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Retirement Board - Members

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1. Am I required to become a member of the Retirement System?

Membership in the Leominster Contributory Retirement System is a statutory requirement for all employees who work a minimum of 20 hours per week on a permanent basis. Only elected officials have the option of whether or not to join the System.

2. How much does a member contribute to the Retirement System?

The amount a member contributes each year is a set statute, and it is determined by the date of your membership into the System. If you became a member prior to January 1, 1975, your contribution rate is 5%. If your membership date was January 1, 1975 to December 31, 1983, your contribution rate is 7%. From January 1, 1984 to June 30, 1996, the contribution rate is 8%. For anyone who enters the System after June 30, 1996, the contribution rate is 9%. In addition to these contributions, any member who enters the System on or after January 1, 1979, must contribute an additional 2% of their salary in excess of $30,000.

3. What happens to the money I contribute to the System?

Once you become a member of the Retirement System, an Annuity Savings Account is established on your behalf. All of your contributions are deposited into your account. Your contributions, plus any accumulated interest, are credited directly to your account. Each year, the Board issues a statement to all of its active members that reflects the yearly and the total contributions, along with the interest credited to your account.

4. Can I borrow money from my retirement account now and pay it back later on?

No. Under State Law, your retirement account has no provisions for withdrawal under any circumstances.

5. Can I receive a refund of my contributions and will I get the interest on those contributions?

You may receive a refund of your total contributions if you officially resign from your position with the City and it is not your intention to accept another position of employment that requires membership in another Massachusetts Retirement System. If you voluntarily leave employment that began after January 1, 1984 and have less than five years of service, no interest will be refunded to you.

If you have served between five and ten years of service, you will receive half of the interest. If you have over ten years of service, all of the interest will be refunded to you. It is important to note that if you do receive a refund or your retirement contributions, we are required to withhold 20% of your federal tax liability. Alternatively, you can have the entire retirement contribution "Rollover" into a tax-qualified Individual Retirement Account (IRA).

6. When am I eligible to retire?

You are eligible to retire at the age of 55 or older if you have at least ten years of creditable service. If you have 20 years of service, you can retire at any age.

7. What are the factors used to determine my retirement allowance?

Because the Leominster Contributory Retirement Board is a defined benefit plan, your benefits are determined by a formula. The factors used to determine your benefits are: your age at the time of retirement, your amount of creditable service, your group classification and an average of your three highest consecutive years of regular compensation.

8. What is the maximum retirement allowance that I can receive?

The maximum benefit you can receive is 80% of your three highest consecutive years of regular compensation.

9. Are there any additional benefits to which I am entitled?

If you are a veteran as defined in the Massachusetts General Laws, a veteran's credit will be added to your retirement allowance. The amount of credit will be equal to $15 per year for each year of creditable service you have accrued, not to exceed 20 years or $300. You will receive this additional benefit even if you are already at the maximum, or if the additional $300 puts your total allowance over the 80% maximum.

10. What does the term “vested” mean? When am I considered vested?

Vested is a term commonly used to signify the right to a retirement allowance at a later date. Vested benefits are those benefits that a member is entitled to today, not based on additional service. You are vested in the Leominster Contributory Retirement Board once you have accumulated the equivalent of 10 years of full time service.

11. Can I purchase creditable service earned in another Massachusetts Retirement System?

If you were a member of another retirement system subject to the provisions of Chapter 32 of Massachusetts General Laws, and you withdrew your retirement funds, it is possible to buy back your prior creditable service. The Retirement Office where you previously were a member will verify your prior service, then calculate the amount of your buyback. You must repay the amount withdrawn, plus interest to the date of repayment. You may complete a buyback as a lump sum payment or a payment plan up to the number of years you wish to buy back may be set up.

12. Will prior years of creditable service affect my membership date or contribution rate in the Leominster Contributory Retirement Board?

