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Item G1 Revised 3/99 BOARD OF COUNTY COMMISSIONERS AGENDA ITEM SUMMARY Meeting Date: April 21. 2004 Bulk Item: Yes 0 No [8J Division: Manaaement Services Department: Administrative Services AGENDA ITEM WORDING: Report on early buY-out proarams. ITEM BACKGROUND: In November 2003 and March 2004. the Board of County Commissioners reauested information on early buy-out proarams. PREVIOUS RELEVANT BOCC ACTION: ~ CONTRACTIAGREEMENTCHANGES STAFF RECOMMENDATION: Approval of staff recommendation not to pursue early buy-out or early retirement proaram at this time. TOTAL COST: Unknown at this time BUDGETED: Yes 0 No 0 COST TO COUNTY: REVENUE PRODUCING: Yes D No D AMOUNT PER MONTH YEAR APPROVED BY: COUNTY ATTY 0 OMB/PURCHASING 0 RISK MANAGEMENT 0 ,OJ ',~ I;: . ~ ('~ ! DIVISION DIRECTOR APPROVAL: '~-!--.J'n(Ll! CL /(;1- ,c/eL/{Lj, DIVISION DIRECTOR NAME: Sheila A. Barker DOCUMENTATION: INCLUDED: [8J TO FOllOW: D NOT REQUIRED: D DISPOSITION: AGENDA ITEM #: &1 Report on Early Buy-Out Programs Generally early-buyout and early retirement programs are often referred to as meaning the same thing. They are different. Early Buy-Out Programs with the FRS are clearly defined under the statutes. A person must be over 50 years of age and have over 25 years of service and must apply for retirement. Counties must purchase annuities for those employees who qualify. Annuity cannot be for more than the total difference in retirement income between the retirement benefit based on average monthly compensation and creditable service as of the member's early retirement date. You can also purchase annuities for employees with qualified out-of-state service (maximum 5 years of service). This is used as an inducement for emplovees to retire. Early Retirement Programs can be much more generous and are meant to entice employees to retire early. They generally enhance the program by offering additional money to make up the difference for age-related deductions to retirement benefits along with additional enhancements such as insurance. There are no FRS guidelines or requirements for your program. The Momoe County School Board has done an early-retirement program in 1992 and in 1997. The latest program had the following requirements: Example of an early retirement program: The Monroe County School Board's 1997 plan briefly described had several eligibility requirements: Plan One At least 10 years of service with entity and anyone of the following: 1. Full time employee age 57 with 15 years of service 2. Full time employee age 54 with 25 years of service 3. Full time employee who has minimum of30 years of service 4. Full time employee age 62 Incentives to retire early 1. Separation salary adjustment of 25 percent of fmal year salary paid to retiree as deferred compo 2. Payment of full cost of health insurance for retiree for a period of 8 continuous years after retirement. 3. Sick leave paid at 100% for frrst 100 days and remaining at 50%. Plan Two At least 10 years of service with entity and anyone of the following: 1. Full time employee age 57 with 15 years of service 2. Full time employee age 54 with 25 years of service Incentives to retire early 1. Five years of payment to offset early retirement penalty 2. Payment of full cost of health insurance for retiree for a period of 8 continuous years after retirement. 3. Sick leave paid at 100% for frrst 100 days and remaining at 50%. Basis for Board Request: The request to examine an Early-Buy Out program was prompted by board action to pay into the FRS system for one employee. We do not have any other employees in exactly the same situation. I checked with FRS to see if any of the 9 employees with over 25 years of service had service with another agency that could be purchased. None of them had time with another agency that could be purchased. Statistics: Employees with Greater than 10 years Year Hired 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Employees Over 55 Years of Age Employees Over 50 Years of Age Number of Employees 1 1 5 1 1 4 9 5 3 3 9 10 13 9 9 13 17 16 8 29 166 187 273 Types of Creditable Service the Employee can purchase on their own: 1. Prior Services including refunded service and service not contributed on. 2. Past service including city/special district, Cuban Refugee Assistance & Multiple Offender Project supervised by State Attorney's office. 3. Military Service 4. Leave of Absence without pay 5. In-State Service (various educational facilities) 6. Out-of-state Service (public service or federal service) Turnover (calendar year): 2001 19% 2002 12% 2003 18% 2004 3% (YTD) Recommendation: Do not implement an early buy-out program at this time. We have decreased county employees from 623 in 1998 to 495 in 2004. At the same time we have developed a recruitment and retention program to retain our employees. By offering an early buy-out/early-retirement program we would increase our turnover in a market that is becoming more difficult for recruiting due to the high-cost of living. Attachments: November Agenda Item regarding Louis LaTorre State's email regarding buy-outs School Board's plans from 1992 & 1997 Two guides found on the Internet L2 SOUNDING BOARD - Discussion concerning Fire Rescue service in Monroe County - Andrew McBroom. No action taken. L3 SOUNDING BOARD - Commend the BOCC and County Administration for taking the steps necessary to enhance both fire and EMS services in Monroe County- Jim Ward. Item deleted. L4 SOUNDING BOARD - Discussion on "donatability" of all property within a conservation area - George Wilson. No action taken. Ml MONROE COUNTY SHERIFF DEPARTMENT - Approval of disposition of inventory items for the month of November,' 2003 in the total amount of $456,085.04 bulk approved. Nl MONROE COUNTY HOUSING AUTHORITY - Approval of Resolution amending the Community Development Block Grant, Housing Assistance Plan bulk approved. 01 MONROE COUNTY HEALTH DEPARTMENT - Approval for Monroe County Health Department to lease space through the Board of County Commissioners for the Health Care Center located at DePoo Hospital and related Interagency Agreement regarding lease payments bulk approved. PI MONROE COUNTY COURT ADMINISTRATION - Approval of Grant-in- Aid Agreement with the Justice Administrative Commission (JAC) bulk approved. P2 Approval of write-off of uncollectible accounts of the court reporting department. Item deleted. Ql MAYOR SPEHAR/MANAGEMENT SERVICES - Approval for Monroe County to pay to the Florida Retirement System the amount of $6,102.27, which is required for the Director of Social Services, Louie LaTorre, Jr., to &e eligible f-or retirement achieve 30 year status in 2/29/04 3-2 (Neugent, Rice) motion to approve, including the above change. Another 5-0 motion was made to direct staff to explore and develop a policy for an early retirement program (buy-out option). Q2 MAYOR SPEHAR/MANAGEMENT SERVICES - Approval to extend Christmas holiday to include Friday, December 26, 2003 and New Years holiday to include Friday, January 2, 2004 3-2 (Neugent, Rice) motion to approve. 9 :.~.~.. .~. ...~ " ....~, \"'~"'..".:~~.'.., ~'''::,~.r ". BOARD OF COUNTY COMMISSIONERS AGENDA ITEM SUMMARY Meeting Date: November 19, 2003 Division: District 1 Bulk Item: Yes No Department: Mayor Dixie M. Spehar AGENDA ITEM WORDING: Approval for Monroe County to pay to the Florida Retirement System the amount of $6,1 07 27, ~ch is required for the director o.f Social Services, Louie laTorre, Jr., to be eligible for retirement in 2/29/04. ITEM BACKGROUND: Mr. laTorre worked as a State Employee from 9/71 to 6/74. The amount requested would purchase 2.83 years of refunded service, which would bring him to a full thirty (30) years of service, February, 2004. Under Florida Statute, SeCtion 121.0181, it is permissible for the County to pay for the contribution for past service with the State of Florida. It provides that a governing body of a covered group (which includes the County) may elect to provide benefits with respeCt to past service earned prior to January 1, 1975. That past service would have to ,be with the State of another agency, which is and was a participant in the Florida Retirement System. PREVIOUS RELEVANT HOCC AcrION: CONTRACT/AGREEMENT CHANGES: STAFF RECOMMENDATIONS: TOTAL COST: BUDGETED: Yes No COST TO COUNTY: SOURCE OF FUNDS: REVENUE PRODUCING: Yes No AMOUNT PER MONTH Year APPROVED BY: County Atty _ OMBlPurchasing _ Risk Management_ DMSION DIRECTOR APPROVAL: ~ >no ~~ 't Mayor ixie M. Spehar DOCUMENTATION: Included X To Follow_ Not Required_ DISPOSITION: AGENDA ITEM#~ Revised 1/03 . :.... ..."': ._~ '. .,n,_ ". ..... : <"I:"4~-Xl'?W ;:.:...... .,.:.-: ,":,-:': .!.,...:;;'O.::-.-..."7..?".". . :.',.CA..,J!l~~:,:' . ,. - ..... )' " ~ Florida Division or Redrement' EstImate of Retirement Benefit (Estimate only, subject to final verificadOD of aU factors) , I!IIIIUIS Estimate 1# 1 Member Information: Retirement Date: 0312004 Binhdate: Ale . RetIrement: 56 Years Jotnt ADDaltaDt information: ' NIlm! LATORRE. OONNA Need Birthdate Verification: Yes 5 Months Birth Date Ate @ Retirement S3 Years 11 Months Need Blrtbdate Verification Yes GenerallDlormadon: Birthdate Verification: If "YesM is noted. see the enclosed MPreparing to Retire" broch~ Verification for the joint annuitant is needed only if you select option 3 Ot 4. Average Final Compensation CAFe): Average of the 5 (10 for TRS) highest fiscal years (July 1 . June 30) of sa1ary. Normal Annual Benefit: Total Percentage x AFC. Option Selection: Please see the enclosed article. "What Retitement Option Should You Choose?" Cals:ulation Information: For this estimate we are including the following years of service: fJm! Plan Descriotion HA FRS-REGm-AR a..ASS XCIII 30.00 ~ 1.6000 fm;m!l 48.00 Totals 30.00 48.00 48.00 71,621.96 37.258.54 Comp Pcn:ent Used A vera&e Final Compensation (AFe) Normal Annual Benefit QmUm fIlrlm:' Monthlv Benefit. Survivor's Benefit 1 1.00000 3,104.88 2 0.97715 3.033.93 3 0.80765 . 