About OP&F
OP&F Members Report Newsletter
June 2002
Governor signs DROP legislation; DROP enrollment to begin January 2003
Members of the OP&F Board of Trustees were pleased to join Governor Taft on April 23, 2002 as he signed Senate Bill 134 into law. This new law will allow OP&F to offer a Deferred Retirement Option Plan (DROP) to eligible members.
"OP&F applauds Governor Bob Taft and members of the Ohio General Assembly for recognizing the value of providing an additional retirement benefit to Ohio's public safety officers," said OP&F Board Member Ken Gehring. "We commend Senator Louis Blessing's leadership in sponsoring Senate Bill 134 in the Ohio General Assembly and thank Representative Kirk Schuring for his key role as a co-sponsor of the bill and in quickly bringing the legislation to the floor of the Ohio House of Representatives."
This exciting benefit enhancement allows eligible police officers and firefighters the opportunity to accumulate additional money for retirement. Although eligible for retirement, DROP participants continue to work as police officers or firefighters. Even though these members continue to work, their retirement income is determined upon DROP entry and while they continue to work and draw their normal salaries, the amount they would have received in retirement benefits accumulates tax-deferred at OP&F on their behalf for a minimum of three years and a maximum of eight years. Upon leaving DROP and retiring, members begin to receive their monthly pension payment and health care benefits, and can also withdraw funds from their DROP accrual in a lump-sum payment or installments, with certain limited exceptions.
OP&F encourages all active members to consider this benefit enhancement when making decisions about their final retirement dates. OP&F recently announced that DROP enrollment would begin in January 2003. Members can participate when they become eligible for a normal service retirement, which is currently 48 years of age or older with 25 years or more of service credit. Members who have already retired will not be eligible for DROP, although members who retire and then return to a position covered by OP&F are eligible for defined contribution plan benefits as a "re-employed retirant."
Senate Bill 134 gives the OP&F Board of Trustees the authority to establish the program commencement date. For more information on DROP, please plan to attend one of OP&F's upcoming pre-retirement seminars (dates on Page 5) or visit OP&F's website (www.op-f.org), which features a new DROP Resource Guide, DROP Benefit Calculator, and other important information.
Board Update
Gehring to serve second 4-year term; election uncontested
Ken Gehring, a firefighter from the City of Toledo, began serving another 4-year term on the OP&F Board of Trustees this month. Mr. Gehring, who has held this seat since 1998, ran unopposed in this year's election. Mr. Gehring, who is a captain on the Toledo Fire Department, has been a firefighter for 23 years and was President of Toledo Fire Fighters Local 92 from 1994-1998.
Beck named Police Officer of the Year for 2001
The Greater Cleveland Police Officers Memorial Society recently named OP&F Trustee Robert Beck as the Police Officer of the Year for 2001. Every year, the Society honors a law enforcement officer who has served the public and fellow officers in a manner that has exceeded expectations. Beck, who has been a police officer for the last 33 years, has served as President of the Cleveland Police Patrolmen's Association for the last 11 years and has been on the OP&F Board of Trustees since 1997.
Saunders selected as Employee of the Month
O'Neal Saunders, the Auditor of State's representative to the OP&F Board of Trustees, was selected as the February 2002 Auditor of State Employee of the Month. Mr. Saunders serves as Fiduciary Counsel in the Auditor's Legal Division and has worked for the Auditor's Office since February 1995. He has sat on the OP&F Board since 1995 and also represents the Auditor of State on the Boards of the other Ohio retirement systems.
DROP Questions and Answers
When does the DROP program officially start?
OP&F will have the program in place for members in January 2003.
When can I enroll in DROP?
Members eligible for a normal service retirement (48 years of age or older with 25 years or more of service credit) can enroll when OP&F's program is in place in January 2003.
Do I have to designate how long I will participate?
No.
What if I decide to continue working beyond the maximum number of years allowed?
DROP participants are required to retire after their DROP participation period ends. If a member chooses to continue working beyond eight years, the member forfeits his or her DROP benefits and receives normal benefits upon retirement. However, they will regain their service credit for the DROP participation period, which had been frozen at the point of DROP entry.
