March 2001

Active Member Benefit Information

New law can require OP&F to pay support directly to ex-spouse

Beginning January 1, 2002, the courts can issue a division of property order that requires OP&F to pay a portion of a retirant's monthly service or disability benefit or a member's refund of contributions directly to the ex-spouse, subject to certain limitations. The passage of House Bill 535 late last year will give the court this new authority.

When determining spousal support in a divorce, dissolution, annulment, or legal separation of marriage, the court may consider the retirement benefits of the parties. Under current law, a member's OP&F pension benefit cannot be split and the only method for the enforcement of support orders against OP&F is provided through the issuance of Child Support Enforcement Agency (CSEA) orders.

CSEA orders, which can provide spousal or child support, require OP&F to deduct a specific sum from a member's OP&F pension and make payments directly to the bureau of support. In addition, the CSEA order can require OP&F to notify the bureau of support any time a lump sum payment of $150 or more is to be paid to the member. OP&F is then required to hold the lump sum payment for a designated time period, during which time a former spouse or child can secure an order from the court requiring OP&F to pay a specified amount of the lump sum payment to the bureau of support.

Under the new law, the courts will not be required to issue a division of property order. This will be another method for parties to divide property. Because current law provides a mechanism for enforcement of support rather than a means of division of property rights, the courts may order members to provide for the spouse's property interest in other ways. For example, the OP&F member could be ordered by the court to transfer funds from his/her own bank account to the ex-spouse.

In December 1999, the Board had formally opposed legislation that would allow the courts to order a division of property in divorce cases. "The Board had properly opposed this legislation as it was not in the best interest of our membership," OP&F Board of Trustees Chairman Bob Beck stated.

OP&F will publish more details on this new law in future issues of the Members Report. For more information, you can also visit the following website: www.legislature.state.oh.us and search for House Bill 535 under the 123rd General Assembly.

Important provisions of the new law include:

• OP&F cannot accept division of property orders until January 1, 2002 (must be in required format);
• For divorces that occurred prior to January 1, 2002, the courts can modify orders to include provisions under the new law if the court decree provided that the ex-spouse had an interest in the OP&F benefit;
• Payments to the ex-spouse do not begin until OP&F begins to make pension payments to the member;
• The amount to be withheld cannot exceed a certain percentage of a member's benefit or lump sum payment;
• The ex-spouse is only entitled to the amount withheld from the monthly benefit or lump sum and will not be eligible for other benefits from OP&F (such as health care);
• The courts will not be required to issue a division of property order;
• CSEA orders will have priority over spousal payments; and
• Payments cease upon the member's death.

Reporting a member's death to OP&F

When a member dies, OP&F is committed to assisting the family in effectively settling the estate and to quickly begin survivor benefits for the spouse and children, if applicable.

A family member or any other person should simply call OP&F's customer service department to report the death. To assist OP&F in most efficiently processing the account, the caller should provide the following information:

• Member's name and Social Security number
• Date of death
• Spouse's name, date of birth and Social Security number
• Names and Social Security numbers of dependent children
• Name of individual handling the estate

OP&F pays survivor pension and health care benefits to the member's spouse and dependent children who qualify. Reporting the Social Security numbers of the spouse and dependent children is very important because OP&F cannot begin calculating survivor benefit payments without them. When receiving a report of death, OP&F sends survivor application information within 48 hours and immediately begins to process interim survivor benefits. Upon the request of a survivor, OP&F can assign a specially-trained HOST volunteer to assist the survivor with the completion of the various forms required for survivor benefits.

If you have questions on reporting a member's death or other survivor matters, please call OP&F customer service toll-free at 1-800-860-9599.

Accrued liability discount program ends on May 15

OP&F is currently offering employers a program that discounts the amount of money that they owe OP&F for employee service prior to 1967. Through OP&F's accrued liability discount program, employers who submit payments of 72.5% of the amount owed will have their entire debit to OP&F cancelled-a discount of 27.5%! To benefit from this discount program, OP&F must receive the appropriate employer payments by May 15, 2001. Employers who do not participate in the discount program have until 2035 to repay this debt at 4.25% interest, as required by law.

Thus far, the program has resulted in a reduction of the amount collectively owed from $205 million to approximately $53 million since the program began in November 1998. The number of employers with this debt has been reduced from 183 to less than 130.

To obtain their payoff balance, which includes accrued interest, employers should contact OP&F's Finance Department.