2.507.66 2,507.66 4 0.88608 2.751.17 1,834.11 Amount Due : The amount due of $6,107:n must be paid bdore you can receive the benefit shown. Annual interest at 6.5% is added eacb June 30 to lIlY unpaid balance. Make your check payable to the PIorida Retirement System. Please write your social security number on tbe chec:k. You may ronover funds from a qualified plan (IRA, deferted compensation. etc.) to pay the amount due. Pot1ll PRO-t, Pretax Direct Rollover Form. must be received with your payment, which can be obtained from our office. RoIIoven aumot be made for upgraded service. r..nm___ts: This estimate is based on a 1Il9104 tenni~tion date with retirement effective 3104. You wUI theD have 30 years or service iaclucUag the purchase 2.83 years of reftmded service . . Page 1 of 1 Barker-Sheila From: Lowe, Sharon [Lowe_S@frs.state.f1.us] Sent: Monday, January 05,2004 12:31 PM To: 'Sarker-Sheila@MonroeCounty-FL.Gov' Cc: Peyton, Anne Subject: RE: "Early buy-out programs" Ms. Barker: You had a question about county authority to offer an "early buy-out" program to county employees. Under current law (s. 121.182, F.S.), counties can buy annuities for certain personnel to encourage early retirement. The law reads: 121.182 Retirement annuities authorized for county personnel.-Counties are authorized to purchase annuities for all county personnel with 25 or more years of creditable service who have reached age 50 and have applied for retirement under the Florida Retirement System, No such annuity shall provide for more than the total difference in retirement income between the retirement benefit based on average monthly compensation and creditable service as of the member's early retirement date and the early retirement benefit. Counties may also purchase annuities for members of the Florida Retirement System who have out- of-state service in another state or country which is documented as valid by the appropriate county. Such annuities may be based on no more than 5 years of out-of-state service and may equal, but not exceed, the benefits that would be payable under the Florida Retirement System if credit for out-of-state service was authorized under that system. Counties are authorized to invest funds, purchase annuities, or provide local supplemental retirement programs for purposes of providing annuities for county personnel. All retirement annuities shall comply with s. 14, Art. X of the State Constitution. History.-s. 10, ch, 96-368, As you can see, the law was enacted in 1996. However, annuities are pretty expensive, so I don't believe that this actually occurs very often. You may want to check with your county to see if this option is feasible (if there is any interest in pursuing such a program). I hope this information helps, Sharon K. Lowe Research & Education Section Division of Retirement (850) 488-5706 -unOriginal Message----- From: Sarker-Sheila@MonroeCounty-FL.Gov [mailto: Barker-Sheila@MonroeCounty-FL.Gov] Sent: Tuesday, December 30, 2003 9:39 AM To: REP@frs.state.f1.us Subject: "Early buy-out programs" Is it possible to offer an early buy-out program to participants of the FRS that work for a county government? Where would I find information on what can and can't be done. Sheila Barker 292-4462 Division Director - Management Services - Gato Room 2-268 1/5/04 ) (.--1 '. I C). MONROE COUNTY ONE-TIME RETIREMENT INCENTIVE PROGRAM INTRODUCTION The Monroe County School Board's commitment to the One-Time Retirement Incentive Program stemmed from an operating shortfall of $1 ,036,623 million, resulting from the rollback of appropriations established for public schools by the 1992 Legislature and a projected reduction in funding for the 1992-93 school year. This will result in a reduction-in-force of Monroe County public school teachers, administrators, administrative and other support personnel, as reported at the April 23, 1992 School Board Meeting. Mr. Fowler, President of the Union, requested at a meeting on April 16, 1992 that UTM and the Monroe County Public Schools meet to discuss the possibility of negotiating an early retirement plan. On May 12, 1992, the parties agreed to study the feasibility of developing a "One-Time-Only" Retirement Incentive Program which would be implemented during the term of the current, (1991- 94), MCPS/UTM labor contract. Mr. Fowler and Superintendent Henriquez stated that job security was their top collective bargaining priority for the 1992-93 school year, and a retirement incentive program, which could persuade eligible teachers to retire (or make additional teachers eligible for early retirement) could mitigate against a projected 15-20 teacher layoff. It was agreed by both parties to conduct a survey of bargaining unit members to determine interest in such a proposal. MCPS administrators and administrative support personnel will also be surveyed by the Superintendent. Four categories of incentives were described in the survey and became the basis for- the final version of the "One-Time-Only" Retirement Incentive Program. The School Board will be informed of the results of these surveys with ajoint recommendation for approval of the "One-Time-Only" Retirement Incentive Plan. Staff estimate that 50 percent of those employees may utilize the "One-Time-Only" Retirement Incentive Plan. CATEGORY I 30 YEAR EMPLOYEES - ENHANCED INCENTIVES ELIGIBILITY Full-time UTM bargaining unit members or administrative or administrative support personnel (rank 7 &, above) with 30 or more years of creditable service who are members of the Florida Retirement System or the Teacher Retirement System and meet the eligibility criteria for normal retirement. NORMAL RETIREMENT PLUS - Employees who exceed normal retirement eligibility. (FRS & TRS) ELIGIBLE TO PURCHASE SERVICE CREDIT - Employees may use such credit to qualify. Credit may only be purchased in accordance with the rules and regulations of the TRS or FRS. AGE REQUIREMENTS - None EFFECTIVE DATE OF ACCEPTANCE - Approval and acceptance of applicants for this plan from employees who are members of the FRS shall be on a first come first served basis and all applications shall be for an effective date no later than June 10, 1992. Approval for applications with an effective date of retirement subsequent to June 10, 1992 and prior to January 31, 1993 shall be at the discretion of the Board. Employees who are members of the TRS shall make application no later than June 10, 1992. However, retirement for members of the TRS, as per current legislation, may not take place prior to January 31, 1993. The effective date of retirement for members of the TRS is subject to any changes in legislation. DESCRIPTION OF BENEFITS · TERMINAL LEAVE PAY reimbursement at the current daily rate of pay for accrued sick leave up to a maximum of 100 days Payment will be made according to the following payment schedule: 25" of the days upon retirement; 25" of the days on January 1, 1993; 25" of the days on April 1 , 1993; 25" of the days on June 30, 1993. · MCSB WILL PAY HEALTH INSURANCE SUBSIDY of $2950 per year up to age 65, maximum of 7 years, to be applied towards the single coverage premiums. Reimbursement will be made to the retiree's choice of health insurance plans. The retiree may continue to cover dependent(s) at the retiree's expense. · TERM INSURANCE SUBSIDY - for retirees up to age 65, 7 years maximum, the MeSB will purchase a $50,000 Term Life Insurance policy. This term life insurance policy will be convertible at the retiree's option and cost to a whole life policy after age 65 or 7 years, whichever occurs first, without proof of medical eligibility provided this conversion is initiated within thirty-one days. · INSURANCE SUBSIDIES will be made only to the retiree. Subsidies will not be transferred to any beneficiaries. In the event of the retiree's death, any 2 subsidy reimbursement will be pro-rated from the beginning of the calendar year to the first of the month following death. CATEGORY II EMPLOYEES AGE 62 - ENHANCED INCENTIVES ELIGIBILITY Full-time UTM bargaining unit members or administrative or administrative support personnel (rank 7 & above) age 62 with 10 or more years of creditable service who are members of the Florida Retirement System or the Teacher Retirement System and meet the eligibility criteria for normal retirement. NORMAL RETIREMENT PLUS - Employees who exceed normal retirement eligibility. (FRS &, TRS) ELIGIBLE TO PURCHASE SERVICE CREDIT - Employees may use such credit to qualify. Credit may only be purchased in accordance with the rules and regulations of the TRS or FRS. AGE REQUIREMENTS - At least age 62 EFFECTIVE DATE OF ACCEPTANCE - Approval and acceptance of applicants for this plan from employees who are members of the FRS shall be on a first come first served basis and all applications shall be for an effective date no later than June 10, 1992. Approval for applications with an effective date of retirement subsequent to June 10, 1992 and prior to January 31, 1993 shall be at the discretion of the Board. Employees who are members of the TRS shall make application no later than June 10, 1992. However, retirement for members of the TRS,as per current legislation, may not take place prior to January 31, 1993. The effective date of retirement for members of the TRS is subject to any changes in legislation. DESCRIPTION OF BENEFITS · TERMINAL LEAVE PAY reimbursement at the current daily rate of pay for accrued sick leave up to a maximum of 100 days Payment will be made according to the following payment schedule: 25" of the days upon retirement; 25" of the days on January 1, 1993; 25" of the days on April 1, 1993; 25" of the days on June 30. 1993. · MCSB WILL PAY HEALTH INSURANCE SUBSIDY of $2950 per year up to age 65, maximum of 3 years, to be applied towards the single coverage premiums. Reimbursement will be made to the retiree's choice of health J insurance plans. The retiree may continue to cover dependent(s) at the retiree's expense. · TERM INSURANCE SUBSIDY - for retirees up to age 65, 3 years maximum, the MeSB will purchase a $50,000 Term Life Insurance policy. This term life insurance policy will be convertible at the retiree's option and cost to a whole life policy after age 65 or 3 years, whichever occurs first, without proof of medical eligibility provided this conversion is initiated within thirty-one days · INSURANCE SUBSIDIES will be made only to the retiree. Subsidies will not be transferred to any beneficiaries. in the event of the retiree's death, any subsidy reimbursement will be pro-rated from the beginning of the calendar year to the first of the month following death. 