What you may need to know
** There will be significant changes in the retirement laws for those who become members of a Retirement System on or after April 2, 2012.
** Please note: If you refund (withdraw) your account and return to service after April 2, 2012, you will fall under the new guidelines.
Below is a list of some of the changes. Click here for a link to an indepth list of more changes
- Increased minimum retirement age; (Group 1 cannot retire prior to attaining age 60)
- New age factors for calculating retirement allowances;
- The unavailablility of the G.L. c. 32, 10 Termination allowance;
- The applicability of G.L. c. 32 105 to elected officials;
- Five Year Average Annual Rate of Regular Compensation for calculating allowances rather than a three year average;
- Proration of benefits earned for service in different Group classifications;
- New contribution rates;
If you are employed by the City of Lawrence on a permanent basis and holding a position, which requires you to work a minimum of 20 hours per week (excluding teachers), you are eligible to become a member of the Lawrence Retirement System. According to the Massachusetts General Laws, Chapter 32 you must become a member of the system if you meet these eligibility requirements. Since the Lawrence Retirement System is governed by the provisions of M.G.L., Chapter 32, any changes in the plan must be made through the legislative process. Each employee is required to contribute to the retirement system a rate which is determined by statute. Rates are as follows
Employment began on or after July 1, 1996 - 9 % of regular compensation
Employment began between January 1, 1984 and July 1, 1996 - 8 % of regular compensation
Employment began between January 1, 1975 and December 31, 1983 - 7 % of regular compensation
Employment began prior to 1975 - 5 % of regular compensation
The law also mandates that for members whose employment commenced on or after January 1, 1979, an additional two percent of regular compensation will be withheld on compensation over $30,000. This two percent is in addition to the above set percent that is already being deducted from regular compensation.
Regular compensation is the portion of your salary that is subject to retirement contributions. Overtime, bonus pay, severance pay and payments made for unused sick time are not considered regular compensation, are not subject to retirement and cannot be used towards your three-year or five-year salary average for the purpose of determining your retirement allowance.
Once you begin contributing to the system, an Annuity Savings Account is established on your behalf. Your employer deducts your retirement contributions and forwards them to us. We then deposit your contributions into your Annuity Savings Account. Your contributions, plus any accumulated interest ( interest rate is determined by the Public Employee Retirement Administration Commission) , are credited directly to your account.
Each year in March we will issue a statement to all our active members that reflects the yearly and total contributions and interest credited to the account. We ask that all our members please keep us updated with their current addresses
As a full time employee, each month you work you are credited a month of service. If you are a part time employee, your time will be prorated accordingly. The only individuals who work less than full time, yet are given full time credit are teacher aide's. If you were a member of another retirement system subject to the provisions of M.G.L., Chapter 32, and you withdrew your retirement funds, it is possible to buy back your prior creditable service. Once supplied with payroll records. The Retirement Office will verify your prior service, then calculate the amount of your buyback. You must repay the amount withdrawn, plus interest, to the date of repayment. You may complete a buyback as a lump-sum payment or through payroll deduction over a five-year period. This service is then added to your account for retirement purposes. If you worked for a municipality yet did not contribute to their retirement system, upon furnishing proof of employment, showing length of service, and salary paid, the Retirement Office will calculate a buyback and request an acceptance of liability. Once received you may complete a buyback as a lump-sum payment or through payroll deduction over a five-year period. All requests can be made at the office or with a phone call to the office.
PENSION REFORM AND ITS EFFECT ON INTEREST - All re-payments (money previously refunded) after April 2, 2012 will be subject to 4% interest if paid by April 2, 2013. If a re-payment is extended beyond this time frame (not to exceed 5 years), it will be subject to 8% interest. All Make-up payments for service that one never paid into the system will be subject to 8% interest. All re-payments after April 2, 2013 will be subject to 8% interest.
Please note any new member that is a veteran may be eligible to do a veterans buyback .
The amount accrued in you annuity savings fund has no bearing on your future retirement allowance. This is determined by your age at the time of retirement, your amount of creditable service, your group classification and an average of your three highest years of *Regular Compensation, see calculating your retirement . In order to collect a retirement you must be either under age 55 (group 1)with a minimum of 20 years of creditable service or over age 55 with a minimum of 10 years of creditable service. If you began your membership into the retirement system after April 2, 2012, you must attain the age of 60 in order to be eligible to retire (group 1). The maximum percentage an individual could receive would be 80% of their highest three years of regular compensation. Or 5 years of regular compensation if membership occurs after April 2, 2012. The only overage on this would be if a member is a veteran.
