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| Benefit Calculation using the Step Formula | |||||||||||||||||||
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Employees hired before July 1, 1989, are eligible to receive whichever formula
(Step or Level) generates the higher monthly annuity. For the most part, employees
who qualify for the Rule of 90 or have 30 or more years of service and wish to retire
early, have benefits calculated under the Step formula.
The step formula gets its name from the formula used to calculate benefits. It pays 1.2 percent for the first ten years of service, and 1.7 percent for each year thereafter. For example, if you have 30 years of service, you receive 12 percent for the first 10 years and 34 percent for the remaining 20 years. Your benefit would be based on 46 percent of your high-five average salary. If a person retires early under the Step formula, the monthly benefit is reduced by 3 percent for each year an employee retires before age 65. For example, an employee retiring under the Step formula at age 58, monthly benefits would be reduced by 21% (7 years X 3% = 21). A person with 30 or more years of service has benefits reduced by 3% for each year under age 62. A person with 30 or more years of service, retiring at age 58, would have benefits reduced by 12% (4 years X 3% = 12%). Under the Rule of 90, an employee with 30 years of service at age 60, there is no reduction in monthly benefits, but benefits are calculated under the Step formula. |
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EMPLOYEES HIRED AFTER JULY 1, 1989 Employees hired after July 1, 1989, are only eligible for the Level formula and have no access to the Step formula. For most people, the full retirement age for employees hired after 1989 is age 66. If you were born before 1943, you will qualify earlier for unreduced benefits. Please see "eligibility" for your exact age of full retirement.
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