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WEAC put this FAQ (frequently asked questions) document together to help answer some of the more common inquiries about the new pension bill.
A: For most general employees (almost all WEAC members) the formula factor will increase from 1.6% to 1.765% for all service prior to January 1, 2000. This will result in an increase in initial pension calculation for that service of over 10%. For service on or after January 1, 2000, the formula factor will revert to 1.6%. You will not be hurt by inflation if you continue working. Let's say you will have worked 20 years at the end of this year and that you will work for another 10 years. At the end of your career, Employee Trust Funds (ETF) staff will determine your final average salary and then credit you with 20 years at the higher rate and 10 years at the lower rate. Of course, it's possible that future legislation will increase the formula factor for service beginning January 1, 2000. You must be a participant, not a retiree, on January 1, 2000 to be eligible for the formula increase.
A: All participants hired on or after January 1, 1982, have had their Money Purchase accounts fixed at 5% per year. Act 11 repeals this inequity. Actual earnings credited to individual accounts for participants hired prior to January 1982 far exceeded the cap. This resulted in higher money purchase benefits for participants hired prior to 1982. Now, all participants will be treated the same, regardless of their hiring date.
A: The Variable Fund will now reopen for all participants. The Variable Fund has been closed to new participants since April 30, 1980. All participants will have the opportunity to allocate up to 50% of future contributions to the Variable Fund. Elections made by individuals to designate future contributions to the Variable Fund become effective the following calendar year. Individuals should contact the Department of Employee Trust Funds for information about signing up for the Variable Fund option..
A: Act 11 eliminates the requirement that a beneficiary must be a spouse or dependent child in order to receive a full death benefit. From the effective date of Act 11, any beneficiary ("natural person or a trust in which a natural person has a beneficial interest") will receive the full death benefit. The death benefit is determined slightly differently for those participants over or under age 55. For those over age 55 at the time of death, their beneficiary will receive the sum of the additional and employe required contributions, the employer required contributions, plus all accumulated interest. For those participants who die under age 55 their beneficiary will receive the sum of the employe additional contribution and twice the employe required contributions, plus all interest earned.
A: No. In fact, the employers in the WRS will receive about $1.2 billion as their share of Act 11. This could result in tax reductions.
A: People who have already retired will benefit from an enhanced dividend adjustment. The Department of Employee Trust Funds Board (ETF) makes a yearly adjustment to dividends. Retirees will receive their normal adjustment plus their 40% share of the transfer of dollars. The media has speculated that this could mean as much as a 15% dividend adjustment for retirees next year.
Posted October 14, 1999; Updated June 12, 2001