Chairman of the Board Message

Dear Members:

It is with great sadness that I announce that Allen Proctor, Executive Director of the Ohio Police and Fire Pension Fund, has decided to pursue other challenges beyond OP&F. While the Board regrets Allen's decision, we granted his request because we have accomplished so much together at OP&F during his tenure.

OP&F hired Allen four years ago because of his strong reputation as a "Mr. Fix It." After we learned of Allen's leadership at Harvard, the New York State Financial Control Board, and the Office of Management and Budget of New York City, OP&F felt assured Allen could meet the challenges faced at OP&F and help turn OP&F around. We are pleased he has done just that. Under the leadership of the Board and supported by his senior staff, Allen helped OP&F reinvent itself. Some of the accomplishments over the past four years I would like to highlight include:

• building a strong and diverse senior staff focused on rigorous management principles.
• improving operations so that the time for a typical retiree to receive his first check fell from over 6 months to under 3 weeks and survivors are immediately provided for.
• working with the Board to put into place one of the most highly regarded disability determination processes across the nation.
• putting into place strong financial and budgetary controls to ensure the highest integrity in handling the funds of our 50,000 members.
• growing assets from $5.5 billion on his arrival to $9.4 billion in our latest financial statements.
• working with the Board to restructure our healthcare financing to support our current healthcare program well into the next decade.
• I am proud of the work we have done with Allen and know his accomplishments have left a strong and positive impact on OP&F. He indicated his desire to move on to new challenges.

As chairman of the board, I would like to be the first to wish Allen well and thank him for his years of service to our members. The next organization which hires Allen will indeed be very fortunate.

Sincerely,
Robert Beck, Chairman

Face Behind the Phone

Mike Beekman

Customer Service Representative Mike Beekman, who is approaching his one-year anniversary with OP&F, says that he enjoys his interaction with members and the problem solving that he encounters each day. Mike, a lifetime resident of Westerville, Ohio, grew up with his mother, police officer father, and an extended family that includes several police officers and firefighters. Growing up surrounded by police officers and firefighters is one of the main reasons why Mike is so successful in relating to the needs and concerns of OP&F's membership. When not at work assisting members, Mike says he enjoys spending time at home with his two border collies, fishing, playing baseball, and riding All-Terrain Vehicles (ATVs).

Facts & Figures

2000 Actuarial Report shows Fund making progress

OP&F's Actuarial Evaluation as of January 1, 2000, showed that OP&F made great strides from the previous year in funding benefits into the future. Interesting points from the evaluation include:

• Funded status increased from 86% to 88%, which means OP&F has 88 cents for every dollar of pension obligations-continued improvement in the OP&F's funded status indicates the long-term ability of OP&F to meet its financial obligations;
• Amortization period of unfunded liability decreased from 47.26 to 26.78 years-Senate Bill 82 requires OP&F to establish an amortization period of no more than 30 years by the end of 2006. To maintain this funding momentum, OP&F will set aside reserves of $1.2 billion to offset disappointing investment returns; and
• The amount of health care payments paid out on behalf of members increased while the percentage of the cost paid by benefit recipients decreased, which has been a consistent trend over the last several years. The new health care contribution schedule to be introduced on July 1, 2001,will ensure that benefit recipients consistently contribute 6% toward OP&F's overall health care expenses.

The Board and staff will use the information contained in this report as they make important decisions regarding health care funding and benefit enhancements into the future.

Planning for Your Retirement

Cost-of-living adjustments made on anniversary date for most retirants

Knowing when OP&F makes cost-of-living adjustments (COLAs) each year will help retirants plan their finances accordingly.

• Members who retired under the COLA plan after July 24, 1986, will receive a COLA on their retirement anniversary date each year. If the anniversary date is in the middle of the month, the increase will be prorated for that month.
• Members who retired before July 24, 1986, will receive a COLA increase on July 1 every year. All retirants in this category receive annual COLAs.

Retirants will receive annual cost-of-living adjustments (COLAs) unless they choose to retire on a non-COLA benefit. Only members with 15 years of service credit as of January 1, 1989, are eligible for non-COLA benefits and must choose between the non-COLA or COLA benefit options upon retirement. The base rate calculation of non-COLA benefits includes eligible termination payouts, which are not included in COLA based benefits. As a result, recipients of non-COLA benefits receive a larger base pension than that of COLA recipients and, for the first several years of their retirement, receive a much higher pension payment than those who chose the COLA option. Recipients of non-COLA benefits do not receive annual cost-of-living adjustments.

For more information on COLA benefits, please contact OP&F.

Questions from our Members

Q: Are OP&F members aware that their Social Security pensions will likely be reduced because they are also receiving a public pension from OP&F?

