Novato Pension Benefit Plan Example

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This page contains information on how benefit formulas are used to calculate pensions benefits for City of Novato employees and retirees. 

Pension Benefit Formulas Background

Novato provides a standard formula for employees.  The plans are different for Miscellaneous (e.g. non-public safety members) and Safety employees. 

Novato Miscellaneous Pension Benefit Formula 2% @ 55
Novato Safety Pension Benefit Formula 3% @ 55

The "2% at 55" and the "3% at 55" are merely convenient ways of referring to and distinguishing the formulas. The minimum retirement age is 50 and employees must have 5 years of service credit to qualify for a pension.

The benefit factor is lower at age 50 (the minimum retirement age) and at 5 years of service (the required vesting period) and grows as the employee gets older and increases their years of service. Under the 2% at 55 formula, the minimum factor is 1.426%. This is based on age 50 and 5 years of service. The benefit factor can grow as high as 2.418% at age 63.

Under the Miscellaneous formula, the benefit factor maximum is 2.418% per year of service at age 63. This means the employee will not get more than 2.418% for each year of employment once he or she turns 63; however, there is no limit on the years of service, so someone who works 40 years would get a little less than 97% of their salary at retirement. Those individuals are few and far between.

It is important to note that the City placed a cap of 100% of salary on retirement benefits for new Miscellaneous employees last year. For Safety members, the maximum they can get is 90% of their salary. The Safety cap is a statutory limit that has been in place for a long time.

 

 

NOVATO MISCELLANEOUS EMPLOYEE EXAMPLE 

Under the 2% at 55 formula, a miscellaneous employee would receive 2% of their salary (the “benefit factor”) for each year of service if the employee retired at age 55.

If the employees started working at age 25 and retired at age 55, that individual would have 30 years of service times 2%. As such, he or she would receive 60% of his/her salary at retirement.

The table shows a hypothetical calculation:

 
Highest Compensation $90,000
Benefit Factor 2% (2% @55)
Service Years 30
Annual Pension $54,000

 

Once again, the benefit factor is lower at age 50 (the minimum retirement age) and at 5 years of service (the required vesting period) and grows as the employee gets older and increases their years of service. Under the 2% at 55 formula, the minimum factor is 1.426%. This is based on age 50 and 5 years of service. The benefit factor can grow as high as 2.418% at age 63. 

The benefit factor chart provided by CalPERS is available here

 

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