4 CATEGORY III EMPLOYEES W/25 YEARS EXPERIENCE - AGE 55 OR GREATER INCENTIVES ELIGIBILITY Full-time UTM bargaining unit members or administrative or administrative support personnel (rank 7 & above) with at least 25 or more years of creditable service and are at least 55 years of age or greater who are members of the Florida Retirement System or the Teacher Retirement System. Preference will be given to those senior staff members with 28 years of service and or age. ELIGIBLE TO PURCHASE SERVICE CREDIT - Employees may use such credit to qualify. Credit may only be purchased in accordance with the rules and regulations of the TRS or FRS. AGE REQUIREMENTS - 55 years or older as of August 1, 1992 EFFECTIVE DATE OF ACCEPTANCE - Approval and acceptance of applicants for this plan shall be on a first come first served basis and all applications shall be for an effective date no later than June 10, 1992. Approval for applications with an effective date of retirement subsequent to August 1, 1992 and prior to January 1, 1993 shall be at the discretion of the Board. DESCRIPTION Qf BENEFITS · EARLY RETIREMENT PENAL TV ELIMINATED - the MeSB pays the amount of the reduction in benefits assessed by the State for early retirement, (i.e. 5% for each year or 5/1 2% for each month prior to normal retirement age). · TERMINAL LEAVE PAY reimbursement at the current daily rate of pay for accrued sick leave up to a maximum of 100 days. TERMINAL LEAVE PAY reimbursement at the current daily rate of pay for accrued sick leave up to a maximum of 100 days Payment will be made according to the following payment schedule: 25% of the days upon retirement; 25% of the days on January 1, 1993; 25% of the days on April 1 , 1993; 25% of the days on June 30, 1993. · MCSB WILL PAY HEALTH INSURANCE SUBSIDY of $2950 per year up to age 65, maximum of 7 years, to be applied towards the single coverage premiums. Reimbursement will be made to the retiree's choice of health insurance plans. The retiree may continue to cover dependent(s) at the retiree's expense. s · TERM INSURANCE SUBSIDY - for retirees up to age 65, 7 years maximum, the MeSB will purchase a $50,000 Term Life Insurance policy. This term life insurance policy will be convertible at the retiree's option and cost to a whole life policy after age 65 or 7 years, whichever occurs first, without proof of medical eligibility provided this conversion is initiated within thirty-one days · INSURANCE SUBSIDIES will be made only to the retiree. Subsidies will not be transferred to any beneficiaries. in the event of the retiree's death, any subSidy reimbursement will be pro-rated from the beginning of the calendar year to the first of the month following death. CATEGORY IV EMPLOYEES ELIGIBLE FOR SABBATICAL &, INCENTIVES ELIGIBILITY Full-time UTM bargaining unit members or administrative or administrative support personnel (rank 7 &, above) age 60 and over with 10 years or more experience or employees with 23 years experience or more and at least 57 years of age or employees with 28 years of creditable service in the TRS or FRS. Employees accepted in this category must be eligible for and agree to enroll in one of the other approved early retirement plans and teach one summer session at the end of the sabbatical leave. ELIGIBLE TO PURCHASE SERVICE CREDIT - Employees may use such credit to qualify. Credit may only be purchased in accordance with the rules and regulations of the TRS or FRS. AGE REQUIREMENTS must be met no later than September 1, 1992. EFFECTIVE DATE OF ACCEPTANCE - Approval and acceptance of applicants for this plan shall be on a first come first served basis for the ten (10) slots established for this category. All applications shall be for an effective date no later than June 10, 1992. DESCRIPTION OF BENEFITS · $5,000 SABBATICAL PAY for up to a maximum of two years. Payment for employees on sabbatical will be made at the rate of $500 a month for ten months, September through June of the approved year. · MCSB PAYS SOCIAL SECURITY AND RETIREMENT ON $5,000 SABBATICAL PAY. 6 · TERMINAL LEAVE PAY reimbursement at the current daily rate of pay for accrued sick leave up to a maximum of 100 days. Terminal leave pay will be paid to the employee upon completion of the sabbatical and retirement. · MCSB WILL PAY HEALTH INSURANCE SUBSIDY of $2950 per year up to age 65, maximum of 7 years. including the sabbatical leave period(s), to be applied towards the single coverage premiums. Reimbursement will be made to the retiree's choice of health insurance plans. The retiree may continue to cover dependent(s) at the retiree's expense. · TERM INSURANCE SUBSIDY - the life insurance benefit becomes effective upon completion of the sabbatical, returning to work for one summer session and the retirement becomes effective. · INSURANCE SUBSIDIES will be made only to the retiree. Subsidies will not be transferred to any beneficiaries. in the event of the retiree's death, any subsidy reimbursement will be pro-rated from the beginning of the calendar year to the first of the month following death. 7 , MONROE COUNTY PUBLIC SCHOOLS(MCPS) ONE-TIME RETIREMENT INCENTIVE PROGRAM RESPONSE FORM If you are eligible and interested, please complete the form below and mail it to the Payroll Department, attention June Sanchez, immediately. Your records will be researched and an estimate of benefits will be sent to you. Individual counseling appointments will not be scheduled until after you have had an opportunity to review the estimate. ************************************************************************ NOTE: Completion of this form does not constitute an application to retire. By completing this form, I am indicating my strong interest in retiring under the provisions of the One-Time Retirement Incentive Program. To the best of my knowledge, I am eligible for (select one category only): CATEGORY I CATEGORY II CATEGORY III 30 Year Employees - Enhanced Incentives Employees Age 62 - Enhanced Incentives Employees w/25 years and Age 55 or more - Incentives Employees Eligible for Sabbatical and Incentives CATEGORY IV I am hereby requesting that the Payroll Office prepare an estimate of my retirement benefits, using an expected termination date of NAME WORK LOCATION SOCIAL SECURITY POSITION HOME ADDRESS CITY ZIP CODE WORK PHONE DATE OF BIRTH: SELF SPOUSE (If applicable) HAVE YOU SEEN A RETIREMENT COUNSELOR PREVIOUSLY? YES ( ) NO( ) IF ELIGIBLE, I WOULD LIKE TO PURCHASE: ( ) MILITARY SERVICE FROM TO ) OUT OF STATE SERVICE FROM TO ) SUBSTITUTE SERVICE FROM TO ) HOURLY SERVICE FROM TO ) APPROVED LEAVE OF ABSENCE FROM TO ( PREVIOUS SERVICE FOR WHICH CONTRIBUTIONS WERE REFUNDED FROM TO SIGNATURE DATE NOTE: Applications will be processed in order of the date on which they are received. r n 'I. - 7 EMPLOYEES ELIGIBLE FOR THE RETIREMENT INCENTIVE PROGRAM Attached you will find a copy of the Retirement Incentive Program Plans and eligibility requirements. Eligible employees wishing to participate in the program will be able to choose one of the two plan options offered. Also attached is infonnation on the meetings we will hold to give all eligible employees details about the program and how everything will work. We encourage you to rely only on the infonnation you receive from us in the regional meetings and individual counseling sessions. At the regional meetings, you will have the opportunity to sign up for individual counseling sessions if you are interested in participating in the retirement program. After everyone has signed up at these regional meetings, we will send out a schedule of the individual counseling sessions that are scheduled at each school and center. We will make sure that this infonnation is given to eligible participants. Many questions have been asked about returning to work after 30 days. The Florida Retirement System has very specific rules about returning to work during the first year after you retire from FRS. You ITIID'_.onl~ ret11m tuwQrK. ~ft~r~Qdays..and Qnlyin.G~rt'!In. _ ---~. types of part-time jobs for a maximum of 780 hours duriIlg tl:1c:lt first y~~ After the first ~,_.,.- ---_.... .---- -'--"'.'-'-- . -. --,-_.,"-'~-"- --_........,-. .-----,---...-.-..-<--...--... ..- .-- year, you may refiiffi~ to work without any FRS restrictions. Attached are copies of the FRS regulations on returning to work for your infonnation. ~ RETIREMENT INCENTIVE PROGRAM MEETINGS THE SCHOOL BOARD IS SCHEDULED TO HOLD A PUBLIC HEARING ON THE RETIREMENT INCENTIVE PROGRAM ON MAY 19TH AT 2:00 P.M. FOLLOWING THE PUBLIC HEARING, THE PLAN AND A CONTRACT WITH THE COMPANY TO ADMINISTER THE PROGRAM FOR THE SCHOOL BOARD WILL BE ON THE REGULAR MEETING AGENDA ON MAY 19TH FOR ACTION. BECAUSE OF THE SHORT TIME LINES WE WILL BE FACING WITH THIS PROGRAM SHOULD THE BOARD APPROVE IT ON MAY 19TH, WE HAVE TENTATIVELY SCHEDULED THE FOLLOWING REGIONAL MEETINGS AND COUNSELING SCHEDULE: WE ENCOURAGE ALL ELIGmLE EMPLOYEES TO A TIEND ONE OF THE REGIONAL MEETINGS. UPPER KEYS REGIONAL MEETING - RETIREMENT PROGRAM MAY 20TH - CORAL SHORES HIGH SCHOOL LIBRARY 6:00 P.M. MIDDLE KEYS REGIONAL MEETING - RETIREMENT PROGRAM MAY 21ST - STANLEY SWITLIK SCHOOL LIBRARY 6:00 P.M. LOWER KEYS REGIONAL MEETING - RETIREMENT PROGRAM MAY 20TH - KEY WEST HIGH SCHOOL - J-WING AUDITORIUM 6:00 P.M. AT EACH REGIONAL MEETING. ELIGmLE EMPLOYEES WHO ARE CONSIDERING PARTICIPATION IN THE RETIREMENT PROGRAM WILL BE ASKED TO SIGN UP FOR INDIVIDUAL COUNSELING SESSIONS. THESE SESSIONS WILL BEGIN ON MAY 27TH. AND WILL BE HELD AT INDIVIDUAL SCHOOLS AND CENTERS. A SCHEDULE FOR THE COUNSELING SESSIONS WILL BE MADE AND SENT OUT IMMEDIATELY FOLLOWING THE REGIONAL MEETINGS. IT IS VERY IMPORTANT THAT ELIGmLE EMPLOYEES ATTEND THESE REGIONAL MEETINGS TO HAVE QUESTIONS ANSWERED. THE OPEN WINDOW FOR DECLARING RETIREMENT UNDER THIS PROGRAM WILL BE MAY 19, 1997 TO JUNE 13, 1997. RETIREMENT INCENTIVE PROGRAM PLAN ONE ELIGIBILITY REQUIREMENTS A. EMPLOYEES MUST HAVE AT LEAST 10 YEARS OF SERVICE WITH THE MONROE COUNTY SCHOOL BOARD AND ANY ONE OF THE FOLLOWING: B. FULL TIME EMPLOYEES AGE 57 WITH AT LEAST 15 YEARS OF SERVICE WITH FRS OR TRS BY 6/30/97. . C. FULL TIME EMPLOYEES AGE 54 WITH AT LEAST 25 YEARS OF SERVICE WITH FRS OR TRS BY 6/30/97. D. FULL TIME EMPLOYEES WHO HAVE AT LEAST 30 YEARS OF SERVICE WITH FRS OR TRS BY 6/30/97. E. FULL TIME EMPLOYEES AGE 62 WITH AT LEAST 10 YEARS OF SERVICE WITH FRS OR TRS BY 6/30/97. BENEFITS 1. A SEPARATION SALARY ADJUSTMENT OF 25 PERCENT (25%) OF THE FINAL YEAR SALARY WILL BE PAID TO THE RETIREE AS DEFERRED COMPENSATION ( An adjustment will not be paid on salary supplements and vacation days) 2. THE BOARD WILL PAY THE FULL COST OF A SINGLE COVERAGE PREMIUM FOR THE EMPLOYEE OR THE FULL COST OF THE HEALTH INSURANCE PREMIUM CURRENTLY PROVIDED TO THE EMPLOYEE, WHICHEVER IS GREATER, FOR A PERIOD OF EIGHT (8) CONTINUOUS YEARS BEGINNING IMMEDIATELY UPON RETIREMENT FOR THOSE RETIREES CURRENTLY ENROLLED IN THE HEALTH INSURANCE PROGRAM. 