Question 1: At what age can I access my 401(k) funds?

Answer: Age 59 1/2

Question 2: If I save all of my sick days can I still apply that towards my retirement?

Answer: Yes, nothing about Senator Snow's plan changes how you can use your sick days.

Question 3: If I have a very technical question about the plan is there someone I can call to help me answer the question?

Answer: Yes, if you have a technical question about the plan that your retirement advisor cannot answer then you can email Senator Snow's office at johnsn@ncleg.net. However, Senator Snow can not tell you what to do - that decision is up to you.

Question 4: I've contacted my retirement advisor and am now ready to take the survey about the 25 year retirement. Where can I do that?

Answer: Just click on this link and it will take you right to the survey.

Question 5: I have read over the proposal. Am I correct in reading that the end results of money are the same per month? I am reading that on the 25 year plan you have to work until age 50 to get full benefits and on the current plan it is 30 years of service. If I work my 25 years and am 45 years old I can retire with full benefits but will not draw until I am 50? Is this correct? For a 21 year old to enter into the police field it is not a benefit to receive the 25 year retirement.

First, there is no such thing as “full” retirement benefits. The longer a person works, which results in greater total service, the higher the retirement benefit will be.
The calculation is essentially the same but instead of using the formula of: AFC x 30 x 1.85 (local LEO) you will use AFC x 25 x 1.85 which obviously will mean a lower benefit as far as the pension portion of it goes. The same is true for the special separation allowance.
The rest of this question is correct in that you can leave service at age 45 but will not draw benefits until age 50. This plan requires that younger officers become more invested in their own future and financial planning if they want the opportunity to work for 25 years as opposed to 30 years. A younger officer is going to have to think long and hard just how long they want to be a law enforcement officer and accept the fact that the youth and vitality that they hold at the beginning of their career will not stay with them to the end of their career.

Question 6: I will have 28 years of service when I reach age 50, will this increase my retirement benefits due to the number of years of service multiplication and if so will it give me the same retirement as I would get under the current plan if I stay the 30 years (only two extra years for me)?

Currently, you will be eligible to receive reduced retirement benefits when you reach age 50 with 28 years of service. If you were to retire with reduced benefits, your retirement allowance would be calculated based upon 28 years of service and then reduced by an age factor as you would be retiring prior to age 55 or the completion of 30 years of service. If this 25 year proposal is enacted, you will be able to retire at age 50 with 28 years of service and receive an unreduced retirement allowance (no reduction based upon age) provided you retire after the age 50 with 28 year is effective. An unreduced benefit, however, based upon 28 years of service will not be as high as an unreduced benefit based upon 30 years of service. Remember, the more service one has, the higher the retirement allowance.

Question 7: What is the present law relating to qualifications for the Special Separation Allowance and how will the law change?

Presently to qualify for the allowance the officer must:
(1) Have (i) completed 30 or more years of creditable service or, (ii) have attained 55 years of age and completed five or more years of creditable service; and
(2) Not have attained 62 years of age; and
(3) Have completed at least five years of continuous service as a law enforcement officer as herein defined immediately preceding a service retirement.

The above qualification will remain the same for all members who have five or more years of service as of the date the law is changed. However, it will change some as the 25 year requirement is phased in. For instance, to qualify for the Special Separation Allowance, a member must be at least age 50 with 29 years of service (years reduced down from 30 one year each year over five year phase in period), but the benefit will not be payable until the point the member would have reached age 55 or when he would have completed 30 years, whichever comes first.

Question 8: If I start at age 21 and work for 25 years can I really retire at age 46? If I do what happens?

If you begin your career at age 21 and work continuously you can leave service 25 years later when you are 46. However, your pension benefits will not begin until you reach age 50 and apply for those benefits. You will not be entitled to the special separation allowance in this example because you must have at least 5 years of service as a law enforcement officer immediately preceding the commencement of pension benefits from the retirement system.

Question 9: Why is there a difference in the rate between a State LEO and Local LEO?

The formula accrual rate is currently 1.82% in the Teachers’ and State Employees’ Retirement System (TSERS) and 1.85% in the Local Governmental Employees’ Retirement System (LGERS). The short answer to this question is that there were gains in the LGERS sufficient to increase the formula accrual rate from 1.82% to 1.85% without requiring an increase in employer contributions. There were not sufficient gains in the TSERS to fund the cost of a comparable increase in that system. Historically, the LGERS has trailed the TSERS relative to benefit enhancements and this is the first time in recent memory that the LGERS has been ahead of the TSERS.

Question 10: Why can’t I access my 401(k) money until I am 59 1/2?

The Prudential web site posts the following information: “Whether or not you are still working, when you reach age 591/2 you may become eligible to take a distribution from your retirement program. You may also be eligible if you are age 55 or older and separated from service. If you stop working before that time, a payout from your Plan will be considered a premature withdrawal and may be subject to a 10 percent federal income tax penalty in addition to regular income tax. However, keep in mind, if you separate from service and receive a distribution in substantially equal amounts over your life expectancy, you are not subject to this 10 percent penalty.”

Distributions from 401(k) plans are governed by federal law which is somewhat complicated. As such, the best advice may be to seek the assistance of your individual legal, financial or tax advisor with any specific questions.”

