Annual Implementation of the Supplemental Benefits Plan
The following are key steps and time periods during which they are executed.
|1st pay period of the fiscal year||Benefit payments are increased on the payroll system as detailed in the Administrative Policy: Supplemental Benefits Plan. Annual payments totaling $200 or less are paid in a lump sum.|
|July||The annual actuarial valuation, delivered during the previous fiscal year, is used to determine funding for the next year. Deposits are made from both O&M and self-supporting units to meet minimum funding requirements.|
|September||Human Resource Management Systems (HRMS), Accounting Services, and Employee Benefits provide information to Watson Wyatt for the annual valuation.|
|January||The University of Minnesota Retirees Association requests any formula increase over and above the annual cost of living. Discussions with the Vice President for Human Resources and the Provost are held and a final decision on the next year's formula is made.|
|March||HRMS runs budget reports after Employee Benefits provides the new formula and cost of living information.|
|No later than April/May||Watson Wyatt delivers the final actuarial valuation for the plan year beginning the previous July 1.|
|May||HRMS runs reports detailing the new benefit payment amounts and they are entered into PeopleSoft and proofed for accuracy. The effective date of the change is the first pay period of the new fiscal year.|
|June||Employee Benefits mails letters detailing the benefit changes to participants.|
Calculation of Benefits
Supplemental Benefit for Pre-October 1, 1963 FRP Participants who retire on or after age 65
The supplemental benefit for this category of participants will be the greater of the following amounts:
- Amount 1, calculated as a (less b), below:
- Determine 2% of the Final Five Year Average Salary for each year of actual service (maximum of 30 years), but not to exceed the following:
- Professor $8,500
- Associate Professor $8,000
- Assistant Professor or Instructor $7,500
Deduct $1,524 from this amount (the estimated 1963 Social Security level).
- Calculate the Estimated Life Annuity.
- Amount 2, calculated as a) less the sum of b) and c) below:
- Determine 1-2/3% of the Final Five Year Average Salary for each year of actual service, to a maximum of 30 years.
- Calculate the Estimated Life Annuity.
- Determine the estimated Primary Social Security Amount payable based on continuous coverage from the date of hire at the University (or January 1, 1955, if later), to the date of retirement.
It is anticipated that all active employees in this eligible employee category are age 65 or older on the adoption date of this policy, and that all of these employees have accumulated FRP benefits at a level that would eliminate their eligibility for the supplemental benefit. As a result, this section has limited, if any, applicability to those individuals not yet retired.
Post-Retirement Benefits Increases, established July 1, 2002
Each July 1, Eligible Participants will receive a benefit increase equal to the sum of 1. and 2. below:
- The lesser of:
- The difference between the current year's COLA Amount and the Prior year's COLA Amount less the difference between the current year's Primary Social Security Amount and the prior year's Primary Social Security Amount. The resulting amount is reduced proportionally for service at retirement of less than 30 years.
- $36,000 reduced proportionally for service at retirement of less than 30 years, less the sum of the University Supplement (converted to a life annuity, if applicable), the Unisex Supplement, the Primary Social Security Amount and the Estimated Life Annuity.
If the retiree elected a joint and survivor payment option, the increase is reduced by 20%
- The lesser of:
- The amount of $8.00 per year for each "point," where one point is awarded for each year of service up to 30 years and 2 and one-half points are awarded for each year since retirement.
- $36,000, reduced proportionally for service at retirement of less than 30 years, less the sum of the actual University Supplement (not converted to a life annuity and including the COLA in (a)(1) above with joint and survivor reduction, if applicable), the Unisex Supplement, the Primary Social Security Amount and the Estimated Life Annuity.
Periodic retirement benefits paid pursuant to the FRP are equalized for similarly situated males and females effective July 1, 1982. To the extent that the benefits in addition to those which are available from the annuity contracts are required, such amounts will be paid through this plan. The equalization is to be calculated in the following manner:
For individuals not yet retired:
All contributions to the FRP after July 1, 1982, are applied to purchase annuities under unisex rates. Total benefits (annuities plus supplement) from contributions to the FRP which are made prior to July 1, 1982, are determined by using male mortality rates for all University employees and female mortality rates for all joint annuitants under the joint and survivor option.
For individuals already retired:
The amount of total periodic benefit (annuity plus supplement) being paid is recalculated using male mortality rates for all University employees and female mortality rates for all joint annuitants under the joint and survivor option. In those instances where the application of such mortality rates provides for increased benefits, such increased benefits will be the unisex adjustment on a retroactive and prospective basis.