A defined benefit pension is an employee benefit guaranteeing regular retirement payments for life, and survivor benefits too. IUOE Local Unions participate in various pension plans but key among them is the flagship IUOE Central Pension Fund (CPF), the nation’s second-largest multi-employer defined benefit pension, with over $24 billion in assets and 6,200 contributing employers.
The CPF is a ZERO cost pension. This means that the employee does not have to pay any money out of their own paycheck. The CPF is funded by employer contributions, which are made by participating employers under the provisions of their respective Collective Bargaining Agreements (CBA). Employers pay a monthly amount based on the hours worked and based on the provisions of the relevant CBA.
With a Defined Benefit Pension, you have the flexibility to choose from several different retirement benefit plans:
Normal Retirement Benefit: Payable at normal retirement age (usually 65). It is a monthly benefit for life.
Early Retirement Benefit: Payable as early as age 55 with 10 years of service. It is equal to the Normal Retirement benefit reduced by 3% per year for years prior to age 65.
Special Early Retirement Benefit: Payable as early as age 55 with 25 years of credited service. It is reduced by 3% per year for years prior to age 62.
Special Retirement Benefit: Payable as early as age 62 with 25 years of credited service. It is equal to the Normal Retirement benefit without reduction.
Disability Benefit: Payable under age 55 with 15 years of service. It is equal to the Early Retirement Benefit at age 55.
In the case of a pension participant’s death, they can pass along pension benefits to their spouse, provided they elect a Joint and Survivor Annuity at the time they retire.
Post-Retirement Surviving Spouse Benefit: Payable to the surviving spouse of a deceased retiree for life, at optional levels of 50%, 66-2/3%, 75%, or 100% of what the retiree was receiving. It is equal to the Normal Retirement Benefit with reductions because the benefit will be paid over two lifetimes.
Pre-Retirement Surviving Spouse Benefit: Payable at any age to the surviving spouse of a vested participant who dies before retirement. It is a lifetime benefit equal to 50% of the Normal Retirement Benefit. This does not apply if the Participant and their spouse have been married for less than one year.
Calculating CPF retirement benefit scenarios for yourself is a simple calculation. Here’s the CPF formula to determine monthly retirement benefits:
Employer Hourly Contribution Rate x Hours Worked Per Year x Years of Service x Benefit Accrual Rate
The current Benefit Accrual Rate is 0.0175. Using this information, you can calculate various retirement scenarios for yourself. The resulting number is the amount you could be paid every month in retirement.
A vested interest means you have a right to a benefit upon retirement that cannot be forfeited. A participant is vested in the Central Pension Fund (CPF) after 5 years of service of at least 1,000 hours per year. The years that you work for a Local Union or Related Organization are known as Years of Service. They are used to determine both your eligibility for a pension and the amount of the pension you will receive.
Engineers that join the CPF after organizing their workplace can be eligible for Vesting Past Service Credits which can help you vest in as little as 6 months. Through organizing, workers can gain past service credit for vesting purposes only. This means that new participants will get credit for past service after working 1000 hours, as long as you have not previously participated in the CPF. For Example:
If you have worked at your employer for more than 5 years after 1000 hours in the CPF, you will be vested in the IUOE CPF as long as you had not previously participated in the Fund.
If you have worked at your employer for 3 years you will be vested after working 1000 hours and then reaching the 5 year mark like any other IUOE member would be.
The IUOE Central Pension Fund (CPF) pays a guaranteed monthly benefit for life, with benefits calculated using a set formula. CPF provides spouse, disability and death benefits. Money for your pension benefit comes from employer contributions. CPF’s benefits are insured by the federal government’s Pension Benefit Guaranty Corporation.
On the other hand, a 401(k) is simply an individual savings account subject to stock market fluctuations. Money for your 401(k) comes out of your paycheck and you must manage your own 401(k) account.
The IUOE’s Central Pension Fund maintains a website www.cpfiuoe.org where you can learn more about the plan. It features a Frequently Asked Questions page, participant and recipient forms, as well as key documents such as the CPF’s Summary Plan Description and its Annual Funding Notice.
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