Deferred-Service Pension Payment Methods
Payment methods for each deferred-interest option were defined in the 2012 and 2013 legislative sessions. Relief associations that elect to pay interest to a deferred member must select an interest payment method, including the interest payment starting date and ending date. Default payment methods for each deferred interest type are set in statute. A relief association may choose to define a different payment method in its bylaws, but if a method is not defined in the bylaws, or if the bylaw definition does not include the payment starting date and ending date, the default established in state statute applies.
If a relief association chooses to pay interest, its bylaws must reflect the association’s payment intent. The statutory defaults will apply to members unless and until the relief association amends its bylaws to define a different payment method.
For example, a lump-sum relief association that chooses to pay interest to a deferred member at a rate of interest set by the association’s board of trustees up to five percent, and that has not defined a payment method in the bylaws, will have interest paid beginning on the first day of the month following the date on which the member separates from active service and membership and ending on the last day of the month immediately before the month in which the deferred member begins to receive the deferred service pension.
To further illustrate this example, the member separates from active service on May 5, and elects to receive his or her deferred service pension on April 22 of the following year. The member receives interest starting on June 1 and continues to receive interest until March 31 of the following year, unless the relief association’s bylaws specify a different payment method.
Several documents are available on the OSA website that provide additional information about deferred service pension payment methods. One is our Statement of Position on this topic.
Published last in the September 2013 Pension Newsletter