Pension (Retirement) Formula

In order to understand the benefits payable by the Retirement System, three important terms must be understood first:

Final Average Compensation (FAC): One-half the sum of (a) compensation for the two consecutive years of Creditable Service with the highest compensation and (b) the value of 25% of sick leave balance at time of retirement.

Sick leave balances for pension calculation purposes may not exceed a Member's sick leave balance as of the pay period ending July 17, 2010 (less time used). Persons who become Members after July 17,2010 shall not be entitled to use sick leave balances in their pension benefit calculations.

Creditable Service: Number of years and completed months of eligible service during which the member receives compensation, beginning on the first day of the month following employment. Creditable Service may include service before April 1, 1960 for all employed on that date. Various ordinances apply if a member has more than one period of employment.

Sick leave balance (in full months only) at time of retirement, not used in calculating final average compensation or paid by the Employer, is converted to additional Creditable Service.

The member may elect to use his/her sick leave balance to qualify for retirement.

Sick leave balances for pension calculation purposes may not exceed a Member's sick leave balance as of the pay period ending July 17, 2010 (less time used). Persons who become Members after July 17,2010 shall not be entitled to use sick leave balances in their pension benefit calculations.

Benefit Compensation Base (BCB): Amount of annual compensation based on the current Social Security Act. This is a means acceptable to the government for properly coordinating benefits of the System with benefits under Social Security. Under the benefit formula, the Final Average Compensation is divided between the part below and that part in excess of the BCB. The amount of the BCB depends upon the member's year of birth and the year in which he/she retires or terminates employment.

Pension is computed in the following manner:

a) 1.30% of Final Average Compensation up to the Benefit Compensation Base;

b) 2.05% of any Final Average Compensation in excess of the Benefit Compensation Base.

The sum of (a) and (b) is multiplied by the years of Creditable Service, and divided by 12 to determine the monthly pension payable during your lifetime.

The following examples are computed using $43,992 as a Benefit Compensation Base, which is in effect for members reaching normal retirement age during calendar year 2005.

EXAMPLE A: Member A worked from May 7, 1974 to June 30, 2005, thus having 31 years and 1 month of Creditable Service (31.08 years). His Final Average Compensation (FAC) was $35,000.

EXAMPLE B: Member B worked from January 20, 1974 to April 30, 2005, thus having 31 years and 3 months of Creditable Service (31.25). Her Final Average Compensation (FAC) was $45,000.

Example

Pension calculator example

	Member A	Member B
1. FAC up to Benefit Compensation Base	$35,000.00	$43,992.00
2. Multiply by 1.30%	x .013	x .013
3. Total	455.00	571.90
4. FAC that is above Benefit Compensation Base	None	1,008.00
5. Multiply by 2.05%	x .0205	x .0205
6. Total	None	20.66
7. Total Lines 3 and 6	455.00	592.56
8. Multiply by years of Creditable Service	x 31.08	x 31.25
9. Annual Pension	$14,141.40	$18,517.50
10.Monthly Pension (Line 9 divided by 12)	$1,178.45	$1,543.13

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