3. SICK DAYS WILL BE PAID AT 100% FOR THE FIRST 100 DAYS, THE REMAINING DAYS WILL BE PAID AT 50%. OPEN WINDOW FOR DECLARING RETIREMENT 5-20-97 TO 6-13-97 THE RETIREMENT DATE WILL BE THE LAST DAY OF THE 1996-97 CONTRACT YEAR ALL EMPLOYEES TAKING ADVANTAGE OF THIS PLAN MUST ENROLL IN WRITING BY JUNE 13. 1997 PLAN TWO ELIGIBILITY REQUIREMENTS A. EMPLOYEES MUST HAVE AT LEAST 10 YEARS OF SERVICE WITH THE MONROE COUNTY SCHOOL BOARD AND ONE OF THE FOLLOWING: B. FULL TIME EMPLOYEES AGE 57 WITH AT LEAST 15 YEARS OF SERVICE WITH FRS OR TRS BY 6/30/97. C. FULL TIME EMPLOYEES AGE 54 WITH AT LEAST 25 YEARS OF SERVICE WITH FRS OR TRS BY 6/30/97. BENEFITS 1. FIVE YEARS OF MONTHLY PAYMENTS TO OFFSET THE FRS EARLY RETIREM ENT PENAL TV OF 5% PER YEAR WHEN AN EMPLOYEE RETIRES PRIOR TO AGE 62 WITH LESS THAN 30 YEARS OF SERVICE. THIS OFFSET PAYMENT IS THE DIFFERENCE BElWEEN FRS NORMAL RETIREMENT OPTION ONE (1) AND FRS EARLY RETIRMENT OPTION ONE (1) (THIS PAYMENT IS WITHOUT THE 3% COLA INCREASE) 2. THE BOARD WILL PAY THE FULL COST OF A SINGLE COVERAGE PREMIUM FOR THE EMPLOYEE OR THE FULL COST OF THE HEALTH INSURANCE PREMIUM CURRENTLY PROVIDED TO THE EMPLOYEE, WHICHEVER IS GREATER, FOR A PERIOD OF EIGHT (8) CONTINUOUS YEARS BEGINNING IMMEDIATELY UPON RETIREMENT FOR THOSE RETIREES CURRENTLY ENROLLED IN THE HEALTH INSURANCE PROGRAM. 3. SICK DAYS WILL BE PAID AT 100% FOR THE FIRST 100 DAYS. THE REMAINING DAYS WILL BE PAID AT 50%. OPEN WINDOW FOR DECLARING RETIREMENT 5-20-97 TO 6-13-97 THE RETIREMENT DATE WILL BE THE LAST DAY OF THE 1996-97 CONTRACT YEAR ALL EMPLOYEES TAKING ADVANTAGE OF THIS PLAN MUST ENROLL IN WRITING BY JUNE 13.1997 Chapter 13 REEMPLOYMENT AFTER RETIREMENT Chapter 13 Contents: I. Public Employer Not Covered By FRS ....... 13-1 II. Private Employer ............................ 13-1 III. FRS Employer ............................... 13-1 IV. Second Retirement Benefit - Renewed Membership ................................. 13-6 I. PUBLIC EMPLOYER NOT COVERED BY FRS After an employee retires from the FRS he or she may work for any public employer not covered by the FRS without affecting retirement benefits. ll. PRIVATE EMPLOYER After an employee retires from the FRS. he or she may work for any private employer without affecting retirement benefits. Ill. FRS EMPLOYER Any employee who retires from any Florida state-administered retirement system is prohibited from being reemployed by an FRS employer in any type of position during the first calendar month after the date of retirement; and is prohibited from receiving both retirement benefits and salary from an FRS employer during the 2nd through 12th months after the retirement date unless the employee is covered by one of the exceptions. This prohibition includes employment in temporaxy. part-time. QfS., and rewularly established positions. If a retiree returns to employment with an FRS employer during the first 12 months after retirement. the following will apply: . If the reemployment is during the first calendar month after the retirement date. the employee will not be considered to have retired. The retirement application will be canceled and th~ employee will October 1993 - REEMPLOYMENT AFTER RETIREMENT 13-1 SAMPLE OF FR-23 FR-23 (R3/90) Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 (904) 488-6491 NOTIPICATION OP REE"PLOYMENT POR SUSPENSION OP RETIREKENt' BENEPITS Name: Retirement Date: SSI: Your retirement viII be cancelled if you are reemployed in any capacity vith any FRS employer during the first calendar month after your retirement date. Employment with any FRS employer during the second through the tvelfth calendar months after your retirement date will result in the suspension of your retirement benfits for the months you are employed. Prohibited employment includes full-time, temporary part-time, other personal service (OPS). and contractual services. [Exceptions for FRS retirees are outlined in Section 121.091(9), F.S. retirees are outlined in Section 238.181. F.S.) Exceptions for TRS PART ONE (To be co.pleted by retiree) I was employed, or will be employed, by on (Name of Employer) (Date) which is within 12 months of my retirement date. Therefore, I request that my benefits be suspended. I viII submit a completed Application to Resume Retirement Benefits Form, FR-23a, vhen I am eligible to have my benefits resumed. Signature: Date: Phone I: ( Address: IF INSURANCE DEDUCTIONS ARE BEING "ADE PROM YOUR RETIREMENT PAYMENT, ADVISE YOUR INSURANCE COMPANY THAT YOUR BENEFIT HAS BEEN SUSPENDED. PART TVO (To be c:oapleted by e.!llployer) I certify that the above retiree ) a. has or vill have prohibited employment with this agency as a (title or position held) effective (Date) ) b. has had employment as a in a position exempted from (title or position held) reemployment limitations and has or viII have reached the 780 hour limitation on (Date) Agency: Phone I: Suncom 1 Local I( Date: Signature: Title: Distribution: Original - D~vision of Ret~rement Copy - Retiree October 1993 - REEMPLOYMENT AFfER RETIREMENT 13-3 Exceptions to _A.n~_~_r_~t!~~e_~ ~~!! r~!ired for one calendar month, work Illay be performed without Reemployment suspending benefits for 780hours during the remaining 11 months,ifhe is covered by . Limitations one of the -exceptions Hstea below: ... - -.....~_..~._..".. ~.,...,.._.~...- -- . FRS and TRS retirees may be reemployed by district school boards as noncontractual substitute or hourly teachers. . FRS and TRS retirees may be reemployed by community colleges as part-time, noncontractual adjunct instructors. . FRS retirees may be reemployed by community colleges as participants in the phased retirement program. . FRS and TRS retirees may be reemployed by the State University System as adjunct instructors, or as participants in the phased retirement program. . FRS and TRS retirees may be reemployed by the Florida School for the Deaf and the Blind as substitute teachers, substitute residential instructors, or substitute nurses. . FRS retirees may be reemployed by district school boards as teacher aides, transportation assistants, bus drivers and food service workers on a noncontractual basis (Le., without a guarantee of employment). The retiree must notify his employer and the Division in writing of the date on which he will complete 780 hours of employment. If a retiree is employed in any of the above positions for more than the 780 hours allowed during the 2nd'through 12th months after retirement, benefits must be suspended until the end of the 12th month or until work has stopped, whichever occurs first. The retiree must repay any benefits received after exceeding the 780 hour limitation during the II-months period. Retirement benefits will remain suspended until repayment has been made. The retiree is responsible for payment of health insurance or any other payments that would otherwise be deducted from the retirement benefit during the period of suspension. If a retiree is considering employment as an independent contractor with an FRS employer during the 2nd through the 12th months after retirement, the Bureau of Enrollment and Contributions should be contacted prior to beginning the employment to verify that the retiree will be considered an independent contractor and will not violate the reemployment provisions. See page 1-48 for further information on independent contractors. Elected officers with renewed membership in the ESCOC or the Regular Class (if not eligible for membership in the ESCOC) are exempt from the reemployment limitations. Revised December 1996 - REEMPLOYMENT AFTER RETIREMENT 13-5 All Retirees (Except ESCOC Members) . Calculation Of Benefit Application Health Insurance Subsidy Effective July 1, 1991, a retiree reemployed in a regularly established position will be enrolled as a renewed member of the Regular Class and earn service credit toward a "second-career" retirement benefit. The renewed member must accumulate an additional 10 years of creditable service to be eligible for this "second-career" retirement benefit. Renewed membership service in the ESCOC can be used toward a second-career retirement in the Regular Class. The renewed member may purchase credit for service performed in a regularly established position after his first retirement and before July 1, 1991 and apply it toward the second benefit. This post-retirement service may be purchased by the renewed member or his employer. The cost to purchase this service may be requested on Form FR-9, Information Request, which should be submitted to the Bureau of Retirement Calculations. If the request includes service performed prior to July 1, 1985 in a regularly established position, a certification of the positions held and a. certification of monthly earnings must be submitted along with Form FR-9. To qualify for a "second-career" retirement benefit, the reemployed retiree must complete at least 10 years of creditable service, which may include service in a regularly established position that was performed after the first-career retirement date and prior to the renewed membership date. For more information on claiming this post-retirement service, please see page 7-23. STATUTORY REFERENCE: Section 121.22, F.S. FRS RULE REFERENCE: Section 608-1.0045 and 4.012 "Second-career" retirement benefits are calculated using the same formula as first-career service