Association of Commuter Rail Employees
                                  MTA Defined Benefit Pension Q&A
 
 

 
How do I calculate my Final Average Salary under the MTA Defined Benefit Pension Plan and does it pay to earn as much as I can in my last year?
 
Income driven pensions like ours are a great motivation to work more. Pensions are calculated using the earnings of the three highest consecutive years in the last 10 years of employment with Metro North. In addition, the two years prior to your three highest years come into play. The reason for that is that there is a look back provision that limits you to increasing your pensionable earnings a maximum of 10% from one year to the next. 
 
As an example:  An employee retiring at the end of 2010 wants to earn as much as he can in the last three years so as to increase his pension. Will all of the earnings will be considered pensionable?
 
To determine whether all the earnings in 2008, 2009 and 2010 are pensionable, you need to look at the earnings in 2006 and 2007.
 
Add 2006 & 2007 together. Divide by half then add 10%.
That total will be the maximum amount that is pensionable for 2008.
 
Add 2007 & 2008 together. Divide by half then add 10%.
That total will be the maximum amount that is pensionable for 2009.
 
Add 2008 & 2009 together. Divide by half then add 10%.
That total will be the maximum amount that is pensionable for 2010.
 
As you can see in the above example, five consecutive years must be looked at in determining your final average salary for pension purposes.

The 10% earnings limitation in our defined benefit plan is a mechanism designed to help maintain solvency in our pension fund. Inflated final year earnings have been a bane to pension plans throughout the nation. The formula for funding our pension is a complex actuarial calculation based on assumptions such as investment returns and employer/employee contributions. 
 
What will my family receive in the way of a death benefit if I should pass away?
 
The following is a more comprehensive and corrected answer to that contained in a recent newsletter:
 
This depends on your status, active or retired?

Active employees
receive an “ordinary death benefit” in the event of their death. The “ordinary death benefit” is calculated as follows: plan members with (1) year of completed service will receive an amount equal to the compensation received in the previous 12 months. Members with (2) years of completed service will receive the amount equal to the compensation received in the previous 12 months multiplied by (2). Members with (3) years or more of completed service will receive the amount equal to the compensation received in the previous 12 months multiplied by (3). In addition any contributions made by the member (3%, military time, non-vested time, etc) will be refunded with interest. This is not a life insurance policy! In the eyes of the IRS this is a taxable disbursement for your beneficiary with the exception of your spouse who has an exclusion from tax liability for the first $50,000 of the “ordinary death benefit”. The balance is taxed at the applicable rate. Beneficiaries have the option of rolling over the “ordinary death benefit” into an IRA or other qualified vehicle to defer taxes. If no election is made for non-taxable rollovers the benefit paid will be treated as a normal cash distribution and tax levied. Active members achieving age 61 will have their “ordinary death benefit” reduced by 4%, and each succeeding year by 4% with a limit of 40% reduction.

Retired employees
receive an “ordinary death benefit” calculated on a reducing scale in the event of their death. The first year of retirement the retiree’s beneficiary receives 50% of the “ordinary death benefit”. The second year, the beneficiary would receive 25% of the “ordinary death benefit”. Every year thereafter it is 10% of the “ordinary death benefit”. This is in addition to any elections the retiree may have made so as to allow for his pension to continue on to a beneficiary as outlined in the following question.
 
Will my beneficiary continue to receive my MTA Pension if I predecease them?

Upon retirement you will be asked whether you desire to protect your spouse or other beneficiary by having them continue to receive your pension if you predecease them. If you choose to do so, there will be a reduction in your monthly pension based on the age of your beneficiary and whether you desire to leave them 100% of your pension or a lesser amount. Upon retirement, these option will be explained to you in greater detail by our pension officers.                              

In the event you have any pension related questions please call ACRE Pension Officer Chris Faherty at 203.435.1036 or Local 9 Secretary Treasurer Joseph Lindenberg at 845.222.6384. 
 
 
 

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