The law determines your group classification based on your position and job description. When you retire, your group number determines which formula is used in the calculation of your retirement allowance. The Board assigns employees to a group as set forth in M.G.L., Chapter 32, Section 3:
Group 1 - General employees, including clerical and administrative workers, laborers and all others not otherwise classified. Most of Lawrence's employees are classified as Group 1.
Group 2 – licensed electricians (may be considered group 4)
Group 4 – Public safety workers such as Police Officers and Firefighters.
Please contact the office if you are unsure of what group you would be classified under.
At the time of retirement you will be offered three choices called “options” of which you must choose one. Using the formulation stated above, an estimated percentage is arrived at and this will be your option A amount.
Option A Election of Option A means that you will receive your full retirement allowance in monthly payments as long as you live. All allowance payments will cease upon your death and no benefits will be provided for your survivors.
Option B Option B provides you with a lifetime allowance which is 2% to 5% less per month than Option A. Your monthly allowance is spit between two amounts, a “pension” amount and a lesser amount called “an annuity”. When you retire, the total amount that you contributed while working is noted in an annuity reserve account and the “annuity” portion you receive each month is withdrawn from this amount. Upon your death, your surviving beneficiary of record will be paid the remaining balance of your accumulated total deductions from the annuity reserve account. It roughly takes 10 to 13 years to deplete this reserve account. Once there is a zero balance on the account, there is nothing given to a beneficiary if you die. Your retirement allowance is not reduced because of the depletion of your accumulated deductions.Under Option B, you may designate any person(s) or charity or institution as your beneficiary. You may, at any time after retirement, change your Option B beneficiary (but not your option selection).
Option C Option C is also known as the joint and last survivor allowance. Selecting this option means that the allowance payments that you would receive during your lifetime would be approximately 20% less than those you would receive under Option A. Upon your death, your designated beneficiary will be paid a monthly allowance for the remainder of his or her lifetime. That allowance will be equal to two-thirds of the allowance which was being paid to you at the time of your death. The monthly allowance you receive under Option C depends upon life expectancy factors for you and your designated beneficiary. You may name only one beneficiary under Option C. The eligible beneficiaries are limited to your spouse, your former spouse (provided he or she has not remarried at the time you designate him/her as your Option C beneficiary), your child, your parent, or your sibling. Once chosen, you may not change your Option C beneficiary after your retirement becomes effective. If yours pouse dies after receiving allowance payments under Option C e ach child would be eligible to receive an equal share of the allowance its parent/your spouse had been receiving. Payments would be made to the legal guardian of each child and would cease upon the child's 18th birthday
Please note, If you named your former spouse as your Option C beneficiary when you were married, your former spouse will continue to be your Option C beneficiary even if you are divorced after retirement.
Option C "Pop Up" If your allowance was as the result of an application filed on or after January 12, 1988 and your Option C beneficiary dies on or after that date and before you die, you will thereafter be paid the full retirement allowance you would have received had you elected Option A at the time your retirement allowance became effective. (This conversion is commonly referred to as the Option C “Pop-Up”.) Any cost-of-living increases that have been granted since your Option C retirement became effective will be reflected in your newly established Option A allowance. All payments will cease upon your death.
For retirees whose retirement became effective before January 12, 1988 and who chose Option C and who are predeceased by their beneficiaries , extension of the Option C “Pop-Up” benefit is determined by their respective retirement board's (and relevant “legislative body's”) acceptance of section 288 of Chapter 194 of the Acts of 1998. Under Section 288, such adjustments must be made prospectively from July 1, 1998. No payment can be made relative to the period, if any, from the date of the death of the beneficiary to July 1, 1998.
Disability retirement may be an option if you have been injured on the job. Please contact the office for more information or refer to our forms page under Guide for Disability.
* What is considered Regular Compensation:
Regular compensation is the amount of earnings that a member will pay retirement contributions on. Regular compensation will be used in determining a member’s final average salary, which is one of the factors used in calculating a retirement allowance. Compensation must comply with statutory and regulatory requirements in order to be pensionable.
Regular compensation generally includes:
- the annual rate of compensation in a member’s salary schedule,
- educational incentives,
- longevity payments made for length of service,
- premiums for holidays and shift differentials for police and fire,
- on call or standby pay,
- hazmat pay for police and fire,
- payments for rendering instructional training,
Regular Compensation Generally excludes::
- amounts paid for hours worked beyond the member’s normal work schedule (i.e., overtime),
- amounts paid as bonuses other than cost-of-living bonuses,
- payments which will not recur , and payments which will recur for only a limited or definite term (i.e., salary augmentation plan),
- amounts paid for unused vacation, sick leave, or other leave,
- severance pay,
- amounts paid as early retirement incentives,
- any payments made as a result of giving notice of retirement,
- amounts paid for housing and lodging,
- amounts paid for clothing, uniform, tool allowances,
- amounts paid for annuities,
- amounts paid for expense payments,
- amounts paid for travel,
- amounts paid for automobile usage,
- amounts paid for insurance premiums or for not participating in the employer’s health insurance plan.