Question 11: Can I still use my sick leave for my retirement?

Yes, nothing about the plan changes anything affecting your sick leave. If you have saved up enough sick leave you can still leave service earlier (depending on your personal situation) as you would currently. However, if you were to do this then you would still not be able to draw on your pension money until you reach age 50.

Question 12: As I read the proposal it seems that as a local police officer I could retire at age 50 with 25 years of service for an unreduced benefit. However, when I arrive at 25 years I will only be 49 years old. Does that mean I must work an extra year to qualify for an unreduced benefit?

No, this means that if you leave service at age 49 you will have to go one full year without receiving any of your retirement benefits, however, you will have earned the right to unreduced retirement benefits when you reach age 50. You do have the option of working longer which would increase your pension pay out and may entitle you to the special separation allowance.

Question 13: Does this plan allow officers currently in the system to have their special separation allowance?

Yes, provided the officer had five years of service as a law enforcement officer on June 30, 2007 (or 2008 depending upon the effective date of the Bill) and provided the officer has five years of service as a law enforcement officer immediately preceding the commencement of pension benefits from the retirement system. Officers who complete five years of service as a law enforcement officer after June 30, 2007(2008) will not be entitled to the special separation allowance.

Question 14: Please confirm that one major change between the current plan for local law enforcement and the proposed plan is that currently there is an option for retirement at any age with 30 years of service and the proposed plan does not have the "any age" option. You must be at least 50 years old to retire with full benefits, correct? That means that a person who began employment at age 21-24 would have to work more than 25 years.

Fundamentally this is correct. The current plan allows for the commencement of an unreduced retirement allowance at any age with 30 years of service. The new plan allows for the commencement of an unreduced retirement allowance at age 50 with 25 years of service. So a person who began working between ages 21-24 could leave service after working 25 years, ages 46-49, but they would have to wait one to four years before they could begin receiving the benefit payments from the retirement system. Please note that anyone with five or more years of service in the retirement system at the point this legislation may be enacted will still have the right to retire upon completion of 30 years of service regardless of age.

When we began looking at this bill we found that there was a great amount of anecdotal evidence which suggested that most officers, when they retired, went on and took a second career doing work that was far less dangerous than being a Law Enforcement Officer. This policy assumes that Law Enforcement Officers will continue this practice with the new plan.
My only concern is that the 25 year retirement requires that you be age 50, instead of providing the retirement benefits at 25 years no matter an individual's age. For someone who gets into law enforcement as soon as they can (age 21), they will still end up working nearly 30 years before they are eligible for full retirement benefits. Taking this into consideration, I don't believe that this portion of the new bill meets the intent of reducing the retirement age.

The bill will allow someone to leave service after 25 years and to receive unreduced retirement benefits when they reach age 50. The difference is that they will have had to save up enough money to live for a number of years without a retirement paycheck from the retirement system or they will have needed to line up a new job before they leave service. In addition, they may disqualify themselves for the special separation allowance.

Question 15: The Special Separation, would it continue until Social Security kicks in? On the proposal it says age 62, but SS has extended the years depending on your age group.

The Special Separation allowance, under the bill, would continue to expire at age 62. 62 remains the age at which someone can receive reduced social security benefits. In one of our earlier drafts we did attempt to change the age to when unreduced social security benefits started but this added millions of dollars to the cost of the plan.

Question 16: Does this mean that if the bill is enacted this year it will still take 5 years to become fully effected? If I’m reading this right it means that anyone with over 25 years at this time will have reached 30 by the time it comes into effect.

Yes this bill is phased in over a five year period. Meaning in the first year it would be age 50 with 29 years of service, the second it would be age 50 with 28 years of service until we get to age 50 with 25 years of service. With local governments just having passed their budgets this bill would probably go into effect during 2008. A law enforcement officer with over 25 years may still be able to benefit if this legislation is enacted. It would allow a person to leave service with 25 or more years of service and receive an unreduced retirement benefit at the point they reach age 50 and when the phase in is effective for their total service.

Question 17: Why would a member want to retire with 25 years of service, only to discover, that in truth, he cannot afford to live off of the amounts as you have shown; and do it for a longer period. As proposed the difference for an officer now at 30 years versus your Proposal is a loss of $5000 annually. Therefore a member is faced with a decision stay where I am and work until my benefits reach a level of support that I can feel comfortable with; or do I retire now, and be forced to seek employment elsewhere until their 62.

This is a fair point – financially law enforcement officers do not fair better under a 25 year retirement plan. This is true for almost any plan that would be viable here in the legislature. However, I am not capable, nor do I want to try, to assign a monetary value to someone’s life. Whether or not this is a good plan for you and your family is something that only you can decide. Only you know if you need to hang around and earn more money or if you have saved enough or lined up a second job to continue paying your bills. The thing that I saw as a Judge and which other legislators have heard is that being a Law Enforcement officer is brutally dangerous work. Each person needs to make a decision of how long they are going to do that type of work or when will they convert over to a less dangerous form of work. That is an individual decision that I am not equipped to make. What I can and have done is presented a bill which I think can actually be passed here in Raleigh whether or not you want me to run with it is entirely up to you. If enough officers come out against this bill I’ll stop working on it. But you will have to take the survey that is part of this entire information gathering process.