Atlanta Pension Reform Presentation 2011

1. City of Atlanta Pension Reform Presentation August 2011

2. Purpose • Familiarize employees with the changes made to the City of Atlanta retirement system • Explain how the changes impact each employee • Update employeeson the timeline of changes and available resources • Respect your time by keeping the presentation short. This presentation is an overview. • Answer employee questions

3. Agenda • Why pension reform? • Who is impacted? • What are the changes? • When will the changes take place? • What are the next steps?

4. Why Pension Reform? • Reduce the City’s annual pension costs • Diversify and balance the City’s and the employee’s risk • Be competitive with other local governments • Retain existing retirement benefits for current employees • Encourage saving for healthy retirement • “If your money’s not right, then you’re not right!”

5. Definitions • Pension/Defined Benefit Plan (DB) • Employee pays percentage of salary into DB Plan each pay period • City pays pension benefit to employee from start of retirement through end of life, and to surviving qualified beneficiary (if any) • Benefit calculated based on set formula • Defined Contribution Plan (DC) • Employee pays percentage of salary into DC Plan each pay period • City pays percentage into employee DC Plan each pay period • Employee determines how to invest DC funds • Retiree receives benefits until DC funds depleted

6. No Impact No change

7. Current Employees* in DC Plan* Throughout this presentation, “Current Employees” are employees hired before 9/1/11 No Change Employee contributes 6% of Salary into DC Plan Retirement Account Employer contributes 6% of salary into DC Plan Retirement Account DC Retirement Acct is an investment acct. Employee directs how money is invested. Value at retirement is based on amount invested and performance of investment.

8. Current Employees in DB Plan Employees may remain in current DB Plan or switch to DB Hybrid Plan City will hold election prior to 11/1/11 Employee will be unable to reverse decision

9. Current Employees in DB Plan If employee chooses current plan Contribution increases by 5% of Salary No change in benefit

10. Current Employees in DB Plan If employee switches to DB Hybrid Plan Benefits accrued prior to 11/1/11 remain the same Beginning 11/1/11, Retirement Plan has DB component and DC component

11. How the DB pension benefit is calculated Your Annual Pension Amount will be a percentage of your annual salary. The percentage is based on your years of service with the City and a “multiplier”. The multiplier is set in your pension plan. It is either 2%, 2.5%, or 3%. The Pension Benefit Formula* is: Annual Compensation x (Years of Service x Multiplier) * The Pension Benefit Formula does not include adjustments such as age penalty and vesting percentage.

12. How the DB pension benefit is calculated Your Annual Pension Amount will be a percentage of your annual salary. The percentage is based on your years of service with the City and a “multiplier”. The multiplier is set in your pension plan. It is either 2%, 2.5%, or 3%. The Pension Benefit Formula is: Annual Compensation x (Years of Service x Multiplier) Annual Compensation X (Years of Service (YOS) X Multiplier) $25,000 X 30 X 2.5% $25,000 X 75% $18,750

13. Current Employees in DB Plan Contributions Before and After 11/1/11 DB Plan Starting Nov. 2011 Effective 11/1/11 for employees hired prior to 9/1/11, unless employee opts into DB Hybrid Plan DB Hybrid Plan Effective 11/1/11 DB Plan Before Nov. 2011 Current Contributions through October 31, 2011 DB Plan Component Employee Contribution 8% of Salary _ _ _ _ _ _ _ _ _ _ _ _ _ _ DC Plan Component Employee Contribution 3.75% of salary mandatory 4.25% of salary voluntary* City Contribution 100% match of Employee contribution Not to exceed 8% total _ _ _ _ _ _ _ _ _ _ _ _ _ _ Total Mandatory Employee ContributionDB Contribution: 8% salary Plus Min. DC Contrib.: 3.75% salary Total Contribution= 11.75% salary *Employee may make additional voluntary contributions w/o City match up to the maximum amt. allowed by IRS Employee Contribution Current 7% of salary with no beneficiary 8% of salary with designated beneficiary Employee Contribution Increases by 5% Salary on 11/1/11 12% of salary with no beneficiary 13% of salary with designated beneficiary

14. All Employees May Make Voluntary Contributions to a Retirement Account Employee decides contribution amount and whether to use pre-tax or post-tax dollars. Employee may make voluntary contributions up to the maximum amount allowed by the IRS

15. Retirement Plan for Employees Hired on or After September 1, 2011 (“New Employees”) DC Plan All employees hired at PG19 and above except for Sworn Police and Fire personnel

16. Future Employees in DC Plan Identical to current DC Plan Employee contributes 6% of Salary into DC Plan Retirement Account Employer contributes 6% of salary into DC Plan Retirement Account

17. Future Employees in Combination Plan Combination Plan DB Plan Component DC Plan Component Employee Contribution 8% of Salary Employee Contribution 3.75% of Salary Mandatory 4.25% of Salary Voluntary* City Contribution 100% match of Employee Contribution Not to exceed 8% total Total Mandatory Employee DB + DC Contribution is 11.75% of salary * Employee may make additional voluntary contributions (above 4.25% of salary) without City match, up to the maximum amount allowed by the IRS

18. Details of Current DB Plan, and DB Portion of Hybrid Plan and Combination Plan Your Annual Pension Amount will be a percentage of your annual salary. The Pension Benefit Formula is: Annual Compensation x (Years of Service x Multiplier)

19. Comparison of Current DB Plan, and DB Portion of Hybrid Plan and Combination Plan Your Annual Pension Amount will be a percentage of your annual salary. The Pension Benefit Formula is: Annual Compensation x (Years of Service x Multiplier)

20. Details of Current DB Plan, and DB Portion of Hybrid Plan and Combination Plan

21. Key Factors • Shared risk: If City DB Plan contribution exceeds a set amount, the City will determine a method for payment of the excess, which could include increasing an employee’s DB contribution by no more than 5% of salary • Shared benefit: If City’s current pension debt is reduced to a set amount, the City may reduce an employee’s DB contribution • Employees who separate from City employment and are later reemployed will be required to join the DC Plan or the Combination Plan depending upon type of employment and pay grade at the time of rehire

22. Impact of Increased Contribution for DB Participants Currently Paying 8% of Salary Impact of 5% of salary increase on bi-weekly DB Plan pre-tax contribution amount

23. Example of Proposed Changes to Bi-weekly Deduction for Current DB Participants *Employee without designated beneficiary will have 7% contribution ** Employee without designated beneficiary will have 12% contribution

24. Your Next Steps • DC Plan members should consider whether to make voluntary contributions, and whether to make them pre-tax or post-tax • DB Plan members should meet with Financial Consultants provided by the City at no cost to employees • Determine impact of increased DB contribution • Assess costs and benefits of switching to DB Hybrid Plan • Consider whether to make voluntary contributions and whether to make them pre-tax or post-tax • DB Plan members should look for information about the October election to designate staying in the current DB Plan or switching to the DB Hybrid Plan

25. Questions For questions send email to pension.questions@atlantaga.gov ; or Contact Sherri Dickerson, Department of Human Resources, at 404.330.6653.