The law does not allow an active member to borrow any contributions from the fund under any circumstances.
If you no longer hold a position in the City of Lawrence and are not going to work for another governmental agency under the provisions of Chapter 32, you may be eligible to receive a refund of your contributions. If you are leaving to accept a position with a Massachusetts political subdivision subject to Chapter 32, you must transfer your retirement contributions directly to your new retirement system. If you are vested and terminate employment in Lawrence, you can choose to "defer" your retirement by leaving your money in the system until you are ready to retire. If you choose to refund, your contributions and all of the interest you receive from your account are subject to federal income tax (with the exception of any contributions made prior to January 12, 1988). When processing a refund of retirement contributions, the Retirement Office is required to withhold 20 percent of the taxable portion of your refund for federal tax. The 20 percent tax payment is required only if the refund is made directly to the member. To defer tax payments, you must make a direct rollover of your retirement funds to an Individual Retirement Account (IRA) or another type of retirement account with a financial institution. With a direct rollover no tax is withheld and the entire taxable portion of your refund is transferred. If you have both taxable and nontaxable contributions, you may accept receipt of the nontaxable portion of your refund with no tax consequence and the taxable portion may be rolled over.
Please note that the amount of interest you receive depends on a few factors.. If you withdraw your funds with at least 10 years of creditable service, you will receive 100 percent of the regular interest that has accrued.. If you are terminated or laid off, you may receive 100 percent of the regular interest you've accrued. As of 7/1/2009, If you have less than 10 years of service and VOLUNTARILY RESIGN from your position your interest is calculated differently. You are entitled to receive 3% interest for each year you have worked. This recalculation of interest is formulated when processing your refund.
If you would like to apply for a refund, see our forms page under application for withdrawal, to print out a refund form or call the office to have one mailed to you.
PLEASE NOTE: IF YOU WITHDRAW YOUR FUNDS AND DECIDE TO BECOME A NEW MEMBER, YOU WILL NOW FALL UNDER THE NEW LAWS OF PENSION REFORM
Each member of the retirement system must have a beneficiary form on file. If you are married and die before you retire, your surviving spouse will have the option of collecting a monthly benefit or receiving a lump sum payment of your contributions. Otherwise your beneficiary or beneficiaries are entitled to a refund of your account. If you are single, you may want to consider choosing an "Option D" beneficiary that would allow you to provide for only the following: a child, parent, sibling, or former spouse in the event of your death prior to retirement. Contact the Retirement Office for more information on Option D beneficiaries.
Each member should know who is listed as their beneficiary and change it if necessary. Please call the office for a change of beneficiary form or download from our forms page and mail it to the office.
Any new employee that checks off yes under veteran status on their enrollment form will be sent a notice of potential benefits pursuant to MGL Chapter 32 § 4(1)(h) form. If you are a new employee and a veteran, you may be eligible to purchase up to four years to add to your creditable service. In order to be eligible you must be a member in service. The act does not contain any retroactive provisions for retired or inactive members. The retirement board will notify you in writing of your option to purchase service and a notice of potential benefits application will need to be filled out. In order to qualify as a veteran under Mass law a person is required to have either: 180 days of regular active duty service and a last discharge or release under honorable conditions - or – 90 days of active duty service, one day of which is during “wartime” (call office for a detailed listing or review application on forms page), and a last discharge or release under honorable conditions.
For “veteran” eligibility requirements please refer to the form Notice of Potential Benefits form Pursuant to MGL Chapter 32 § 4(1)(h).
Please note: MGL Chapter 32 § 4(1)(h) was offered to anyone coded as a veteran in our files back in 1997. At that time, if you did not file an application when it was offered to you, you no longer have the option of taking part in this benefit. If by some chance, we did not have you listed as a veteran and no correspondence regarding § 4 (1)(h) is documented as being sent to you, you may approach the retirement board and request that it be done at this time. Approval of this will be at the discrimination of the Board.
Veterans who also have Active Reserve and Massachusetts National Guard Service may receive creditable service for such guard/reserve service on a ratio of five years to equal one year of creditable service towards retirement.
If you choose to purchase your military time, you will have a set amount of time to do so. Our office policy allows for an individual to purchase their time within a specific time frame equal to the amount of time they are purchasing. Example: John Smith is purchasing 2 years of veterans service. Mr. Smith will have 2 years from the date of the approval letter to purchase this time.
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