TACOMA EMPLOYES' RETIREMENT SYSTEM

Orientation OutlineOrientation Outline

I Sources of Retirement Income

II How the Plan Is Funded and

Managed

III Service Retirement Benefits

IV Benefits Other Than Service

Retirement

V Recent Plan Enhancements

VI Calculating Your Retirement

Benefit

VII Deferred Compensation

Sources of Retirement IncomeSources of Retirement Income

• RETIREMENT SYSTEM ANNUITY

• SOCIAL SECURITY

• DEFERRED COMPENSATION

• PERSONAL SAVINGS & INVESTMENTS

What is the Tacoma Employes’ What is the Tacoma Employes’ Retirement System?Retirement System?

The Tacoma Employes’ Retirement System is a defined benefit plan funded by employee contributions and employer contributions which are tax deferred, as well as investment return.

Plan FundingPlan Funding

• Employer Contributions - 7.56% of salary (effective 1/1/01)

• Employee Contributions - 6.44% of salary (effective 1/1/01)

• Investment Earnings

Who is responsible for the Who is responsible for the administration of the administration of the

Retirement Fund?Retirement Fund?

The Retirement Office is responsible for the

administration of the Retirement

Fund as directed by the Retirement

Board.

Who are the members of the Who are the members of the Board of Administration?Board of Administration?

William Baarsma Mayor and ChairmanSteve Marcotte Director of Finance

Secretary of the BoardDiane Supler Designee of the City ManagerDoug Read Designee of the Public Utilities

DirectorDiane Wetzel Employee RepresentativeMichael CrispEmployee RepresentativeKen Turner Employee RepresentativeDavid Peterson Retired RepresentativeChris Webster Citizen Representative

When does the Retirement When does the Retirement Board meet?Board meet?

The Board of Administration conducts its monthly Retirement Board meetings on the second Thursday of the month. These Retirement Board meetings are held at 2:00 p.m. in the Retirement Office Conference Room 1544 on the 15th Floor of the Tacoma Municipal Building and are open to the public.

Web Sites• Located at

http://www.cityoftacoma.org/52retirement on the internet and at http://www/cityweb/retirement on the intranet are the Retirement Booklet; Commonly Asked Retirement Questions; Standard Forms for both Active & Retired Members; Annual Report/Summary Annual Report; and the Retirement Board packets, including the minutes and agendas.

Service Retirement EligibilityService Retirement Eligibility• AGE 60, ANY NUMBER OF YEARS OF

SERVICE

• AGE 55 OR OLDER, 10 YEARS OF SERVICE

• AGE 40 OR OLDER, 20 YEARS OF SERVICE

• ANY AGE, 30 YEARS OF SERVICE

• RULE OF 80 (AGE & YEARS OF SERVICE = 80)

Determining Benefit AmountDetermining Benefit Amount• AVERAGE SALARY

• YEARS OF SERVICE

• UNREDUCED BENEFIT -

- 30 YEARS OF SERVICE

- AGE 60

- RULE OF 80

(AGE & SERVICE = 80 or MORE)