Are DROP participants eligible for enrollment in OP&F's medical expense benefits program?
No. Eligibility for OP&F's medical expense benefits program begins when members retire and start receiving a monthly pension benefit from OP&F.
How do I terminate my DROP participation?
DROP termination can only occur under the following circumstances: termination of employment, disability award acceptance, death, and continuing to work after eight years. By law, members must wait until three full years have elapsed from the date of DROP entry before they can receive any distribution of funds from the DROP accrual.
Are there penalties for terminating the program before three years?
If termination occurs within three years of joining the program, participants forfeit all of their DROP interest. Continued participation is necessary to offer the program to members while also keeping it cost neutral to OP&F.
Can I transfer to another employer while I am participating?
DROP participation continues as long as there is no break in service. Members who are planning to transfer to another employer should contact OP&F prior to making a transfer to ensure the transfer does not adversely affect their benefits under DROP.
What if a member dies while participating?
The spouse will receive the full balance of the DROP benefits accrued for that member, regardless of how long the member was in the program. If there is no spouse, DROP benefits will be payable to the designated beneficiary. If there is no spouse or beneficiary, the benefits will be payable to the estate. A member's survivor would also be eligible for the 50 percent (or larger percentage if selected) joint and survivor annuity benefit, regardless of whether the member elected this benefit at the time of DROP participation. Any other death benefit as provided under Ohio law would also apply.
What if members become disabled while participating?
Members still have a disability benefit option while participating in DROP. DROP participants who are awarded disability retirement will have a choice of either staying in DROP and declining their disability award or accepting the disability award and forfeiting their DROP benefits. If they choose their disability benefits, their service credit earned and salary paid during their DROP participation will be used for the calculation of disability benefits as applicable, but the DROP benefits are forfeited.
Once I retire, how can I receive my DROP distribution?
Once a member retires and after three years have elapsed from the date of DROP entry, the member can receive the distribution in monthly installments or as a one-time lump sum payment that may be subject to taxation. The member forfeits the DROP benefit if he or she continues to work beyond eight years.
Will a member's monthly pension amount be recalculated upon actual retirement?
No. A member's final retirement benefit and DROP accrual is calculated based on the "normal service retirement formula" using the service credit and average annual salary upon the time of DROP entry. A member does not continue to accrue service credit during DROP participation.
Will a member still have the option to retire under a non-COLA benefit plan?
Benefits for DROP participants are calculated using the COLA benefit plan, providing for annual 3% cost-of-living adjustments. Under this benefit plan, OP&F calculates the member's benefits by multiplying the average three highest years of salary, compensation and earnings by a percentage mandated by law. The COLA benefit plan does not include terminal pay such as unused sick leave, vacation and personal leave. Members are encouraged to contact OP&F for more information on COLA versus non-COLA benefit plans.
How can I get more information about DROP?
Members are invited to learn more about DROP at the upcoming pre-retirement seminars to be held around the state this summer and fall (see page 5 of this newsletter for a listing of dates and locations). OP&F will also continue to publish updates on DROP in the quarterly member newsletter and on its web site: www.op-f.org
Executive Director Message
Dear Members,
As highlighted on the front page of this newsletter, we are pleased to announce that enrollment into our Deferred Retirement Option Plan (DROP) will begin in January 2003. The recent passage of Senate Bill 134, which permits OP&F to offer DROP, is the culmination of over five years of work by past and present OP&F Board members, staff members and others. I would personally like to thank all individuals involved in the passage of this legislation including the many associations who publicly expressed their support of the bill, and even testified to the legislature in its support.
The DROP program was created because many of you indicated your desire for such a program. I would encourage you to seriously consider this option when you become eligible for normal service retirement. The DROP plan that we have created can greatly benefit you and offers you further resources for your retirement.
DROP is a retirement benefit enhancement and should not have any impact on your employment status under your collective bargaining agreement since you will continue to be an active employee. If your employer proposes changes that would adversely impact your right to participate in DROP, we would encourage you to seek legal counsel regarding this matter.