retirement benefits (Years of Service X Percentage Value Per Year of Service X Average Final Compensation). The "second-career" benefit is calculated independently of the first-career benefit. Only the service and salary earned during the "second-career" will be used in the calculation of the renewed membership benefit. If the renewed member has not reached age 62 or earned 30 years of service in the "second-career," the benefit will be reduced 5% for each year under age 62. To apply for a "second-career" benefit, the member must complete Form FR-l J, FRS Applicationfor Retirement. A retirement option must be chosen and a beneficiary designated, which may be different from the member's first-career retirement option and beneficiary . If the renewed member is not already receiving the maximum IDS with the first-career benefit, the member will be eligible for an additional HIS up to the maximum based on combined first- and second-career service. The total HIS of both benefits may not exceed the maximum of $90 a month. Revised December 1996 - REEMPLOYMENT AFTER RETIREMENT 13-7 '. . ........' . REEMPLOYMENT AFTER RETIREMENT After you retire under the normal or early retirement provisions of the Florida Retirement System (FRS), Teachers' Retirement System (TRS), or any other existing retirement system that was merged into the FRS; you may work for a private employer, any public employer not covered by the FRS, or in another state, without affecting your retirement benefit. (Your Social Security benefit may be affected. Contact the Social Security Administration at 1-800-772-1213 for specific information.) If you retire under the FRS disability provisions, you may not be gainfully employed and still receive FRS disability benefits. There are, however, certain reemployment limitations that affect employment with employers who participate in the FRS. You and your ,employing agency will be held jointly and severally liable for repaying to the FRS Trust Fund any retirement benefits you receive in violation of these reemployment limitations, plus interest. If you are reemployed with an FRS agency, you may be required to sign a statement that your reemployment does not violate these provisions. The limitations on reemployment with FRS employers are as follows: . If you return to work during the first month of your retirement you will not be considered to have retired. Your retirement application will be void and all , retirement benefits must be repaid. . You may not receive both a salary and retirement benefits for 12 months after your effective retirement date. . If you work during the first 12 months after your effective retirement date, you must inform the Division of Retirement. Your retirement benefits will be suspended for the months you are employed during the 12-month 13 period. Any retirement benefits received while working during the first 12 months after you retire must be repaid. . There are no limits on working for an FRS employer after you have been retired for 12 months. The following provisions are exceptions to the lawretstricting reemployment with FRS employers during the first 12 months after your effective retirement date: 1. Up to 780 hours of reemployment is allowed during the 2nd through the 12th months of retirement for: . FRS and TRS retirees reemployed as noncontractual substitute teachers or hourly teachers with district school boards. . FRS retirees reemployed as substitute or hourly teacher aides, transportation assistants, bus drivers, or food service workers with district school boards. . FRS and TRS retirees reemployed as part-time, noncontractual adjunct instructors with community colleges. . FRS retirees reemployed by community colleges as participants in the phased retirement program. ~. ',~ . FRS and TRS retirees reemployed as participants in the phased retirement program or as adjunct faculty with the State University System. . FRS and TRS retirees reemployed as substitute teachers, substitute residential instructors or substitute nurses with the Florida School for the Deaf and the Blind. If you are employed in one of the above excepted positions for more than the 780 hours allowed, you must advise the Division. Your retirement benefits will be suspended for the months you continue to work during the 12-month limitation period. 14 ..' .... 2. Elected officers with renewed membership in the ESCoe or the Regular Class (if not eligible for membership in the ESCOC) are exempt from the reemployment limitations. RENEWED MEMBERSHIP AFTER RETIREMENT All retirees who are reemployed in regularly established positions (except those elected to a public office covered under the FRS) will be enrolled in the Regular Class of the FRS and earn service credit toward a "second-career" retirement benefit subject to the following: . A reemployed retiree must earn an additional 10 years of creditable service to be eligible for this benefit. . Post-retirement service (service performed after the first retirement and before July 1, 1991 in a regularly established position) may be purchased by the reemployed retiree or his employer for second-career retirement credit. . Service performed prior to the first retirement may not be used in the calculation of the second-career benefit. If, after you retire, you are elected to a public office covered under the Elected State and County Officers' Class (ESCOC), you will be enrolled in that class of the FRS. For more information on the ESCOC, you may request the ESCoe handbook from the Division at the address on page 4. NOTE: Renewed members are not eligible for disability benefits and are subject to the reemployment limitations outlined above. HEALTH INSURANCE SUBSIDY FOR RENEWED MEMBERSHIP RETIREES If you retired with less than 30 years of service in your first- career retirement, upon your second-career retirement, you may use part or all of your years of service from your second- career to increase your health insurance subsidy (HIS) payment. The maximum number of years you are eligible to include in the calcuation of your total HIS payment is 30 years. 15 After your name is added to the retired payroll, an application for the health insurance subsidy, Form HIS-I, will be mailed to you. See page 7 for more information on the HIS program. Contact the Disbursements Section if you are not sure if you qualify for increased HIS payment based on your second-career retirement. REEMPLOYMENT FOR DISABLED MEMBERS A member who retires on disability may not be gainfully employed and receive disability benefits. Therefore, if you recover from your disability and return to work for any employer, you should inform the Disability Determination Section immediately to stop your benefits. If you return to work for an FRS employer for one continuous year of creditable service, you may purchase credit for the period you were retired on disability toward your subsequent retirement benefit. SOCIAL SECURITY COVERAGE DURING REEMPLOYMENT .' ~ Under most circumstances you will be required to pay Social Security contributions on salary earned during reemployment. 1 -" ,. DISABILITY REEXAMINATION If you retired due to disability, we may check the status of your condition periodically. The Disability Determination Section will provide the forms to be completed and will pay for your reexamination. If your doctor charges for completing the report, the Division \vill reimburse you. Once we have received the completed forms, we will write and tell you if you still qualify for benefits. If you do not qualify to continue receiving benefits, you may appeal the decision to the State Retirement Commission. ~ " . , i I , " / 1 (;, .!~J ~,. EPe. G::oup'of Companies Page 1 of9 e"'~~ EPC specializes in developing, implementing and administrating early buy-out incenti Uj'-' plans for schools, colleges, universities, and municipalities. '~.M Early Buy-Out Incentive Plan Experts 1.800,747. HotTil": I~ont.:o(t U: F 8.:0 :Itqlrtv t'ld', E-Ne,""=Io'.tter Eltectl",? Plan: E,~th' 811'( ,:"rt F'I~,,: f\Je\Il,': ~~,t tll_!t?-= (hent LI't T etlc her Rel"'"rtm,'r~ Rt.'i.'lted I_,fll, _ r;'etlt emer,t PI ,r n'r"J [II . " ",. ", " -- ""4! . ;.. . J' ",,,:, /~ 7' ~) ,-<' , A Guide to Early Buy-Out Plans by Joseph D. Kelly, CFP I,Ih~Plcmnil1g$tCi9~ II.The Plan IJI,lmpl~m~Dtil1gJl:l~PICin IV.MCinCigingth~S~n~fits V.Alternative Approaches VI.Third Party Administration YILIotCiIPICinCosts I.THE PLANNING STAGE THE DECISION ... There are several reasons employers consider offering employment termination incentives. The foremost reason is to bring salaries and wages into balance. Another important reason is to 'revitalize' the staff. A third reason is to reduce the total number of employees. It is not unusual to have all three of these objectives in mind when considering accelerated employment attrition. The decision to offer incentives to terminate employment, (whether early retirement, or early termination), requires several important steps, plus an understanding of how the offer will be perceived by those to whom it is offered. The offer must be considered as a meaningful benefit, above and beyond what has traditionally been thought of as a retirement incentive more on this most important element later in the manual). To offer an incentive without knowing in advance what the results will be is a sure way to not only lose considerable funds, but also to create unfavorable employee reaction, even to the extent of actually getting fewer exits than offering no plan! Thus, the decision must include an accurate projection of anticipated results. Also, it is necessary to know in advance what the re-staffing requirements will be if a plan is successfully implemented. It is necessary to know what the costs will be, and what staff replacements will be needed. A recruiting plan is recommended. COST VERSUS RESULTS ... The question of costs must consider what would occur if a plan was not offered. A review of normal retirement and attrition will allow a projection of anticipated results. There are factors, which can change these projections dramatically, however. Such factors include, first year of a multi-year contract with an increase, or no increase in each year; last year of a higher salary rate of