Preparing Members for Retirement

As members approach retirement, many questions come to mind: How are my monthly benefits calculated? How old do I have to be to collect my pension? Will I be able to work during my retirement if I choose to? What are the requirements to receive my Social Security?

Preparing for retirement can be confusing and leave members wondering where they can get answers to their questions. The Pension Fund Administrator or your local union is there to guide members through the process and answer questions.

As we see the tail end of the Baby Boomers reach retirement age, Generations X and Millennials are thinking about their retirement and wonder what decisions they will need to make in anticipation. It is never too early to prepare for your “golden years.”

EARNING A BENEFIT

To qualify for a monthly pension benefit through the Bricklayers & Trowel Trades International Pension Fund (IPF), the participant must first become vested.

Prior to January 1, 1999, defined benefit participants were required to have earned ten Vested Service Credits before becoming eligible for a pension benefit. A Participant who has one or more hours of service on or after January 1, 1999 must have earned at least five Vested Service Credits (VSC) to qualify. One VSC is earned for each calendar year 1,000 hours has been reported on a participant’s behalf under covered employment.

However, IPF monthly benefits are calculated by using Future Service Credits (FSC). Participants receive one FSC for every 1,500 hours reported on their behalf for each calendar year, or 1/10 of a FSC for every 150 hours. In layman’s terms, the more hours you work the larger your monthly benefit. Note: Local pensions may govern under different rules.

PENSION OPTIONS

The IPF offers four pension options: Normal, Early, Disability and Deferred Vested.

For the first option, Normal Retirement Age (NRA) with the IPF is age 64. If you wait to age 64 to begin receiving benefits you will not receive a monthly benefit reduction. The second option, Early Retirement, is for active participants who retiree between the ages of 55–63. If this option is selected, there will be a reduction of 8% per year between the ages of 60–63, with an additional 5% reduction per year between the ages of 55–59.

The third option, Disability Retirement, is available to active participants who received a Social Security Disability Award and have a physician statement stating permanent and total disability from the trades. This option has a reduction of 8% per year between ages 60–63. The fourth option, Deferred Vested, is when a participant leaves covered employment prior to retirement and has earned a vested benefit. This option must wait until the NRA of 64 to commence.

All options include Joint & Survivor (J&S) and have a reduction based on 50% or 75% survivor benefits chosen by the participant. Note: These are examples under IPF. Other plans may have different NRA and reductions.

WORK AFTER RETIREMENT

For a pensioner receiving a monthly retirement benefit from International Pension Fund who chooses to return to work, they must not work for one full month following their pension start date before returning to covered employment. After turning age 64, a pensioner can return to covered employment without affecting their monthly benefit and receive additional benefit accrual for hours worked after normal retirement age of 64.

For pensioners who are between the ages of 62–63 and return to covered employment, each year Social Security sets an annual earnings limit that would affect your monthly benefit once exceeded. For 2024, the limit is $22,320.00. For pensioners between the ages of 55–61 who choose to return to covered employment, the pensioner must inform the Fund office within 15 days of return to covered employment. The pension benefit will be suspended until the Fund office is notified by the pensioner that disqualifying employment has ended. 

APPLYING FOR SOCIAL SECURITY

Social Security Administration (SSA) benefits are determined by lifetime earnings. The SSA adds up a person’s highest 35 years of earnings and adjusts them for inflation using the national average wage index. This is known as Average Indexed Monthly Earnings (AIME). The SSA then applies a formula to the AIME to calculate the Primary Insurance Amount (PIA), which is the basis for an individual’s Social Security benefits. In determining the monthly benefit, the SSA uses the PIA to calculate the benefit amount a person would receive at their full retirement age. The SSA retirement calculator can be used to estimate monthly benefits using actual earning history.

Full Retirement Age (FRA) is between 66 and 67, depending on the year a person was born. At FRA, a person is entitled to 100% of their Social Security benefit. However, should a person choose to receive their SSA benefit early, they would receive a reduction based on their age below their FRA. The following reflects FRA according to birth year:

+ Born in 1957: 66 years 6 months

+ Born in 1958: 66 years 8 months

+ Born in 1960 or later: 67 years

The earliest age you could receive Social Security benefits is age 62.

TAXES AFTER RETIREMENT

All pension benefits are federally taxable. The following states do not tax Defined Benefit pensions:

+ Alabama

+ Alaska

+ Florida

+ Hawaii

+ Illinois

+ Iowa

+ Mississippi

+ Nevada

+ New Hampshire

+ Pennsylvania

+ South Dakota

+ Tennessee

+ Texas

+ Washington

+ Wyoming

Note: Some of these states tax 401(k) withdrawals.

For questions concerning IPF, IPF-Canada, RSP Annuity and BAC Save 401(k) Funds, contact: Lester W. Kauffman, III Executive Director, International Pension Fund Lkauffman@ipfweb.org | 1-888-880-8222.