2019 RS Plan Statements Available Soon

Annual benefit statements and the Financial Power RS newsletter for most Retirement Security (RS) Plan participants will be mailed and posted online by the end of March. However, some participants with more complicated situations (such as those who have a qualified domestic relations order; or had participated in a prior plan that merged into the RS Plan; or may be affected by regulatory salary or benefit limits; or that have other benefit service history requiring manual calculations) can expect to receive their statements in the second quarter. The new issue of the Financial Power RS newsletter includes articles to educate participants on factors that affect their retirement benefits.

NRECA has posted sample language on the Employee Benefits website for benefits administrators to use in letting employees know that their statements are being mailed and posted online soon. The note includes a link to the “Weighing Your RS Plan Payment Options” flier on the Employee Benefits website which explains how lump sums are determined and how changes in interest rates may affect the value of estimated benefits.

The following information is provided as background to answer potential questions from RS Plan participants:

• The government-required interest rates that are used to calculate 2019 Retirement Security (RS) single sum cash payment values (also referred to as the lump sum) are higher than they were in 2018.
• On its own, when interest rates go up, lump sum figures can go down; however, the interest rates are only one of many factors in the RS Plan benefit calculations. Therefore, for some participants the statements will show a lower “Available Single Sum Cash Payment” in comparison to 2018 even when the accrued benefit continues to increase. This decrease in the available single sum cash payment option could be approximately 5–10% for some participants. Participants who do not see their lump sum go down may still see that it did not go up as much as in prior years. This is because factors that typically act to increase benefits over time (e.g., more benefit service and higher average salary since the last statement) were offset by the lowering of lump sums due to increasing interest rates.

As a reminder, the following information was reflected on the 2018 statements but may result in fresh questions as participants review their 2019 statements.

• For the standard RS Plan formula benefits, current and estimated future annuity benefits are shown as a 50% joint and spouse annuity (which is the normal form of payment for married participants). The numbers displayed do not take into account the spouse’s date of birth. However, the updated annuity conversion factors implemented in 2018 now take into account participant and spouse ages and can produce higher amounts of benefits for some optional annuity forms of payment. Therefore, the actual 50% joint and spouse annuity amounts a participant might see on their projections or final option forms could differ than what is shown on the statement.
• For Age 60, Age 62, and Age 65 plans, the normal retirement date listed on the statement is the first of the month coincident with or immediately following the participant’s normal retirement age. For example, if a participant in a plan with a normal retirement age of 62 reaches 62 on May 15, his normal retirement date is June 1 of that year (although he would still be able to quasi-retire as early as May 15). Before 2018, the statements did not indicate the normal retirement date as the first of the next month.