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The answers below are based on the recommendations OP&F submitted to the Ohio legislature. It is yet to be determined if these will be altered – or if any new changes are added – in the legislation.
Q: What is the 10-year Treasury rate now? And where can I find more information about it.
A: While the rate is published daily, the DROP rate will be reset quarterly. Thus, the rate that would be used for the 1st quarter of 2011 is the rate for December 31, 2010, which was 3.30%. The source for this rate will be - FRB: Federal Reserve Statistical Release H.15 - Historical Data. The website is: http://www.federalreserve.gov/releases/h15/data.htm
Q: Is the increase in member contributions from 10% to 12.25% implemented gradually or all at once?
A: The revised funding plan approved by the Board calls for the increase to be implemented over three years (0.75% per year).
Q: By reducing the percentage of member contributions credited to DROP, does that mean we do not get all of our money we are paying?
A: As with the current DROP formula, not all of the member contribution will go into the participant’s accrual. The new recommendation just changes the formula. The current formula calls for 50% of the member contribution to be credited to the DROP accrual in the first two years of participation, with 75% in year three and 100% in years 4-8. This change to the new formula would impact only new DROP participants after the effective date of the legislation.
Q: What percentage of our contributions will go to our DROP accrual?
A: OP&F has recommended that 50% of a member’s contribution will be credited to their DROP accrual for their first 3 years in DROP, 75% of the contribution for years 4-5, and 100% for years 6-8. This change would impact only new DROP participants after the effective date of the legislation.
Q: Is the new formula for the percentage of member contributions credited to DROP for new participants only?
A: Yes, the formula currently in place would stay in place for anyone already in DROP.
Q: Is the elimination of COLAs during DROP for just new participants to the plan or everyone enrolled?
A: This recommendation would affect only those who enter DROP after the implementation date of the legislation. Those who are currently in DROP and at least age 55 would continue to receive a COLA.
Q: Does the delay in COLA until age 55 apply to those currently in DROP?
A: Yes, COLAs will be delayed until age 55 for all members, including current DROP participants. Although the “no COLA while in DROP” recommendation affects only new particpants to the plan, the age 55 delay affects all members. At the time of implementation, if a current DROP participant is under the age of 55, they will not receive a COLA credited to their DROP accrual until they reach age 55.
Q: When will these changes go into effect?
A: The final legislation passed into law will specify when each change will go into effect. Two pieces of pension reform legislation were introduced on Feb. 1: Ohio H.B. 69 and Ohio S.B. 3. The recommendations from the retirement systems will be the basis of the initial version of the bill.
Q: Will the increase in the normal service retirement age to 52 affect when I can enter DROP?
A: Only for those hired after the implementation date. For all current active members, they may still enter DROP at age 48 with 25 years of service. For those hired after the implementation date, they are eligible to enter DROP at age 52 with 25 years of service.