If you have retirement contributions from a previous public employer directly transferred to our System, you are entitled to maintain the level of contribution you were paying in your previous employment. If you have received a refund of your retirement contributions from your previous retirement system and later became a member of the Leominster Contributory Retirement Board, your contribution rate will be at the new member rate, regardless of what you were paying in the prior system. If you should later purchase your prior service through a buy back, your contribution level will remain at the new member rate and will not be reduced to your previous rate.

13. How is creditable service achieved?

You earn creditable service towards your retirement allowance for the period during which you are contributing to the retirement system. For members of the System who work 20 or more hours per week on a permanent basis service time starts accruing the day you begin work and continues until the day you separate from service.

14. Is regular compensation the same as total compensation?

No. Regular compensation is the portion of your salary that is subject to retirement contributions. Overtime, bonus pay, severance pay, payments made for unused sick time and certain other payments are not considered regular compensation, are not subject to retirement and can not be used towards your three year average for the purpose of determining your retirement allowance.

15. What are the group classifications within the Retirement System?

• Group 1: General employees, including clerical, administration, technical workers, laborers and all other not otherwise classified.
• Group 2: Fire or police signal operators or signal maintenance repairmen; employees of the city who are licensed electricians.
• Group 4: Police officers and firefighters.

16. What are the different options I can chose from when I retire?

• Option A: This option provides you with the highest payment monthly. There is no payment to a beneficiary after your death.
• Option B: This option provides you a lower payment monthly, but after your death a lump sum payment is made to your beneficiary of any remaining balance in your account. The total annuity portion paid to you up until the date of your death is deducted from your accumulated contributions. The remaining balance is payable to your beneficiary.
• Option C: This option provides you with a lesser monthly payment. But upon your death, your beneficiary will receive two-thirds of your monthly allowance, until he/she passes away.

17. If I leave my job what happens to my contributions?

If you leave your job and are not going to work for another Government unit which comes under the provisions of Chapter 32, you may be eligible to receive a refund of your contributions. If you are leaving to accept another position with a Massachusetts political subdivision subject to Chapter 32, then you must transfer your retirement contributions directly to your new retirement system.

18. Is there any time limit after your termination for requesting a refund of your contributions?

No. You may request a refund of your funds at any time after termination. If you leave your funds on deposit, however, and later seek a refund, your deductions will only earn interest for two years after your termination date.

19. Can a member who is vested and who terminates employment be eligible for a refund?

Any member who terminates employment may be eligible to withdraw their retirement funds. If the member is vested and has earned the right to a retirement allowance at a later date, careful consideration should be given to the value of the retirement benefit he/she may be forfeiting in exchange for a refund.

20. If I terminate my employment and leave my money in the retirement system can I retire at a later date?

If you are vested and terminate employment, you can choose to "defer" your retirement by leaving your money in the system until you are ready to retire.

21. What are the tax consequences if I take a refund of my retirement contributions?

Your contribution and any interest that you receive from your account are subject to federal tax income (with exception of any contribution made prior to January 12, 1988). When processing a refund of your retirement contributions the Retirement Office is required to withhold 20% of the taxable portion of your refund for federal tax. The 20% tax payment is required only if the refund is made directly to the member. To defer tax payments, you must make a direct rollover of your retirement funds to an Individual Retirement Account (IRA), or another type of retirement account with a financial institution. With a direct rollover, no tax is withheld and the entire portion of your refund is transferred. If you have both taxable and nontaxable contributions you may accept receipt of the nontaxable refund without tax consequence and the taxable portion maybe rolled over.

22. If I die before retirement, what happens to my money?

If you are married and die before you retire, your surviving spouse will have the option of collecting a monthly benefit, including a monthly allowance for any children under the age of 18 or if a student is in an institution until the age of 22, or receive a lump sum payment of your contributions. Contact the Leominster Contributory Retirement Board Office at 978-534-7507, ext. 246 for more information.