TACOMA EMPLOYES' RETIREMENT SYSTEM

1. TACOMA EMPLOYES' RETIREMENT SYSTEM

2. Orientation Outline I Sources of Retirement Income II How the Plan Is Funded and Managed III Service Retirement Benefits IV Benefits Other Than Service Retirement V Recent Plan Enhancements VI Calculating Your Retirement Benefit VII Deferred Compensation

3. Sources of Retirement Income • RETIREMENT SYSTEM ANNUITY • SOCIAL SECURITY • DEFERRED COMPENSATION • PERSONAL SAVINGS & INVESTMENTS

4. What is the Tacoma Employes’ Retirement System? The Tacoma Employes’ Retirement System is a defined benefit plan funded by employee contributions and employer contributions which are tax deferred, as well as investment return.

5. Plan Funding • Employer Contributions - 7.56% of salary (effective 1/1/01) • Employee Contributions - 6.44% of salary (effective 1/1/01) • Investment Earnings

6. Who is responsible for the administration of the Retirement Fund? The Retirement Office is responsible for the administration of the Retirement Fund as directed by the Retirement Board.

7. Who are the members of the Board of Administration? William Baarsma Mayor and Chairman Steve Marcotte Director of Finance Secretary of the Board Diane Supler Designee of the City Manager Doug Read Designee of the Public Utilities Director Diane Wetzel Employee Representative Michael Crisp Employee Representative Ken Turner Employee Representative David Peterson Retired Representative Chris Webster Citizen Representative

8. When does the Retirement Board meet? The Board of Administration conducts its monthly Retirement Board meetings on the second Thursday of the month. These Retirement Board meetings are held at 2:00 p.m. in the Retirement Office Conference Room 1544 on the 15th Floor of the Tacoma Municipal Building and are open to the public.

9. Web Sites • Located at http://www.cityoftacoma.org/52retirement on the internet and at http://www/cityweb/retirement on the intranet are the Retirement Booklet; Commonly Asked Retirement Questions; Standard Forms for both Active & Retired Members; Annual Report/Summary Annual Report; and the Retirement Board packets, including the minutes and agendas.

10. Service Retirement Eligibility • AGE 60, ANY NUMBER OF YEARS OF SERVICE • AGE 55 OR OLDER, 10 YEARS OF SERVICE • AGE 40 OR OLDER, 20 YEARS OF SERVICE • ANY AGE, 30 YEARS OF SERVICE • RULE OF 80 (AGE & YEARS OF SERVICE = 80)

11. Determining Benefit Amount • AVERAGE SALARY • YEARS OF SERVICE • UNREDUCED BENEFIT - - 30 YEARS OF SERVICE - AGE 60 - RULE OF 80 (AGE & SERVICE = 80 or MORE) • REDUCED BENEFIT

13. Portability • SYSTEMS INCLUDED: TRS PERS SERS SCERS WSPRS LEOFF II SEATTLE, SPOKANE & TACOMA • SERVICE REQUIREMENT (Must be met for each system) • AVERAGE FINAL SALARY (Highest base salary will be used for all calculations) • 2/1/97 Years of Service under Portability are used for purposes of eligibility and benefit formula

16. Disability Benefits 1.5% of AVERAGE SALARY X YEARS OF SERVICE MINIMUM BENEFIT = $1OO/MONTH DISABILITY INSURANCE AVAILABLE THROUGH HUMAN RESOURCES SERVICE ALLOWANCE OPTIONS 1/1/2001

17. Death Benefit LUMP SUM OF CONTRIBUTIONS PLUS INTEREST (less than 5 years) or LUMP SUM & INTEREST OR MONTHLY PAYMENT FOR 10 YEARS HAVING 2 X VALUE OF LUMP SUM (5 years or more of service) or IF ELIGIBLE FOR SERVICE RETIREMENT AND SPOUSE AS BENEFICIARY, RETIREMENT BENEFIT OVER SPOUSES LIFE EQUAL TO OPTION E or DEFERRED DEATH BENEFIT (5 years or more of service)

18. (Continued) • Effective January 1, 2001, upon the death of any member who has not retired but who, as of the date of his or her death, had five years’ creditable service, in lieu of the death benefit provided,the spouse may elect to defer payment of a death benefit, leaving the member’s accumulated contributions with interest, not including contributions on overtime with interest, in the Retirement Fund until a deferral date.

19. Termination of Employment LUMP SUM EQUAL TO REFUND OF CONTRIBUTIONS PLUS INTEREST (less than 5 years) or LUMP SUM EQUAL TO 150% OF CONTRIBUTIONS PLUS INTEREST (5 years or more) Both are taxable unless rolled directly to an Individual Retirement Account.

20. Benefit Improvements • Effective January 1, 1997: • The employees’ contribution rate was reduced from 8.89% to 7.68% and the employer’s contribution rate was reduced from 10.44% to 9.02%. • Employees terminating from City service with at least 5 years of membership service may receive a refund equal to one and one-half times their accumulated contributions and interest (including overtime contributions and interest).