increase, change in extra duty, extra pay policies, restructuring of assignments, anticipated layoffs, to name a few. If an offer is to be made, it must substantially increase the number of persons leaving employment. Thus, employees who did not plan to leave for five, six, even ten or more years must take a close look at the offer and a percentage of those httn:/ /www.encintemet.comlearlybuyoutp1ans.htm1 12/30/03 EPC Grpup of Companies Page 20[9 persons must accept the offer. An offer which is only accepted by persons who would retire in the next year or two simply "gilds the lily" of these employees at great expense to the employer. Studies that assume only retirement eligible persons will consider the offer, and only those who would have retired in the next four or five years, often conclude that incentives do not save money. These studies do not agree with ten years of actual results based upon meaningful offers. The facts are, that there are always a number of persons who, given the incentive, retire or terminate employment much sooner than those encompassed in these studies. In fact, the actual results of over, eighty such plans show that over 50% of those accepting are under age 55! SUBSTANTIAL INCREASE... A minimum target for positions to be vacated should, based upon the specific employee data, exceed 400% to 1 ,500% of normal retirements. Thus, if in a normal year four to five persons retire, a properly implemented incentive offering should attract a minimum of sixteen to twenty acceptances. Prior to offering the plan, the eligible pool must be determined. The employee data from the pool can be utilized to determine, within 97% accuracy, the actual final results of the offering. baclsJo top II. THE PLAN THE ELIGIBLE POOL ... If maximum acceptances of the offer are a factor, the plan should be offered to a much larger pool than those who are "retirement eligible" only. A larger pool may be established in several different ways. If a series of "steps" in salary amounts are in place, those employees in the top step and above may be in the pool. There may be 65% to 85% of total staff in this category! Total specific years of service under the current employer may also be considered as the eligible pool. AGE DISCRIMINATORY PLANS... Care must be taken to prevent the plan from discriminating as to age and sex of the employee group. A plan, which is determined to be discriminatory, can cause serious problems for the employer. Subtle nuances can cause the plan to be determined as discriminatory. Legal counsel must review the plan to insure that it is in no way discriminatory in its intent or application. THE WINDOW PERIOD... For the majority of plans there are specific requirements regarding the time period allowed for the eligible employee to make a determination regarding acceptance of the offer. This period must be followed by a "cooling off" period, even if the employee accepts the plan. During this period, the eligible employee may change his or her mind and reject the offer, even though a formal resignation has been submitted. MULTIPLE WINDOW PERIODS... More than one window period may serve to increase the effectiveness of the plan. It may be appropriate to have different window periods for different employee groups. COMMON TERMINATION DATES... Termination of employment may be one http://www.epcintemet.com/earlybuyoutplans.html 12/30/03 EPC Grpup, of Companies Page 3 of9 common date, or there may be two or more termination dates. The window period may be the same, as long as the required period for consideration and 'cooling off' are observed. Care must be taken to avoid confusion as to termination dates and requirements for eligibility for the optional termination dates. DOCUMENTS ... The plan which is offered to the employee must be formalized with binding contracts. In addition, the employee may be required to waive certain rights in the future in return for the payment or payments he or she receives. The requirements for such documents provide that the employee shall have them for specific periods of time prior to close of a window period. Legal counsel must review the language and time requirements. TAX IMPLICATIONS ... Tax treatment of plans vary with the type of plan offered. The eligible employee must have a clear and concise understanding of the taxation of benefits based upon the applicable tax laws. Income taxation and the method of handling and explaining of applicable tax requirements are very important in the success or failure of a plan offering. Legal review is always necessary. bC3CI< toJQP III. IMPLEMENTING THE PLAN PLAN ANNOUNCEMENT ... Plan eligibility and details of the offering must be made available to all employees. In addition there are requirements for presenting information as to eligibility at various ages using employee data. Employees on disability, sabbatical, leave of absence, and layoff should also be included. GENERAL MEETING... A general meeting, conveniently scheduled for employees and spouses at the beginning of the window period is important to the success of the offering. This meeting should include basic information on the plan, offered eligibility, important dates, resource material, and the reasons the employer is offering the plan. It is also important to explain the tax aspects of the plan as it may relate to total income. Schedules for individual counseling can be completed following this meeting. Spouses should be invited to this meeting, as they are usually an important party in making the decision to accept or reject the offer. INDIVIDUAL COUNSELING... Each person who is eligible should be given the opportunity for a one-on-one, confidential counseling session. These sessions are one of the most important aspects of a plan offering. As a general rule, employees do not wish to discuss personal financial matters and/or other personal matters, which may be part of the decision process. Competent, confidential third party counseling can increase participation as much as 50% to 70%! Prior to the counseling session, personal financial data must be collected, analyzed and incorporated in a meaningful presentation for each employee counseled. It is strongly recommended that the total retirement income picture be included in the analysis. This enables the employee to compare pre and post income. Health, dental and other insurance information must also be included in these sessions. Counseling is often an overlooked area. Individual counseling requires the most planning and preparation in a plan offering, and is the single most important element for plan participation. http://www.epcintemet.com!ear lybuyoutplans.html 12/30/03 EPC Gr:oup. of Companies Page 4 of9 FOllOW-UP INFORMATIONAL SERVICE... As employees consider the offering, invariably additional questions arise. Even after meetings, memos, and individual counseling, questions must be addressed. Specific directions for answering questions from employees, accountants, attorneys, financial planners, insurance agents, and other advisors must be maintained during the window period. A single, central location and phone number should be designated to answer all questions. AGREEMENTS, WAIVERS, BENEFICIARY FORMS... The agreement and other related documents, including the beneficiary form (if applicable), depending on the nature of the offer, must have been in the hands of the eligible employee for the time prescribed by law. These forms, together with a letter terminating employment, must be signed and collected within the window period. Specific instructions for turning such forms into the employer must be given in clear language with date and time limitations spelled out. Each form should be date-time stamped to insure that they were received within the prescribed period. If the forms are mailed or delivered by someone other than the employee, notification of receipt of the form should be mailed to the employee. Once the date is established, exceptions cannot be made, as they could invalidate the window period and open the door for persons who decide too late to accept the offering. p~<::* totQP IV. MANAGING THE BENEFITS BENEFIT PERIOD REQUIREMENTS... Benefit period requirements include: payment calendar, income tax reporting system, beneficiary procedures, death proceeds authentication procedures, beneficiary payment method, direct deposit of checks option, change of name and address forms, lost check replacement policy, check stop payment and replacement policy, account audit procedures, to name a few. Policies for the administration of the benefits must be clearly enunciated to the participants. TAX AND lEGAL AUTHORITY RESOURCE... It is quite usual that tax and legal questions will arise during the benefit payment period. Such issues, which may have been explained during the enrollment period, nevertheless, must often be addressed again. In the early years, particularly at tax time of the year, inquiries can be expected from not only participants, but also, tax advisors, accountants, attorneys and financial planners. Applicable IRS code must be available to address such issues. The IRS may raise issues with participants regarding the taxation of benefits received by the taxpayer (participant). A system to handle all such issues and questions must be in place during the entire benefit payment period. Thus, ongoing administrative procedures can be for many years. pack. totop V. ALTERNATIVE APPROACHES http://www.epcintemet.comlear lybuyoutplans.html 12/30/03 EPe Grqup. of Companies Page 5 of9 TOTALS COST VERSUS BENEFITS ... Plan objectives, no matter how carefully developed, and do not just occur because the plan is offered. The plan offering must include a meaningful benefit, professionally presented, and individually interpreted and, must all fit together to achieve outstanding result. The employer simply offering the benefit is the most prevalent reason for plan failures. There are many factors that only experience in offering and managing such plans can address. Setting aside the considerable legal aspects for the moment, let's examine the acceptance or rejection levels in the total process. The Superintendent.. As the responsible administrator to the board, the superintendent