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.