Submitted by Bruce "Ed" Caskey, Ret. Dayton Police Department

A: OP&F is unaware if this situation is common knowledge, so we are bringing the facts to our members' attention. The Federal Government's "windfall elimination provision" affects how your Social Security benefits are calculated if you receive a pension from work not covered by Social Security. Under this provision, the formula used to figure your Social Security benefit amount is modified, resulting in a lower benefit. So, although you paid into both Social Security and OP&F and accrued the necessary time to receive benefits from both systems, you most likely will not receive full pension benefits from Social Security. Please note that your benefits through OP&F will NOT be reduced if you receive retirement benefits from Social Security.

According to Social Security Administration Publication No. 05-10045, "A Pension from Work not Covered by Social Security," the windfall provision primarily applies to individuals who earned a pension from a government agency, such as OP&F, and also worked at other jobs covered by Social Security long enough to qualify for retirement or disability benefits. More specifically, the provision "applies to you if you reach 62 or become disabled after 1985 and first become eligible after 1985 for a monthly pension based in whole or in part on work where you did not pay Social Security taxes. You are considered eligible to receive a pension if you meet the requirements of the pension, even if you continue to work." Social Security will use the modified formula to figure your benefit beginning with the first month you receive benefits from Social Security and another pension system.

In addition, the "Government Pension Offset" may reduce Social Security benefits for spouses or widows who also receive a non-Social Security pension. There are exceptions to these provisions. For complete information, please contact the Social Security Administration at 1-800-772-1213 or visit their website: www.ssa.gov.

Bruce "Ed" Caskey retired on a disability benefit in 1990 after serving for 21 years on the Dayton Police Department. Following retirement, Ed headed to Florida where he worked as a hotel bartender and assistant manager. Unfortunately, serious illness three years ago prevented Ed from continuing to work. During that illness, Social Security gave Ed the bad news-despite his disability and the years that he had paid into Social Security, his monthly Social Security benefit would be reduced to $7 because he was also receiving a retirement benefit through OP&F. He hopes that other OP&F members won't be caught by surprise like he was. Ed has one daughter who is a Librarian and lives in Cincinnati.

Reception effectively brings together public safety organizations and new legislature

OP&F joined forces with its member associations to host a reception for the 124th General Assembly on February 27 in Columbus. This highly successful event was well attended by members of the Senate, House of Representatives, and staff from other government affiliates.

The reception marked the first event in recent years that was jointly hosted by OP&F and its member organizations. The organizations that co-hosted the event with OP&F included: the Cleveland Police Patrolmen's Association, the Fraternal Order of Police, the Northern Ohio Fire Fighters, the Ohio Association of Chiefs of Police, the Ohio Association of Professional Fire Fighters, the Ohio Fire Chiefs' Association, the Ohio Patrolmen's Benevolent Association, the Police and Fire Retirees of Ohio, and the Toledo Police Patrolmen's Association.

Bob Beck, Chairman of the OP&F Board of Trustees and President of the Cleveland Police Patrolmen's Association, believes that the groups' goal in hosting the reception was realized. "As a representative of both OP&F and the Cleveland Police Patrolmen's Association, I think that this reception was highly effective in making essential contacts and generating support for all organizations involved," he said. "The person-to-person contact impressed representatives, senators, and officials that our members are individuals that are backed by a strong, unified front working toward positive common goals for all members."

OP&F recently banded together with these organizations to build a unique network that will focus on legislative matters that affect active and retired public safety officers in Ohio. The legislative reception was the group's first official event toward this end. Network members plan to utilize the contacts made at the reception to promote understanding, initiate crucial new laws, and reintroduce necessary legislation not passed in prior sessions.

Members of the legislative network will continue to meet regularly to map strategy to work with lawmakers on topics of significance to members.

Retiree/Survivor Benefit Information

OP&F Now Determines Taxability for Certain Retirants and Survivors

OP&F is pleased to provide an important new service to many of our members and survivors! OP&F now calculates and reports the taxable amount of annual benefits for members and survivors on Form 1099-Rs if the member retired or was disabled on or after November 19, 1996. Reportable income for these individuals was printed on the Form 1099-Rs for the 2000 tax year, which were mailed in January 2001.

