Q: Which option (“Tier 2” or “Tier 3”) is the better for me?
A: The LABF cannot offer you financial advice as to which option is better for you. Every person's financial situation is unique. Therefore, you may want to consult a financial advisor to assist you with the decision. As a reference, please see the Summary Comparison of “Tier 2” and “Tier 3” Benefits (Summary Comparison Table) to view the different benefit and contribution structures.
Q: Why do I owe additional contributions to LABF if I elect “Tier 3” benefits?
A: The Act was written such that you cannot elect “Tier 3” benefits until after October 1, 2017 (and no later than November 15, 2017); however, as soon as you make the election, you owe additional contributions retroactive back to July 6, 2017. LABF simply administers the Act as it is written and therefore must collect the difference retroactively.
Q: How much in additional contributions will I owe if I make the “Tier 3” election and how do I make the payment?
A: Employers (either the City or a retirement fund board depending on your specific situation) will begin automatically deducting 9.5% contributions from your pensionable salary beginning with the late-November/early-December payroll. You will owe an additional 1% on your pensionable earnings retroactive back to July 6, 2017. The LABF will send you a letter in December of 2017 with the precise amount you owe and provide you with payment options. Your payment will be due by June 30, 2018. No interest will accrue so long as you make your payment in full to LABF by the stated deadline.
Q: What is “normal cost”?
A: The way the Act was written, your employee contributions become the lesser of 11.5% of your pensionable salary or a percentage based on the normal cost beginning on January 1, 2019. "Normal cost", which is an actuarial term, is essentially the annual cost of providing retirement benefits. The idea behind making employee contributions the lesser of 11.5% or a percentage based on the normal cost is to protect members from paying more for their benefits than they are worth. It is unlikely that the normal cost (as a percentage of payroll) will be less than 11.5% in the near future.
Q: Do I need to do anything if I want to keep my current “Tier 2” benefits?
A: No. You will remain subject to the “Tier 2” benefit and contribution structure unless you explicitly elect the “Tier 3” benefit.