The rules for retirement are changing for public employees in Ohio

The Ohio Public Employees Retirement System (OPERS) recently enacted changes to its pension and health care plans that place more of the burden on retirees to pay for their health care coverage.
Also being adjusted is the elimination of the annual 3 percent cost-of-living adjustment (COLA). The COLA will now be based on the consumer price index, says Phillip Natale, RCIP, a financial consultant at AXA Advisors, LLC.
“Depending on what the index has done, the participant will get between a zero and 3 percent COLA each year,” Natale says. “This could have a huge long-term effect on the participant’s income.”
Another component of the changes is a tier system that will force some OPERS employees to work a little longer than they had previously planned.
There’s not much good news in these changes, Natale says. But that doesn’t mean public employees in Ohio are out of options.
Smart Business spoke with Natale about the pension and health care plan changes and what OPERS plan participants can do to come out ahead.
How is the retirement timetable for OPERS members changing?
People fall into one of three groups, depending on their years of service at the time of the pension change, which went into effect Jan. 7, 2013. Participants in Group A can still get their unreduced benefits at any age with 30 years of service or at age 65 with five years of service.
In Group B, participants must have at least 31 years of service and be 52 years old; have 32 years of service at any age; or have five years of service at age 66, in order to get their unreduced benefits.
What is being changed with health care coverage?
Historically, pension plans picked up most, if not all of the cost of health care coverage in retirement. But with more and more pension plans struggling to remain solvent, many pension plans are moving away from paying for health care and turning this responsibility over to the retiree.
As a result, married couples are looking at anywhere from $1,000 to $1,200 a month for health care coverage, a figure which could add up to as much as 50 percent of the person’s pension.
Is it too late for those close to retirement age to turn things around?
It’s not too late. People who are nearing retirement need to talk to a professional. A few simple decisions can drastically change their status. Unfortunately, many people don’t know or don’t understand their benefits or their pension plan and end up making decisions that aren’t necessarily the best for their specific situation.
For instance, an individual will pull $30,000 or $40,000 out of their retirement plan to pay for their home, a move that could leave the person in a tough spot should an emergency situation arise.
The key lessons are to start saving earlier and to find a professional who can help you develop a customized retirement plan.
How can a single-life or joint-and-survivor annuity help?
Take a married participant with a pension that pays $5,000 a month. The participant receives $5,000 a month when he dies and nothing goes to a spouse. If the participant chooses joint-and-survivor, he can get $4,000 and his beneficiary can get $2,000 a month. So he’s essentially paying the pension plan $1,000 a month to give his wife $2,000 a month.
If individuals start planning early, this man may be able to buy his own life insurance policy for $100 a month. If it builds sufficient cash value, he can then take the single-life annuity and make an extra $900 in retirement. When he dies, his wife ideally would get a lump sum that produces the same amount of income if he had taken joint-and-survivor. This strategy will only be suitable under certain circumstances, and may not work for all people. Please consider all factors before taking any action.
This promotional information is not approved or endorsed by the Ohio Public Employees Retirement System. Neither AXA Advisors, LLC (and its affiliates) nor Phillip Natale is affiliated or associated with the Ohio Public Employees Retirement System. 
Phillip Natale offers securities through AXA Advisors, LLC (NY, NY, 212-314-4600), member FINRA, SIPC, offers investment advisory products and services through AXA Advisors, LLC, an investment advisor registered with the SEC, and offers annuity and insurance products through AXA Network, LLC. AXA Advisors and AXA Network do not provide tax or legal advice. AGE 101614 (03/2017)
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