must not only have a complete understanding of the plan offering, but also the confidence that the results projected can be achieved. There must be agreement by involved administrators regarding the many facets of the offering. The board must not only understand the financial aspects of the plan, but also the impact of the offering on the educational process. A clear statement of the plan objectives must be presented to the board, with complete details available for examination. Employee Bargaining Units ... Incentive buy-outs may be considered a matter of wages and salaries, an as such require the approval of the bargaining unit. Thus, it is possible that such plans are part of the bargaining process. Often they replace, or at the very least supplement pre-existing retirement 'bonus' clauses in the contractual employee agreements. An enthusiastic acceptance of the plan by the collective bargaining team can be most helpful in achieving desired objectives. The Community.. Due to the major impact on the educational process, the interested community must also have a clear, concise, although perhaps not as detailed, understanding of the plan. The issue of the effect on the educational process will arise, and should be addressed from the onset in presenting the plan to those who participate in school matters on a regular basis, and those who will come forward when such a plan is presented. All the 'negatives' must be anticipated in advance. Typical of the negative responses are: "We are going to pay employees to leave, when we do not have enough money to pay the employees we have?" or "We are going to lose all our most experienced staff, and replace them with untried, inexperienced staff!" These and other reactions must be anticipated if the plan is to be adapted. Each can be dealt with when explained in context. The Eligible Employee... Many plans, which do not succeed, do so for the simple reason that the eligible employee's perception of the plan does not measure up to the employer's idea of a "meaningful benefit." If the plan benefit falls short of achieving the meaningful benefit status, or, is not properly presented, the plan will not only fail, but will create ill-will, and enormous additional cost to the employer. Only those who were leaving anyway will accept the plan. In fact, some that were going to leave will not leave hoping for a better plan in the next year or two! Historically, such plans have been offered in the past and continue to negatively influence employers' opinions of buy-out plans. The comment, "We tried it once and it did not work," is often heard when the idea is reintroduced to employers. It "did not work" because it was doomed to fail from the beginning due to its perception by the employees! The idea was good, but the plan or its implementation failed. A properly http://www.epcintemet.com!earlybuyoutp lans.html 12/30/03 EPC Group' of Companies planned, well-executed incentive will work! Page 6 of9 COMPLIANCE WITH TAX LAW... Major issue- Incentive plans, which are not in compliance with both IRS and Department of Labor regulations, can be the source of major liability for the employer. In this regard, the teacher's associations at the state and national level have issued, in writing, stringent warnings to their membership and employers that serious consequences can occur if an incentive plan is not in compliance with such regulations. Attorneys and CPA firms representing the association, both at the state and national level have provided their opinions, which are deemed to be correct, regarding the tax treatment of specific plans. Extreme care must be taken to insure adherence to the regulations. LIABILITY INSURANCE ... A very important safety measures. The major decision to be made by the eligible employees is certainly one requiring preparation, thought and counseling. The employer must provide the resources that make this process easier for those that are eligible. If, a third-party counseling and administration firm is utilized, it is of the utmost importance that an additional safeguard is in place to protect the employer in the event of errors and omissions which could occur in the process, despite careful planning and execution Substantial Errors and Omission liability coverage is a 'must'. This coverage should be verified in advance, with E&O coverage provided by the third-party firm. Such coverage, the limits of which should be substantial, provides an additional layer of protection that could save the employer from substantial claims due to errors or omissions, which occur in the process. bc:lckJotop VI. THIRD PARTY ADMINISTRATION SELF-ADMINISTERED VERSUS THIRD-PARTY ADMINISTRATION... It is reasonable to consider designing and implementing an incentive plan without the services of a professional third party implementation. A careful understanding of the preceding material demonstrates the many facets of offering an incentive plan. It simply makes more sense to let the experts design and implement the incentive plan. Every aspect of the entire process has been tested and fine-tuned. A stream of income is undoubtedly more meaningful than a lump-sum incentive. Income to a retiree must be added to all other sources of post retirement assets. A lump sum is invariably looked upon as something to spend. Thus, counseling becomes the single most important aspect of a plan offering. A professional third party counseling program is far more effective than peer-to-peer counseling. Employees are reluctant to discuss personal financial matters with fellow employees, especially their superiors. The main reason for considering self-administered plans is to reduce costs. An incentive plan is only as successful as the attainment of the objectives established. Self-administered plans still have costs. To name a few: The cost of the plan documentation and the legal fees associated with it. http://www.epcintemet.comlearlybuyoutplans.html 12/30/03 EPC Group of Companies The cost of the actual plan implementation. Page 7 of9 The time set aside for counseling and preparation of resource material. The personnel and the associated cost of post plan administration. The additional potential liability incurred when counseling employees for major career changes. The major costs if the objectives are not attained. Third party implementation allows the employer to continue to engage in the education business rather than the retirement counseling business. There are substantial off-set savings in the third party approach. Prepared and tested documents are available. Expert retirement counseling and financial analysis capabilities are in place. In depth and finely tuned projections reduce the planning stage substantially, and create the confidence to accept or reject a proposed plan. The planning stage alone can be a costly procedure in time and effort. The third party should be thoroughly checked out. References from employer clients should be sought. Third party consultants should not be in the business of selling insurance products. The objective for the employer is not to sell insurance plans to the employee, but to achieve the objective set forth. Plans which require or urge employees to buy an insurance policy are suspect. Future income streams for the employee should not be based upon uncertain interest projections used in many life insurance plans. PClc; kJoJop VII. TOTAL PLAN COSTS There are many cost factors in a buy-out plan. The most obvious is the actual cost of the incentive offered. This cost represents the total "outlay" for the benefits only. In addition to this obvious cost are what could be referred to as "hidden costs". These costs are associated with the planning, pre-plan administration, legal costs in preparing contractual documents, beneficiary documents, waiver and release documents, the cost of time for persons involved in any part of the total process; including records management, review of eligibility, preparation of time lines, notices to eligible persons, preparation of general meetings, printing and related costs, assignment of personnel to answer questions which may arise, etc. The counseling process alone, by far the most important element in successful plan implementation, requires hundreds of hours spent one-on-one with eligible persons, represents the most costly of the "hidden costs". Counseling, referred to several times in this brochure, deserves special attention when considering costs. We have determined by comparing similar data in plans implemented with and without counseling that the individual counseling increases total participation 40 to 70%. Thus, when the "break even" level of participation is achieved, all additional participants reflect 100% cost reduction as reflected in the http://www.epcintemet.com/earlybuyoutplans.html 12/30/03 EPC Group of Companies actual plan results. Page 8 of9 The question of counseling raises other issues: Whom can best provide the counseling phase of the plan? It is not only our opinion, but the combined opinions of dozens of districts that professional third party counseling is far more effective than counseling provided by in-house personnel. The reasons as determined by actual experience are easily understood. "In-house" counselors, because they are 'fellow employees' often do not receive personal and private information which may be critical to the eligible person's decision to accept or reject the offer. This information can vary from financial issues to health and even personality problems they are experiencing. In addition, our experience tells us that in-house counselors must walk a narrow line to prevent them from losing their governmental immunity in making recommendations to employees in areas foreign to their training and authority. Third party counselors covered by substantial errors and omission insurance coverage can and do deal with areas which employer counselors, by the very nature of their positions cannot and do not explore. The actual cost of third party implementation cannot be quantified on the basis of the benefits alone. For example, if the total cost of the benefits is $1,000,000, without addressing the present value of money expended, the cost, including all of the