• REDUCED BENEFIT

RP-1

Age Creditable Service30 29 28 27 26 25 24 23 22 21 20 19-10 9-1

40 0.759 0.698 0.642 0.591 0.544 NA NA41 0.897 0.825 0.759 0.698 0.642 0.591 NA NA42 1.060 0.975 0.897 0.825 0.759 0.698 0.642 NA NA43 1.252 1.152 1.060 0.975 0.897 0.825 0.759 0.698 NA NA44 1.417 1.332 1.252 1.152 1.060 0.975 0.897 0.825 0.759 NA NA45 1.603 1.507 1.417 1.332 1.252 1.152 1.060 0.975 0.897 0.825 NA NA46 2.000 1.706 1.603 1.507 1.417 1.332 1.252 1.152 1.060 0.975 0.897 NA NA47 2.000 1.815 1.706 1.603 1.507 1.417 1.332 1.252 1.152 1.060 0.975 NA NA48 2.000 1.871 1.815 1.706 1.603 1.507 1.417 1.332 1.252 1.152 1.060 NA NA49 2.000 1.929 1.871 1.815 1.706 1.603 1.507 1.417 1.332 1.252 1.152 NA NA50 2.000 1.964 1.929 1.871 1.815 1.706 1.603 1.507 1.417 1.332 1.252 NA NA51 2.000 2.000 1.964 1.929 1.871 1.815 1.706 1.603 1.507 1.417 1.332 NA NA52 2.000 2.000 2.000 1.964 1.929 1.871 1.815 1.706 1.603 1.507 1.417 NA NA53 2.000 2.000 2.000 2.000 1.964 1.929 1.871 1.815 1.706 1.603 1.507 NA NA54 2.000 2.000 2.000 2.000 2.000 1.964 1.929 1.871 1.815 1.706 1.603 NA NA55 2.000 2.000 2.000 2.000 2.000 2.000 1.964 1.929 1.871 1.815 1.706 1.706 NA56 2.000 2.000 2.000 2.000 2.000 2.000 2.000 1.964 1.929 1.871 1.815 1.815 NA57 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 1.964 1.929 1.871 1.871 NA58 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 1.964 1.929 1.929 NA59 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 1.964 1.964 NA60 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000

PortabilityPortability• SYSTEMS INCLUDED:

TRS PERS SERS SCERS WSPRS LEOFF II SEATTLE, SPOKANE & TACOMA

• SERVICE REQUIREMENT (Must be met for each system)

• AVERAGE FINAL SALARY (Highest base salary will be used

for all calculations)

• 2/1/97 Years of Service underPortability are used for purposes of

eligibility and benefit formula

Disability BenefitsDisability Benefits1.5% of AVERAGE SALARY X

YEARS OF SERVICE

MINIMUM BENEFIT = $1OO/MONTH

DISABILITY INSURANCE AVAILABLE THROUGH DISABILITY INSURANCE AVAILABLE THROUGH HUMAN RESOURCESHUMAN RESOURCES

SERVICE ALLOWANCE OPTIONS1/1/2001

Death BenefitDeath BenefitLUMP SUM OF CONTRIBUTIONS PLUS INTEREST (less than 5 years)

or LUMP SUM & INTEREST OR

MONTHLY PAYMENT FOR 10 YEARS HAVING 2 X VALUE OF LUMP SUM

(5 years or more of service)or

IF ELIGIBLE FOR SERVICE RETIREMENT AND SPOUSE AS BENEFICIARY,

RETIREMENT BENEFIT OVER SPOUSES LIFE EQUAL TO OPTION E

orDEFERRED DEATH BENEFIT

(5 years or more of service)

(Continued)(Continued)

• Effective January 1, 2001, upon the death of any member who has not retired but who, as of the date of his or her death, had five years’ creditable service, in lieu of the death benefit provided,the spouse may elect to defer payment of a death benefit, leaving the member’s accumulated contributions with interest, not including contributions on overtime with interest, in the Retirement Fund until a deferral date.

Termination of EmploymentTermination of EmploymentLUMP SUM EQUAL TO

REFUND OF CONTRIBUTIONS

PLUS INTEREST (less than 5 years)

or

LUMP SUM EQUAL TO

150% OF CONTRIBUTIONS

PLUS INTEREST (5 years or more)

Both are taxable unless rolled directly to an Both are taxable unless rolled directly to an Individual Retirement Account.Individual Retirement Account.

Benefit ImprovementsBenefit Improvements• Effective January 1, 1997:

– The employees’ contribution rate was reduced from 8.89% to 7.68% and the employer’s contribution rate was reduced from 10.44% to 9.02%.

– Employees terminating from City service with at least 5 years of membership service may receive a refund equal to one and one-half times their accumulated contributions and interest (including overtime contributions and interest).

(Continued)(Continued)

– Members retiring from City service are entitled to a service pension equal to not less than 200% of the member’s contribution plus interest. This benefit is paid in a normal annuity form which will be the actuarial equivalent of the single sum.