21. (Continued) • Members retiring from City service are entitled to a service pension equal to not less than 200% of the member’s contribution plus interest. This benefit is paid in a normal annuity form which will be the actuarial equivalent of the single sum. • Maintain a minimum 50% of purchasing power for Cost of Living Adjustments for retirees.

22. (Continued) • Increase the Cost of Living Adjustment for retirees from 1.75% to 2% (effective 1/1/97) to 2.125% (effective 1/1/01). • Improved early retirement benefits. The revised early retirement provisions allow employees to be eligible for early retirement sooner (age 55 rather than 57, with 10 years of service). Additionally, an individual may reach full “service retirement” eligibility sooner.

23. Benefit Improvements • Effective January 1, 2001: • The Annual July Cost of Living Adjustment for retirees increased to 2.125%.

24. (Continued) • Employees retiring from City service with at least 5 years of membership service may receive a refund equal to one and one-half times their overtime contributions and interest. • After January 1, 2001, a member who retires under a disability retirement may elect optional retirement allowances.

25. (Continued) • The employees’ contribution rate was reduced from 7.68% to 6.44% and the employer’s contribution rate was reduced from 9.02% to 7.56%.

26. Calculating Your Retirement Benefit • Retirement Options • Pension Calculator • Purchase of Time • Portability

27. Unmodified Option The maximum allowance you can receive is the unmodified monthly form of payment. The Unmodified Option provides a guaranteed pension for life, but makes no provision for a beneficiary after your death.

28. Option A Provides that at your death your estate or beneficiary will receive a lump sum refund of the difference between your total accumulated contributions and interest at the date of retirement and the annuity payments you have received since retirement. Annuity payment refers to that portion of the retirement benefit that is considered payable from the member’s accumulated contributions.

29. Option B Provides that at your death your estate or beneficiary will continue to receive monthly annuity payments until the total of them equals your total accumulated contributions and interest at the date of retirement. Annuity payment refers to that portion of the retirement benefit that is considered payable from the member’s accumulated contributions.

30. Option C Provides for the payment of a retirement allowance for a guaranteed period of years. If you live beyond the guaranteed period, the allowance is continued to you for life, but if you die before the expiration of the period, the allowance will be continued to your estate or beneficiary for the balance of the time. You have an option of five or ten years for the guaranteed period.

31. Option D Provides a modified monthly allowance for life and after your death your spouse at the time of retirement will receive one-half of this amount each month for life. * Option E Provides a modified monthly allowance for life and after your death your spouse at the time of retirement will receive the same monthly allowance for life. * * See Pop-up Provision.

32. Option F If a member at the time of retirement has no spouse, a modified monthly allowance for life is provided and after death, the beneficiary will receive one-half of this amount each month for life or will receive the same monthly allowance for life.* *See Pop-up Provision.

33. *Pop-Up Provision Provides for those members retiring on or after January 1, 1999, and selecting a joint and survivor Option D or E, or Option F, to have a pop-up when the spouse of the member (Option D or E) or the named beneficiary (Option F) predeceases the member subsequent to the members retirement. The benefit is increased to the Unmodified retirement allowance calculated under Sections 1.30.580 through 1.30.620.

34. Social Security Modification • A member retiring from service, who has not reached the age of 62, may elect to receive an additional pension allowance that will continue until he or she reaches the age of 62. • At age 62, the member’s pension will be permanently reduced by an amount that is the actuarial equivalent of the additional pension paid the member. • If the member dies leaving a beneficiary entitled to an allowance, the allowance shall be the same as the beneficiary would have received had the member not selected this modification

35. Pension Calculator The pension calculator will allow you to calculate retirement benefits or allow you to calculate the purchase of time. The pension calculator is located at: • http://www.cityoftacoma.org/52retirement on the internet. • http://www/cityweb/retirement on the intranet.

36. Purchase of Time Individuals may purchase up to 5 years of service effective January 1, 2002 and may also transfer money from a 457 or 403 (b). Effective September 1, 2002, repayment may also be made by a direct rollover to the Retirement Fund from an IRA qualified under Internal Revenue Code Section 408. Purchase of time must be made at the time of retirement or to become eligible for retirement.

41. PORTABILITY with 2 x Value and no Pro-Ration (If Combined 30 Years or > may = Proration) Member Information

42. PORTABILITY with 2 x Value and no Pro-Ration (If Combined 30 Years or > may = Proration) Calculation

43. PORTABILITY with 2 x Value and no Pro-Ration (If Combined 30 Years or > may = Proration) Options

44. Deferred Compensation • Tax-deferred – current tax deduction for contribution and tax-deferred growth • Contribution Limits - $13,000 for 2004; Catch up for those over 50 - $3,000; cannot be used in the same as 457 Catch-up which is $26,000 for 2004. Limits will increase over next two years. • Several investment options • Upon separation from service, funds can remain in deferred compensation or transferred to another employer-sponsored salary deferral plan (401(k) or deferred comp) and an IRA, without income tax. • Funds can be withdrawn at separation from service without tax penalty. Ordinary income tax will be paid whenever funds are withdrawn.