Diocese of Paterson Retirement Program Restructuring

FREQUENTLY ASKED QUESTIONS

Diocese of Paterson Retirement Program Restructuring

As of July 1, 2016, the Diocese of Paterson Retirement Program will change. Briefly, the Diocese of Paterson Pension Plan for Lay Employees (Pension Plan) will be frozen and replaced with a defined contribution plan, the Diocese of Paterson Retirement Savings Plan for Lay Employees (the Plan.)

These Frequently Asked Questions are provided to help explain what’s happening, how it affects you, and what the retirement program will look like starting in July. We will keep you informed as additional information becomes available. In addition:

· On-site group and individuals meetings will be held where you can learn more about the changes and ask any questions you have

· If you have questions that aren’t answered here, you can email them to . You can normally expect a response within 1-2 business days.

· If there is any difference between any information in this FAQ and the Plan document, the Plan document will govern.

PENSION PLAN FAQS

What is happening?

The current Pension Plan will be “frozen” effective June 30, 2016 (Freeze Date). That is, the pension benefit you have earned as of that date will not increase with additional service to the Diocese or increases in your pay after the Freeze Date.

The plan freeze does not reduce or eliminate any benefits that you have earned through the Freeze Date. A freeze means that no further benefits will accrue under the Pension Plan on your behalf.

Why is this happening?

The Diocese must manage ongoing workforce and financial challenges that make it impossible to keep the Pension Plan going forward as it is. Given this reality, the Plan Trustees requested an evaluation of the Diocese retirement program to determine how we could continue to meet Pension Plan obligations, and also continue to provide a meaningful way for current and future employees to save for retirement.

What are the Diocese’ goals for the change?

The Diocese is freezing the current Pension Plan to protect all benefits that employees have already earned. In making this change, the Diocese’s goals are:

· Fairness to our employees: We want to help to ensure that the benefits provided to employees of our parishes, schools, agencies and other diocesan organizations during their working years, together with Social Security and savings opportunities made available by the Diocesan employers, provide financial stability in retirement.

· Protecting the pension benefits already earned by current and past employees: The change in our retirement program helps ensure that benefits already earned under the Pension Plan as of the Freeze Date are not reduced and that the Pension Plan will continue to have the money to pay out accrued benefits to employees when they are requested.. Participating employers will continue to contribute to the existing Plan in future years to fully fund these benefits.

· Stabilizing employee-related costs for all of our parishes, schools, agencies and other diocesan organizations: For the Diocese to continue its work in the church and community, diocesan employers must be financial stable. To that end, we must be sure that the financial promises they make to their employees going forward are affordable.

· Helping our current and future employees save for their own retirement: As with most employers in America, the Diocese and our employees must share responsibility for the retirement security of employees.

When is this happening?

The freeze of the Pension Plan will be effective June 30, 2016.

What does this mean?

Your pension benefit will be determined as of the Freeze Date. That amount will remain unchanged regardless of future pay increases or length of service.

Will I lose any existing benefits?

No, your pension benefit earned through the Freeze Date will not be lost or reduced because of this change.

Will I continue to earn pension benefits between now and the Freeze Date?

Yes, you will continue to accrue pension benefits as normal until that time.

Is my accrued pension benefit at risk? How is it protected?

The Diocese intends to continue to contribute to the current Pension Plan with the funds collected from its locations in order to fund all benefits accrued through the Freeze Date. The funds in the current Pension Plan are held in an IRS Qualified Pension Trust. The funds in the trust can only be used for their stated pension purpose.

What retirement benefit will be provided for employees after the Freeze Date?

Beginning July 1, 2016 the Diocese will provide retirement benefits through a defined contribution plan, the Diocese of Paterson Retirement Savings Plan (the Plan) for eligible employees.

I am retired and currently receiving benefits. How will this affect me?

There will be no impact to current retirees. You will continue to receive pension benefits as you do currently.

I am a current employee in the current Defined Benefit Plan. Do I have to take any action now?

You don’t need to take any immediate action, but you should be aware of the following:

· This past Fall, you should have received an individualized estimated pension statement showing your estimated accrued benefit as of June 30, 2015 based on your earnings through the end of 2015.

· After June 30, 2016, you will receive an updated benefits statement showing your actual frozen benefit as of June 30, 2016.

· In the coming months, you will also receive additional information from the Diocese about the new Plan that starts July 1, 2016.

I am no longer working at a Diocesan location, but think I am owed a pension. What does this mean to me?

If you were a Participant in the Pension Plan and are no longer working for a Diocesan location, there will be no change or reduction to the benefit you have earned. If you are unsure of your pension status, please contact:

Gallagher Pension Administration
Diocese of Paterson Pension Service Center
c/o Arthur J. Gallagher & Co., 3600 American Boulevard West, suite 500
Bloomington, MN 55431
(844) 369-0311

Can I start receiving my pension benefits now?

The plan freeze does not change any rules related to when an individual may begin receiving pension benefits. The current Pension Plan allows for former employees to commence their pension at age 65. Alternatively, you can retire early with a reduced pension if you are at least age 55 when you stop working for a Diocesan location and you were in the Pension Plan at least 10 years.

