Accumulated Deductions
The monies that an active member personally contributes to your retirement
plan plus the interest your retirement account earns.
Active Member
A person currently employed by a Pennsylvania Municipal Retirement System
(PMRS) member municipality.
Actuarial Assumptions
A group of assumptions set by the Pennsylvania Municipal Retirement Board
about future inflation, rates of return, salary growth, probable death rates
and probable disability. As a whole, these form a basis for the actuary to
determine the liability of the pension fund and the amount of money that
needs to be paid into the plan.
Actuarial Valuation
The actual cost of the municipality’s pension plan based on the plan’s
demographics. The cost study is based on the plan’s determined retirement
age, benefit level, years of credited service, and the individual demographics
of the employees. The actuary calculates how much money is needed to fund
the pension in accordance with Act 205 of 1984.
Actuary
A person who determines the amount of money that needs to be deposited in
a defined benefit plan to ensure adequate assets accumulate to pay the promised
benefit.
Agreement
The document or contract between the employing municipality and PMRS that
details the retirement benefits and eligibility requirements for plan members.
Annuitant
A retiree or a survivor or beneficiary of a retiree who receives a monthly
retirement payment from PMRS.
Annuity
A payment of a fixed sum of money issued to an annuitant.
Beneficiary
The joint annuitant or any other person, estate, or trust fund you last designated
in writing to receive any benefits which may be payable upon your death.
Benefit Accrual Rate
A percentage determined by a plan’s retirement formula (usually between
1% and 2%) and years of service that is applied to the person’s final
average compensation to determine the person’s retirement allowance.
Board
The Pennsylvania Municipal Retirement Board created by the Pennsylvania Municipal
Retirement Law, Act of 1974, P.L. 34, No. 15.
Cash Balance Plan
Employees’ benefits are based on the accumulated value of the members’ accounts.
Employees may make mandatory or optional contributions to the plan to increase
the basic benefit. The municipality makes a required contribution based on
its agreement or contract with PMRS and the benefit is dependent upon the
individual’s accumulated member and municipal contributions at retirement.
The money is divided by a life expectancy factor based on age to determine
the monthly benefit.
[Example: Accumulated account value divided by unisex factor based on age
at retirement equals annual benefit. Assume account value $60,000 and retirement
age 60; unisex factor is currently 11.2383 (obtainable from PMRS offices)...$60/11.2383=$5,338.89
annual benefit]
Credited Interest
Member account interest set by the Board (currently 6.0% per year) plus any
excess interest that may be allocated to the members’ accounts. (also
see excess interest)
Credited Service
Service you earn by being paid for work in a regularly-established position
with an employer that is a PMRS member plus any additional service you may
be eligible to purchase, e.g., military time.
Defined Benefit Plan
The municipality guarantees a benefit based on the employee’s years
of service and the salary of the employee. The employees’ retirement
benefit is based on a formula. For example if the benefit accrual rate is
1% and employees work for 25 years, they will receive 25% of their final
average salary. [Example: 25 years of service x 1% benefit accrual rate x
$30,000 final average salary = $7,500 annual benefit]
Disability
An inability to be gainfully employed by reason of physical or mental impairment.
Disability Reserve Account
The account to which shall be credited the contributions made by municipalities
toward the disability retirement of members.
Early Retirement Date
The date when you become eligible and choose to receive a reduced retirement
benefit because you have not reached normal retirement age. As a broad general
rule, benefits are reduced approximately 6% for each year an individual retires
early.
Excess Interest
The investment earning on the Pennsylvania Municipal Retirement Fund in excess
of that required for allocation for regular interest plus maintaining adequate
reserves if the System does not earn its regular interest and administrative
expenses.
Final Average Salary
The average of the highest or final years of compensation earned during covered
employment. The number of years used in the average will depend on the employer’s
retirement plan.
Fund
The Pennsylvania Municipal Retirement Fund created by the Pennsylvania Municipal
Retirement Law, Act of 1974, P.L. 34, No. 15.
Inactive Member
A municipal employee, municipal firefighter, or municipal police officer
who is enrolled in PMRS but is no longer earning credited service in a PMRS
pension plan due to separation or leave from employment.
Joint Annuitant
A beneficiary eligible to receive continuing benefits upon your death.
Member’s Account
The account that is credited with the payroll deductions from active members
plus interest earned.
Money Manager
The various firms which invest the assets of the Pennsylvania Municipal Retirement
System under investment guidelines set forth by the Pennsylvania Municipal
Retirement Board.
Municipal Account
The account maintained for each municipality to which shall be credited the
contributions made by it toward the retirement and death benefits of members.
Municipality
A city, borough, town, township, county, institution district, any newly-created
governmental unit, an authority, an institution supported and maintained
by a municipality or municipal government association, or an industrial government
association which has adopted bylaws and the governing body of which is organized
and holds regular public meetings.
Municipal Plan Member
A municipality or authority that contracts with PMRS to provide for certain
retirement benefits for eligible employees.
New Member
A municipal officer, employee, firefighter, police officer or an employee
of a municipal government association who first becomes a member after the
effective date the municipality joins PMRS.
Normal Retirement Age/Date
The age or date when you first become eligible to retire without a reduction
in benefits.
Original Member
A municipal officer, employee, firefighter, police officer or an employee
of a municipal government association who was employed by the municipality
at the date the municipality joined PMRS.
PMRS
The acronym for the Pennsylvania Municipal Retirement System.
Portability
When a member leaves a PMRS-administered plan and within one year of the
date of termination enters into employment with another PMRS-administered
plan, the member can transfer previously accrued credits to the new employer,
subject to provisions of the municipalities’ contracts.
Prior Service
Includes service to the municipality prior to the effective date of the plan.
Regular Interest
The rate of interest fixed by the Pennsylvania Municipal Retirement Board
from time to time, on the basis of earnings on investments. The rate has
been set at 6.0% as of January 1, 2005.
Retired Member
A former municipal employee, municipal fire fighter, or municipal police
officer or the beneficiary or survivor annuitant of same who is entitled
to a monthly benefit payment from the System’s retired reserve account.
Retired Members’ Reserve Account
The account from which all retirement allowances are paid for superannuation
and disability retirement.
State Pension Aid
State aid is available for municipalities to help fund their pension plans
according to the Municipal Pension Plan Funding Standard & Recovery Act
(Act 205 of 1984). Only cities, boroughs and townships are eligible to receive
state aid; authorities and counties are not eligible. The source of state
pension aid is a 2% tax on out-of-state (foreign) casualty insurance companies
doing business in Pennsylvania.
Survivor
A dependent eligible to receive an allowance upon a member’s death.
System
The Pennsylvania Municipal Retirement System created by the Pennsylvania
Municipal Retirement Law, Act of 1974, P.L. 34, No. 15.
Termination of Employment
Occurs when you end employment with your employer.
Vested Member
A member who after sufficient years of service (based on the plan in which
the member is enrolled) elects to terminate municipal employment and leave
total accumulated deductions in the fund, and defer receipt of an annuity
until achieving normal retirement age. The election to vest must be made
within 90 days after the effective date of termination of service.
Vesting
Allows a member to terminate employment before being eligible for a normal
retirement benefit and defer receipt of a monthly benefit until the individual
is eligible to receive a normal retirement benefit.
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