– Maintain a minimum 50% of purchasing

power for Cost of Living Adjustments for retirees.

(Continued)(Continued)

– Increase the Cost of Living Adjustment for retirees from 1.75% to 2% (effective 1/1/97) to 2.125% (effective 1/1/01).

– Improved early retirement benefits. The revised early retirement provisions allow employees to be eligible for early retirement sooner (age 55 rather than 57, with 10 years of service). Additionally, an individual may reach full “service retirement” eligibility sooner.

Benefit ImprovementsBenefit Improvements

• Effective January 1, 2001:

– The Annual July Cost of Living Adjustment for retirees increased to 2.125%.

(Continued)(Continued)

– Employees retiring from City service with at least 5 years of membership service may receive a refund equal to one and one-half times their overtime contributions and interest.

– After January 1, 2001, a member who retires under a disability retirement may elect optional retirement allowances..

(Continued)(Continued)

– The employees’ contribution rate was reduced from 7.68% to 6.44% and the employer’s contribution rate was reduced from 9.02% to 7.56%.

Calculating Your Retirement Calculating Your Retirement BenefitBenefit

• Retirement Options

• Pension Calculator

• Purchase of Time

• Portability

Unmodified OptionUnmodified Option The maximum allowance you can receive is the

unmodified monthly form of payment.

The Unmodified Option provides a guaranteed pension for life, but makes no provision for a beneficiary after your death.

Option AOption A Provides that at your death your estate or

beneficiary will receive a lump sum refund of the difference between your total accumulated contributions and interest at the date of retirement and the annuity payments you have received since retirement.

Annuity payment refers to that portion of the retirement benefit that is considered payable from the member’s accumulated contributions.

Option BOption B

Provides that at your death your estate or beneficiary will continue to receive monthly annuity payments until the total of them equals your total accumulated contributions and interest at the date of retirement.

Annuity payment refers to that portion of the retirement benefit that is considered payable from the member’s accumulated contributions.

Option COption C

Provides for the payment of a retirement allowance for a guaranteed period of years. If you live beyond the guaranteed period, the allowance is continued to you for life, but if you die before the expiration of the period, the allowance will be continued to your estate or beneficiary for the balance of the time. You have an option of five or ten years for the guaranteed period.

Option DOption D Provides a modified monthly allowance for life

and after your death your spouse at the time of retirement will receive one-half of this amount each month for life. *

Option EOption E Provides a modified monthly allowance for life

and after your death your spouse at the time of retirement will receive the same monthly allowance for life. *

* See Pop-up Provision.

Option FOption F

If a member at the time of retirement has no spouse, a modified monthly allowance for life is provided and after death, the beneficiary will receive one-half of this amount each month for life or will receive the same monthly allowance for life.*

*See Pop-up Provision.

*Pop-Up Provision*Pop-Up Provision

Provides for those members retiring on or after January 1, 1999, and selecting a joint and survivor Option D or E, or Option F, to have a pop-up when the spouse of the member (Option D or E) or the named beneficiary (Option F) predeceases the member subsequent to the members retirement. The benefit is increased to the Unmodified retirement allowance calculated under Sections 1.30.580 through 1.30.620.

Social Security ModificationSocial Security Modification

• A member retiring from service, who has not reached the age of 62, may elect to receive an additional pension allowance that will continue until he or she reaches the age of 62.

• At age 62, the member’s pension will be permanently reduced by an amount that is the actuarial equivalent of the additional pension paid the member.

• If the member dies leaving a beneficiary entitled to an allowance, the allowance shall be the same as the beneficiary would have received had the member not selected this modification

Pension CalculatorPension CalculatorThe pension calculator will allow you to calculate

retirement benefits or allow you to calculate the purchase of time.

The pension calculator is located at:

• http://www.cityoftacoma.org/52retirement on the internet.

• http://www/cityweb/retirement on the intranet.

