It’s not uncommon for a member to work for two or three different LAGERS employers over their career. And while every employer uses the same formula to calculate retirement benefits, each employer makes a unique election of benefits that can affect a member’s benefit calculation and retirement eligibility. If you have worked for more than one LAGERS employer, or even for two different departments within the same employer, here are a couple of important items to keep in mind when it comes to calculating your benefit.
How is my benefit calculated?
If you have worked for multiple LAGERS employers, chances are each employer had a different benefit program (multiplier). When your employers have different programs, it is important to keep in mind that the service you earn at each employer is calculated at whatever benefit program that employer had elected while you were employed. For example, if you work 5 years at City A who has the L-1 program (1.00% multiplier) and 10 years at City B who has the L-7 program (1.50% multiplier), LAGERS will perform two separate benefit calculations that look like this:
City A Benefit: 1.00% x 5 years x Your Final Average Salary, PLUS
City B Benefit: 1.50% x 10 years x Your Final Average Salary
As far as our retirees are concerned, they receive one payment from LAGERS, but the calculation is separate. I sometimes hear of members who think that they can move to an employer with a higher multiplier for the last 6 months of their career, and it will ‘upgrade’ all the service at their former employer, which again is not the case.
When it comes to your Final Average Salary, however, salary changes at one employer may positively or negatively impact your final benefit calculation at the other. Here’s why: unlike the benefit program, LAGERS does not separate salary by employer. Rather we take the highest consecutive 36 or 60 months from your last 10 years of wages to use in each of your benefit calculations. Take our previous example: the member worked a total of 15 years between two LAGERS employers, but the last 10 years were exclusively at Employer B. This means that in this case, we are only looking at wages from employer B for both benefit calculations. If employer A had a 5 years final average and employer B had a 3 year final average, we simply take both a 5 and 3 year average from the same last 10 years and plug it into each respective calculation.
For most, this works well, because wages from employment that took place 15, 20, or 25 years ago are typically much lower than more recent wages. However, if you move to an employer and take a pay cut, keep in mind that if you stay long enough at that employer, it may impact that salary calculation at BOTH employers.
I took a refund, lump sum, or had a break in service, what now?
On occasion, I’ll have a member come up during a seminar and wonder why one of their stints of LAGERS employment isn’t showing up on their benefit estimate. Keep in mind that if when you left one of your LAGERS employers and choose to take a refund of member contributions, or had more than a 10 year break in LAGERS service and were not vested, then that service may have been forfeited. This service may be eligible for purchase or possibly reinstatement, so make sure to call our office if you have questions about which option(s) are available to you. If you took a lump sum payout in the past, however, you have already received a benefit for that service and nothing else would be payable in the future for that period of service.
When can I draw what?
Once you are ready to retire, having more than one LAGERS benefit can also have impact on your retirement eligibility. For example, if you worked for two employers, one with Regular Retirement Age and one with the Rule of 80, you can use all of your LAGERS service from both employers to count toward eligibility for the Rule of 80, but you can only retire with unreduced benefits at your Rule of 80 age from the one employer with that benefit election. You would have the option to draw your second account with an early retirement reduction, or you can delay your benefit from the Regular Retirement employer until you attain your full retirement age.
The same would be true if you worked for two separate departments, either at the same or a different employer, where your retirement age is different. For example; you worked for both a police department (with a normal retirement age of 55) and later a general department (with a normal retirement age of 60). If you have turned 55 and are no longer working for a LAGERS employer, you can begin drawing an unreduced benefit from your police service and have the option to either take an early, reduced benefit from your general department service, or delay that benefit until age 60. If, however, you have police or fire service and are still working as a general employee, you may not begin drawing your police or fire department time until you have completely stopped working.
In no circumstance can a member begin to draw one benefit while they are still actively employed with another LAGERS employer. If, however, you have already retired from your first employer and are drawing a benefit, you may have options if you desire to return to either full or part-time employment. Check out our blog on working after retirement to learn more!
Working for more than one LAGERS employer can add an extra layer of things to think about when it comes to your retirement benefit. If you ever have specific questions about your individual situation, please do not hesitate to call your benefit specialist at 1-800-447-4334. Taking time to review your accounts with LAGERS staff is one of the best ways to make sure you are maximizing your hard earned benefit!