CORRECTION: This article ran in the September 9, 2014 Union News. The Business Agent would like to correct some of the figures used in the example in the 5th paragraph. The percentages used in our newspaper in that paragraph were the social security percentages for members born between 1943 and 1954. However, the example used in the article was a member born in 1955 and those figures are a bit different. They are corrected below. The few changes are highlighted in in bold print.
Business Agent’s Column
By Ric Casilli
CONTRACT 2015- NEED IMPROVED PENSION SUPPLEMENTS
In my last 2 columns, I outlined what I thought would be two necessary ingredients to improve the GE Pension Plan in the 2015 contract. These were improvement in the Pension Update and the Guaranteed Pension Tables. These two items would help one’s base pension for the rest of one’s life. (Note: There also are other areas of the Pension Plan that could be improved to help a member’s base pension for life – like improving the future service career annuity formula and lowering survivorship option deductions for example.)
However, there is a third piece of the pension package that is critical to improve despite the fact that is does not add anything to a member’s life base pension. That is the 2 Pension Supplements that are temporary in nature but “bridge” that tough period between GE Optional Retirement (age 60) and the date you are eligible to collect 80% of your Social Security benefit (63-64 years old for vast majority of members that will be retiring under the next contract).
The negotiated optional retirement age, to collect an unreduced pension, is age 60 under the GE Pension plan. Thus, many members retire at age 60 or sometimes before they are eligible for any Social Security (SS) monies at age 62 to supplement their pension. The problem got heightened with changes made under the Social Security law amendments (back under Reagan in 1983) which gradually increased the age one had to reach to receive 80% and 100% Social Security.
For example, members born between 1943 and 1954, now have to wait to age 63 (rather then 62) to get 80% SS benefits and age 66 (rather then 65) to get their 100% SS benefits. The age requirement for such benefits gradually gets higher (worse) for people born after 1954. But the pension supplements continue past 63 for members born 1955 and later to the month you become eligible for 80% Social Security.
Let’s use an example. A member’s birth date is June 29, 1955. That member wishes to retire on July 1, 2015 right after his 60th birthday. He/She begins receiving their GE union negotiated unreduced Pension right away at age 60. However, he/she is not eligible to collect any Social Security benefits until age 62 and should he/she decide to begin collecting Social Security then at age 62, he/she would be eligible ONLY for a 74.1% SS benefit going forward for life. If he/she waits to age 63 the SS benefits would be 79.1% going forward for life. (Note: @ age 64-it would be 85.5%, @ age 65- 92.2%, and @ age 66- 98.8%). This is where the GE Pension supplements come in. They provide a “financial bridge” for this member for the 3+ year gap to age 63 (and a couple of months) when the member becomes eligible for 80% Social Security. (Note: The age one ultimately decides to collect their Social Security has no impact at all on the period this member can collect his pension supplements. This member would receive the GE pension supplements for 3+ years from age 60 until he/she turns 63 and a couple of months (Age of his /her eligibility,based on his/her year of birth, to collect 80% Social security).
The Union recognized this “gap” problem years ago and thus negotiated Pension Supplements to help “bridge” people’s earning until they could collect at least their 80% social security. The Pension supplements negotiated originally ended at age 62, which at that time was the eligibility age for 80% Social Security. When the negative Social Security changes began impacting members, the Union also negotiated improvements that the supplements would continue until one reaches whatever their eligibility age was to receive their 80% Social Security benefit (currently age 63 for most members but that age goes up gradually for those members born 1955 or later) Thus, the union maintained the original design feature of the Supplements, to “bridge” all members to at least the 80% Social Security eligibility age.
With the ending of the GE pension supplements at age 63 or a bit higher, most members financially need then to begin collecting their 80% Social Security Benefit. The Union has, over the years, negotiated improvements of the amounts of both supplements and that will be necessary to do again.
CURRENT PENSION SUPPLEMENTS
- REGULAR SUPPLEMENT- $20.00 per month, per year of Pension Benefit Service until the age of eligibility for 80% social security benefits (Examples: 30 years PBS=$600 monthly benefit ; 35 years PBS = $700 monthly benefit)
- SPECIAL SUPPLEMENT- $400 per month until the age of eligibility for 80% social security benefits
Obviously, we would like to see decent improvements in the amounts of both supplements again. However, a novel improvement would extend the time period that one gets the two supplements from the “the age of eligibility for 80% social security benefits to “the age of eligibility for 100% social security benefits”. This would allow the member, if he/she so wishes, to possibly afford to defer collecting their Social Security until age 66 (or higher) and thus get his/her full 100% Social Security for life.
- Many Local 201 members will be eligible to retire at age 60 or above under the 2015 Contract.
- Thus, Improvements in the Pension Update, Guaranteed Pension Table, and Pension Supplements are more important than ever and are 3 key ingredients needed in Pension Plan improvements.
NOTE: I will be highlighting more Key Contract 2015 areas in upcoming articles such as the Pre-65 Retiree Medical Plan & Contribution rate issues, the potential elimination of post 65 and life insurance for many current members and recent retirees, the Younger Local 201 Members’ needs, and the protection of New Hires benefits