In addition, OP&F mailed Form 1099-Rs for the 2000 tax year to all members, regardless of whether or not their benefits were taxable. In previous years, OP&F did not produce 1099-Rs for members whose benefits were not considered taxable under an IRS Private Letter Ruling prepared for OP&F in 1996. This mostly affected members receiving disability benefits and their survivors. Several of these members asked OP&F to annually issue them a 1099-R, as these tax documents are a convenient form of income verification for lenders or others who request income information. The 1099-Rs for these members will show zero dollars as being taxable.

For those benefits that OP&F determines taxability for, OP&F uses the IRS-required method. Due to the tax laws in existence prior to November 19, 1996, OP&F is unable to determine the taxability for members and survivors of members who retired before that date. When preparing tax returns, OP&F recommends that these members and survivors seek the assistance of a tax professional.

OP&F included informational tax brochures with the February 1, 2001, pension checks and direct deposit statements. Members will need to use the Statement of Contribution that they received at retirement to complete their taxes. To receive a duplicate copy of any of these documents, please contact OP&F customer service at 1-800-860-9599.

Changing tax withholding amounts

To change the amount of Federal or Ohio tax withheld from your benefit check, please send written notification to OP&F including your name, Social Security number, and signature. Specific forms also are available, but are not required. OP&F can only withhold "state tax" for Ohio.

Members receive personalized letter regarding their new health care premium

All benefit recipients received a personalized letter from OP&F in early March informing them of their new health care contribution beginning July 1, 2001. OP&F's new health care contribution schedule is simpler and more equitable with only three categories and three monthly rates that include: single-$25.35; two-party-$35.49; and family-$45.63. The rate a benefit recipient pays is simply based on the number of family members enrolled in the health care program.

The letters also served as a reminder to benefit recipients with total "household income" of less than $10,000 annually that they could now apply for a 30% discount on health care monthly premiums for the period of July 1, 2001 through June 30, 2002. Benefit recipients who believe they may qualify should contact OP&F customer service at 1-800-860-9599 to request an Application for Health Care Contribution Discount. To apply for the discount, benefit recipients should make sure that OP&F receives their completed application by April 30, 2001.

OP&F is committed to providing a health care program for retired members and their families well into the future. The implementation of the new health care contribution structure is part of OP&F's long-term plan to fund health care, which includes ensuring that members collectively contribute 6% toward OP&F's annual overall health care expenses. Without this change, the share of health care costs covered by members would eventually decline to 1%. In addition, the plan also allocates more employer contributions and potentially more investment income to health care and ensures that the OP&F Health Care Stabilization Fund is protected. The Board will review health care expenses annually to determine the premiums and discount that will be effective on July 1st each year. As required by state law, OP&F deducts health care contributions from monthly benefit payments.

Disability recipients to receive 2000 Annual Earnings Statements

OP&F will mail 2000 Earnings Statement forms to disability retirants on March 31, 2001. State law requires disability retirants to submit a statement of earnings to OP&F each year. Disability retirants must complete and return their forms to OP&F by September 1, 2001, unless they have been waived from filing. Pension and health care benefits will be suspended for disability benefit recipients who do not comply. Disability retirants who have applied for and been granted a waiver, pursuant to the requirements set by law, have been notified by letter.

Mastectomy and related procedures covered

The OP&F medical expense benefits program provides coverage for mastectomy surgery and related medical treatment including:

• Reconstruction of the breast on which the mastectomy was performed;
• Surgery and reconstruction of the other breast to present a symmetrical appearance; and
• Prostheses and treatment of physical complications at all stages of the mastectomy procedure, including lymphedemas (swelling of the hand and arm on the operated side).

The Women's Health and Cancer Rights Act of 1998, signed into law in October 1998, mandates that group health plans offering mastectomy coverage must also provide coverage for reconstructive surgery in a manner determined in consultation with the attending physician and patient. The OP&F program has covered these services for quite some time. For more information regarding the coverage of these services, please contact your health plan carrier at the number on the back of your health care card.

In Remembrance-Governor James A. Rhodes, 1909-2001

As governor, Rhodes was instrumental in the creation of the Ohio Police & Fire Pension Fund, which began operation on January 1, 1967 after the passage of House Bill 642.

Board Update

Spring election to determine active police officer seat

In May, active police officers who are eligible will have the opportunity to vote in an election to fill the active police officer spot on the OP&F Board of Trustees. The 4-year term of the current police officer who holds this seat, Bob Beck (Cleveland), will end on June 3, 2001. OP&F distributed information regarding nominating petitions and filing information in February. OP&F must receive nominating petitions no later than April 2, 2001. Results will be reported in late May. To ensure their right to vote, active police officers should make sure that their current address is on record at OP&F by April 9, 2001-ballots cannot be forwarded.