Purchase of TimePurchase of TimeIndividuals may purchase up to 5 years of service

effective January 1, 2002 and may also transfer money from a 457 or 403 (b).

Effective September 1, 2002, repayment may also be made by a direct rollover to the Retirement Fund from an IRA qualified under Internal Revenue

Code Section 408.

Purchase of time must be made at the time of retirement or to become eligible for retirement.

John Smith

AGE 46 BENEFIT ESTIMATE FOR

Factor Years Percentage 2 Yr Salary Benefit

1.252% x = 31.30% x 4,162.08$ = 1,302.73$ per month, guaranteed for life

for the Unmodif ied Option.

OPTIONAL ALLOWANCES: A 1,297$ Estate receives lump sum benefit: balance of accumulated contributions

B 1,298$ Estate receives monthly annuity payments of balance of accumulated contributions

C-5 1,301$ Provides for payment of retirement allow ance for a guaranteed period of five years - live beyond

guarantee and pmts continue; die before guarantee and payments continue for balance of period.

C-10 1,298$ Provides for payment of retirement allow ance for a guaranteed period of ten years - live beyond

guarantee and pmts continue; die before guarantee and payments continue for balance of period.

D 1,159$ Provides modif ied monthly allow ance for life and after your death, your spouse at time

of retirement w ill receive one-half of the same monthly allowance for life

(Benefit w ill 'pop up' to Unmodified if spouse pre-deceases retiree.)

E 1,023$ Provides modif ied monthly allow ance for life and after your death, your spouse at time

of retirement w ill receive the same monthly allowance for life

Footnotes: (Please scroll down to read.) (Benefit w ill 'pop up' to Unmodified if spouse pre-deceases retiree.)

If you are not currently retirement eligible, but wish to calculate a 'Purchase of Time' amount that willmake you eligible, this Benefit screen will not calculate; however, the 'Purchase of Time' screen will calculate.

This estimate is approximate and does not include all minimum guaranteed benefits. Ages are calculated to whole years only and pre-1983 factors have not been used for calculating Option D and E.

Spouse age differences greater than 14 years are not correctly reflected in Options D & E.

Options A & B are calculated based on estimated employee contributions and are subject to change based on actualemployee contribution value at retirement.

This program rounds all ages to nearest whole number. (55-1/2 will be 56) Final calculations done by RetirementOffice at the time of retirement will use 1/4 year calculations.

Estimates for retirement dates that are less than 1 year apart can show decreasing benefits for the Optional Allowances for the later retirement date due to the way actuarial reduction factors work. The older you are at retirement, the greater the reduction, and the less the pension amount. In an actual retirement calculation, this slight decrease will usually be offset by other factors, such as increased salary and/or years of service.

In no case does the Unmodified amount ever decrease with a later retirement date. In the rare case where the OptionalAllowances do decrease, it is comparable to an insurance policy where it costs more to buy insurance, the older you are.

This program does not calculate the Twice the Value Benefit but does calculate the service retirement; however, you will receive

whichever is higher.

25

February 1, 2006

PORTABILITY with 2 x Value and no Pro-Ration (If Combined 30 Years or > may = Proration)

Member Information

PORTABILITY with 2 x Value and no Pro-Ration (If Combined 30 Years or > may = Proration)

Calculation

PORTABILITY with 2 x Value and no Pro-Ration (If Combined 30 Years or > may = Proration)

Options

Deferred CompensationDeferred Compensation• Tax-deferred – current tax deduction for

contribution and tax-deferred growth

• Contribution Limits - $13,000 for 2004; Catch up for those over 50 - $3,000; cannot be used in the same as 457 Catch-up which is $26,000 for 2004. Limits will increase over next two years.

• Several investment options

• Upon separation from service, funds can remain in deferred compensation or transferred to another employer-sponsored salary deferral plan (401(k) or deferred comp) and an IRA, without income tax.

• Funds can be withdrawn at separation from service without tax penalty. Ordinary income tax will be paid whenever funds are withdrawn.