To see for yourself what DROP can mean for you, please visit our website (www.op-f.org), which contains a DROP Resource Guide and a DROP benefits calculator. Using this calculator, you can get an estimated total of what your DROP value could be through eight years of participation. In addition, I would invite you to attend one of our up-coming pre-retirement seminars, which will highlight the DROP plan (see Page 5 for dates and locations).
We look forward to rolling out this exciting new benefit to our eligible members next year and I hope that many of you will take advantage of the program.
Sincerely,
William J. Estabrook
Executive Director
Face Behind the Phone
As a new member of the Customer Service Unit last summer, OP&F Customer Service Representative Jaysherrie Wheeler was ready to go above and beyond the call of duty, but she had no idea to what extent until the tragedies of September 11th struck. Shortly after the attacks, she received a call from an OP&F member who was stranded at the airport, thousands of miles from home. Jaysherrie offered to help, and within a few hours had arranged for alternate transportation for the member. The member was extremely thankful and sent special appreciation for her efforts. Although Jaysherrie has been with OP&F for five years in other positions, she finds the customer service position "especially rewarding." The member she helped last summer and others would most assuredly agree that the customer service position fits her well. When she's not assisting OP&F members, she and fiancé Mel Tufts, along with his children, Whitney and Merrill, spend much of their time together participating in church activities and redecorating their new home.
Planning for Your Retirement
The Challenges of Providing Health Care Benefits
OP&F realizes that health care is an important part of your retirement benefit. Providing these benefits is becoming an increasingly difficult task, however, due to the following challenges:
- Health care benefits are a goal, not a guarantee like your pension benefits. By law, OP&F is only able to offer health care benefits as long as the funding of those benefits does not adversely affect the payment of pension and survivor benefits.
- Health care costs are rising. When OP&F began providing retiree health care benefits in 1974, health care expenditures were approximately $3 million. In 2002, OP&F expects to pay $143.9 million in health care benefits on behalf of benefit recipients and their dependents!
- By law, health care benefits can only be paid with funds from certain sources. These benefits must be paid through retiree-paid contributions and employer-paid payroll contributions, which OP&F supplements with restricted investment income (see chart in the Facts and Figures section of this newsletter). The narrowing gap between the number of retirees and active members, and our sluggish economy will continue to push more of the cost load onto retirees.
- OP&F's health care stabilization fund could be depleted by 2009 if no action is taken. This special fund is set aside to pay for OP&F health care benefits and it is imperative that benefit recipients pay more towards health care costs in order for OP&F to continue these very important benefits.
Because of these issues, all of the Ohio Retirement Systems are faced with finding ways to fund health care in the future. Many retirement systems across the nation do not even offer health care benefits to retirees. Despite these challenges, however, the Board is determined to provide current and future retirants with quality health care benefits. This year, the Board and staff will explore other health care plans and funding options and create a long-term health care plan. Be sure to watch future issues of the Members Report for updates.
Questions from our Members
Can I be waived from my annual requirement to file a statement of earnings as a disability retirant?
Submitted by Dennis Superak, Ret. City of Girard Police Department
As a condition to continue receiving disability retirement benefits, Ohio Law requires each disability benefit recipient to report the previous year's monetary earnings to OP&F on an Annual Earnings Statement (AES) by September 1 of every year. If a disability benefit recipient fails to file the statement, his or her benefits may be suspended until the requirement is met. If a benefit recipient with suspended benefits fails to file the AES by the next year, the law requires OP&F to terminate his or her benefits. The law does allow the Board to consider a waiver of the AES requirement as long as certain requirements are met. Some of the qualifying conditions for a waiver that are included in the Board's waiver policy include, but are not limited to: certain types of cancer, some joint replacements, paralysis, multiple sclerosis, muscular dystrophy, hemorrhagic disease and seizure disorders. To request a waiver, members must submit the request in writing and should also include supporting medical documentation. OP&F's medical advisor will then review the request and supporting documentation and present a recommendation to the Board. This process can take up to four months and the member may be called upon to provide additional documentation. OP&F notifies members in writing immediately following the Board's decision.