriage
  for your spouse or a registered affidavit for
  your domestic partner.

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Planning Ahead...

• One of the most important decisions you will
  need to make at retirement is the irrevocable
  choice of a pension payment option. The role of
  the Benefits team is to explain your options, not
  to provide selection advice.
• You are strongly encouraged to seek the advice
  of a financial counselor to guide you through
  this process, with emphasis on your personal and
  your family situation. Listed below are a few
  reasons why you may want to seek both
  professional tax and financial advice
• review of total financial resources
• review of current and future expenses
• review of appropriate tax withholdings
• review of all insurances life policies,
  long-term care, disability, etc.
• review of estate planning