Understanding The 2021 Limited Retirement Option

Written by Chris Draughon

I want to see you achieve your financial goals so I spend my time making the complicated things simple. As the Director of Financial Planning I help our clients identify their most important financial goals and develop paths to get them there on time with room to spare.

March 3, 2021

Do you understand the 2021 Limited Retirement Option? On February 23rd, Jacksonville’s City Council enacted Ordinance 202-529-E adding the 2021 Limited Retirement Option to the City’s retirement plan. As of the time of the writing, the legislation still requires the Mayor’s signature, but it looks pretty certain this is good to go. