Alabama Current Pension vs Cash Balance Proposal

Plan

Current DB 1.625%
Multiplier
Cash Balance
Contribution 12.0%
Current DB 1.625%
Multiplier
Cash Balance
Contribution 12.0%
Current DB 1.625%
Multiplier
Cash Balance
Contribution 12.0%
Current DB 1.625%
Multiplier
Cash Balance
Contribution 12.0%

Starting Retire
Age
Age

Years
of
Service

COLA

Employ
ee
Cont.

Starting
Wage

Wage at
Retirement

Single
Benefit

Starting
Retirement
Income

26

56

30

2.0%

7%

17,000

56,700

48.75%

25,800

26

56

30

2.0%

6%

17,000

56,700

30.99%

16,400

26

56

30

1.0%

7%

17,000

56,700

48.75%

25,800

26

56

30

1.0%

6%

17,000

56,700

34.96%

18,500

31

56

25

2.0%

7%

19,700

56,700

40.63%

21,400

31

56

25

2.0%

6%

19,700

56,700

23.73%

12,500

31

56

25

1.0%

7%

19,700

56,700

40.63%

21,400

31

56

25

1.0%

6%

19,700

56,700

26.58%

14,000

Assumptions
Cash Balance Credit Rate
Employer Contribution
Wage Increase
Wage at Retirement
Annuity Interest Rate
Final Average Salary
COLA
Mortality table

6.0% (4% guaranteed plus 75% above 4% of the 5-year geometric mean)
6.0% (actual rate not mentioned in document)
Starting and ending wages provided. 5% step increases first 6 years.
$56,700
4.00%
Last 5 years
Ad hoc basis as approved by State Legislature. For basis of this example: 1% and 2%
IRS site: period life 2009

Cash Balance
Plan Benefit
Reduction

Total
Contribution to
Match DB
Benefit

-36.4%

18.9%

-28.3%

16.8%

-41.6%

20.7%

-34.6%

18.3%

Alabama Income at Retirement

Pension vs Cash Balance Proposal

30,000

25,800

25,800

25,000

21,400
20,000

21,400

18,500
16,400

15,000

14,000
12,500

10,000

5,000

0
DB 30-Year (2%
COLA)

CB 30-Year (2%
COLA)

DB 30-Year (1%
COLA)

CB 30-Year (1%
COLA)

DB 25-Year (2%
COLA)

CB 25-Year (2%
COLA)

DB 25-Year (1%
COLA)

CB 25-Year (1%
COLA)