I will not have been in the Pension Plan for at least 10 years on the Freeze Date. Will I still be able to retire early?

If you continue working in the Diocese until the date you would have had 10 years in of Pension Plan participation, that service will count towards you eligibility for Early Retirement.

What is the value of my pension benefit?

Your pension benefit will be based on the current plan formula, which uses your years of service and compensation history through the Freeze Date to compute your individual benefit. This past Fall, you received, an individualized estimated pension statement showing your estimated accrued benefit as of June 30, 2015. After the Freeze Date of June 30, 2016, you will receive a final pension statement, which will reflect your service, compensation history and final accrued pension benefit through the Freeze Date.

I meet the requirements to start receiving pension benefits, how do I begin doing so?

You should contact our Pension Administrator at least 60 days prior to your anticipated retirement date. You will be asked to complete an application and provide proof of your age. In some cases, you may also need to provide proof of your spouse’s age and a copy of your marriage certificate. Here is the contact information:

Gallagher Pension Administration
Diocese of Paterson Pension Service Center
c/o Arthur J. Gallagher & Co., 3600 American Boulevard West, suite 500
Bloomington, MN 55431
(844) 369-0311

I work at more than one Diocesan location. Does my combined service count toward my pension benefit?

Yes. If you work at more than one location, you are eligible to accrue a pension benefit provided you have worked 20 or more hours per week for at least five years your service and earnings at all locations count toward your pension benefit.

What happens if I stop working at a Diocesan location before June 30, 2016?

Your eligibility for a pension benefit and the value of that benefit will be determined based on the final date of your employment. If you are a Participant in the Pension Plan when you leave, you will receive a pension statement explain your pension benefits.

Will I be able to take my accrued benefit under the current Pension Plan as a lump sum after the Freeze Date and forego a future pension benefit when I retire?

There is currently not an option to take a lump sum payment. The Diocese may investigate this option in the future.

NEW PLAN FAQS

How does the new Retirement Savings Plan work?

After the Pension Plan Freeze Date, you will be able to participate in a new retirement plan, the Diocese of Paterson Retirement Savings Plan for Lay Employees (the Plan.) This is a defined contribution retirement plan, meaning that you as a participant have choices regarding how much to contribute and how your money is invested.

When the new Plan is available on July 1, 2016:

You can contribute a percentage of your salary to your account via automatic salary deduction. For 2016, the IRS maximum contribution amount is $18,000 if you are under age 50, $24,000 if you are older.

To help you save, the Diocese may make an employer matching contribution to your account. All active, full-time employees are eligible for a matching contribution. While the Diocese expects to make the matching contribution each year, it is a discretionary contribution. This means the Diocese decides each year whether to make the matching contribution and the amount of the contribution, when made. For 2016, the expected matching contribution will be 50 cents for every dollar you contribute to the Plan, up to a certain percentage of your pay. For details on the employer matching contribution, please see the next question.

In the coming weeks, you will receive additional, detailed information about the DC Plan and be invited to attend an on-site employee meeting where you can learn more and ask questions.

When the new DC Plan starts on July 1, how much will my employer contribute to the DC Plan on my behalf?

The amount your employer will contribute will depend on several factors, including whether or not you are currently a participant in the Pension Plan, your age and your years of participation in the Pension Plan.

Employees who are not currently in the Pension Plan, who work at least 1,000 hours each year and have worked for the Diocese for at least one year, will receive an employer matching contribution of 50% of your contribution up to 6% of your eligible compensation. In other words, if you contribute 6% of your eligible compensation, your employer will contribute 3%.

If you are currently a participant in the Pension Plan, the amount your employer will contribute will be determined based on the following chart:

Current Plan Participants

Age + Years in Pension Plan =

Employer Fixed %

Employee Contribution %

Employer Match %

Transition Credit %

Grandfather %

Total %

Employer Portion %

< 60

60-69

70-79

1.5%

11.5%

7.5%

80+

12%

If you are currently a participant in the Pension Plan, your employer will contribute the Employer Fixed, and if eligible, the Transition and Grandfather amounts even if you are unable to make contributions to the Retirement Savings Plan.

What are some benefits of the new Plan?

· Contributions to the Plan are made directly into an individual account for each employee.

· You will have a choice of investment options and be able to choose the investment portfolio that matches your retirement savings goals. You can change your investment options at any time online.

· The account is portable. This means that if you leave employment at a Diocesan location, your account can be rolled over to an IRA or possibly into a defined contribution plan at your new employer.

· Your account can also be included in an estate and left to your heirs.

I’m not used to choosing my own investments. Can I get help with that?

Yes. We have chosen Lincoln Financial Group as the recordkeeper and participant service provider for our new Plan. In addition to keeping account records for the plan, Lincoln Financial offers a variety of participant services that can help you understand your options and make the most of your participation in the plan, including:

· Personal assistance from dedicated Retirement Consultants who can meet with you on-site or over the phone

· Easy-to-understand retirement planning tools

· User-friendly account website

· Personal and automated customer service support

How can I learn more about the new Plan with Lincoln Financial?