administrative, counseling, documentation, enrollment, follow up would be approximately 103% of the total costs! In short, less than the actual outlays of dollars as benefits are paid. Considering present values and depending on the structure of the payments in terms of years, the third party administered plan could cost 2% to 3% more than the cost of a self-administered program, but would achieve 50% to 70% more favorable results. If, in considering plan costs, and factoring in all of the additional costs to be borne in the self administered (in-house) plan, especially the increased participation, the third party plan becomes the obvious course to follow. In discussing costs, I have only dealt with the plan implementation process. More precisely, the offer and enrollment of participants. The administration after implementation adds substantially to the costs. Because successful plans provide income for several years into the future, there must be an on-going provision to handle all of the many issues, which arise during the payment period, promised by the employer. Invariably issues arise from the simple: change of name and or address, late checks, lost checks; to the more involved: death claims, beneficiary disputes, legal and tax issues, fraudulently cashed checks, and tax issues with attorneys and accountants. Thus, when these additional costs are considered, third party plans are far more cost efficient. This last phase, post-plan administration must be in place and must be able to provide prompt, knowledgeable solutions to any and all problems, which arise. It is often overlooked in planning buy-outs, and can be an area subject to serious liability problems for the employer. Successful plans require detailed planning. All of the foregoing areas must be addressed in advance. It should be noted that plan costs of third party plans might vary depending upon investment rates at the time of the first full plan payment. Plan payments are "spread" so that third party implemented plans may be spread over several years' budgets. http://www.epcintemet.com/ear1ybuyoutp1ans.htm1 12/30/03 EPC Group of Companies back to top Page9of9 http://www.epcinternet.comlearlybuyoutplans.html 12/30/03 EPe Gr.cup of Companies Page 1 of 5 e~r::: EPC specializes in developing, implementing and administrating early buy-out incenti 'Il,,-ij. plans for schools, colleges, universities, and municipalities. Early Buy-Out Incentive Plan Experts 1.800.747. HulTl.;- ':,)nl'1ct u. F e,~ ~ 1k:"lrt, .1"",/ E .r'le ,,' 'It'rtf"t Ette(11 ':.~ F lar, ~ E.~tl\' 81J'i":"lt Pi ;[, ~,le" , "lll,.I,~: ':hem li:t T eac rlet R'~I'lllrtn1"flt F:",hlPIl i ,rll Relit ernc-rrl PI "f,r f'~1 "Vlf-~ [1~ ~~- - , '. , , ,l~ ,,' 1" . 1.:;'<' ~ ,"~. .::' "Structuring an Effective Early Buy-Out Severance Plan" Copyright @ 1990 - 2004 EPC The primary reasons for implementing an early buy-out plan are to reduce salary and fringe costs, which are 80% or more of the budget, and to take advantage of a favorable recruiting environment. A properly structured plan will increase top of scale staff exits by as much as 500% to 1200%, attracting early exits of top of scale staff that might not have left for 3, 5, 10, 15 or more years. There are many details to address to assure success of a plan, and it must be in compliance with legal and tax codes. The consulting firm of Educators Preferred Corporation has 15 years of experience specializing in the implementation of early buy-out plans for school districts, colleges, and public libraries. EPC has assisted over 250 districts in the implementation of successful plans, and they bring to the presentation their expertise in structuring an effective incentive plan. With school financing a major issue today, cost containment tools are a must. Carefully structured incentive plans can be effective and dynamic, helping to avoid program and staff cuts. We have combined our experience of eight years specializing in this field with the experience of superintendents, business managers, attorneys, and accountants throughout the state. The following is a brief list of the "do's and don'ts" we have compiled while working with school districts that have implemented successful plans. To help assure effective results from an incentive plan... Don't: iii Implement a plan without a thorough pre-plan analysis, as a plan may not be viable for your district II Implement a plan without securing a release and waiver of claims from participants that has been reviewed by legal counsel o Imbed the plan in the collective bargaining agreement iii Offer a benefit that will only appeal to those exiting in the next three years http://www.epcinternet.com!effecti yep lans.html 12/30/03 EPC Group of Companies Page 2 of5 II Proceed without knowing tax consequences for both the employee and the employer II Offer a plan that is age discriminatory, whereby the older the participant is, the less the benefit II Look at only the next one to five years, as this is too short term F.I Conduct the window period activities yourself due to liability and effectiveness issues FI Offer a lump sum, as it is perceived as a bonus not an incentive Do: . List the objectives of the plan: budget reduction, ideal number of opters, staff and program changes III Carefully examine the demographic profile of the staff . Project the analysis of the plan forward for ten years . Adhere to strict Age Discrimination requirements - get proper legal review . Understand tax consequences - get accounting review . Include FICA and pruchase of pension time costs when analyzing the plan II Subtract out normal retirements from projected results II Review the plan with the collective bargaining unit before final Board approval . Offer the plan on a one-time basis only II Secure a release and waiver of claims (reviewed by legal counsel) from participants . Prepare a Press Release before Board approval II Talk to other districts that have implemented successful plans .. Offer comprehensive employee counseling - this will increase participation by 500% or more . Have a recruiting and replacement plan in place as up to 20% (or more) of staff may elect the plan When a plan is correctly implemented and everyone understands the plan's structure and objectives, successful results will follow. Pre Plan Issues These are areas to address when determining if a plan is viable for your district, and the budget reduction that can be projected as a result of implementing a plan. II Plan Objectives I!I cost containment tool g staff revitalization II program changes II promote staff II maximum and minimum number of participants III Plan Structure http://www.epcintemet.comleffectiveplans.html 12/30/03 EPC Grj;>Up of Companies III eligibility: top of scale versus eligible to retire at state level . benefit: lump sum versus stream of income . - 8 year, 10 year, lifetime . - purchase of pension time ,. - alternate exit dates II - life insurance, with or without incidence of ownership II eligible groups: teachers, administrators, support III coordination with current contract severance benefits III - offer plan in lieu of contract benefits ,. - offer plan in addition to contract benefits II - integrate with contract benefits III Pre-Plan Evaluation II examine eligible pool .. examine top of scale salaries and pay trends for next ten years III examine hiring practices and the resulting entry level salaries II examine pay trends for next ten years . examine projected number of opters (need a model) II subtract out those that would have exited anyway, without a plan DI economic analysis: ten years, with selected assumptions Tax and Accounting Issues: Various approaches to tax issues Aggressive - take a chance? Conservative - based on solid tax code. Employer's responsibility I employee's responsibility W-2 reporting 1099-R reporting 941 reporting Review of plan by tax counsel Third Party Expertise . Legal counsel - tax counsel . Plan administrator - experience and track record . Liability coverage . Avoid insurance "solicitors" . Certified counselors Recruiting and Replacement Plan II Be prepared for "more than normal" activity (up to 20% of staff may opt) II Remain within guidelines of hiring step 1 - 3 consider re-assignments, consolidation, and promotions http://www.epcinternet.comleffectiveplans.html Page 3 of5 12/30/03 EPG Graup of Companies Page 4 of5 Plan Implementation . Administration Review: with Board of Education, with the bargaining unit(s) II window period activities II memo's, flyers, other communications II confidential employee packages . general meetings II confidential employee counseling + spouses, CPA, other decision makers [I guidance throughout the process Areas of employee concern that must be fully addressed: l'I plan benefits II pre versus post retirement income . insurances: health !Iife ! dental! vision . Social Security . tax issues . beneficiary issues . time lines II post retirement activities II career changes Demographic and Staffing Results of an Effective Plan Results of recent study: . 25% of those opting were age 38 to 52 . 28% of those opting were age 53 to 56 11 28% of those opting were age 57 to 60 II 15% of those opting were age 60 to 62 II 4% of those opting were age 63 or older Why people opt for plans (it's not just for retirement). 1]1 To pursue a new career. Education is no longer challenging or interesting. III To be with their family, children during formative years, or being with parents. fI To return to school; obtain an additional degree or a degree in a new field. III To retire early or as planned, with a more financially comfortable retirement. iii Too much stress in education. EI To pursue a position at another district or college. 51 To relocate out of state. Ell To join a retired spouse. htto:/ /www.epcintemet.comleffectivep lans.html 12/30/03 EPC. Qroop of Companies Page) ot ) . Health difficulties. II Current position may be or has been eliminated. This information contained within is proprietary to EPC. Please contact EPC before copying or distributing. As EPC is not tax or legal counsel, we recommend that any questions and all tax and legal decisions be reviewed by district advisors. http://www.epcintemet.comieffectiveplans.html 12/30/03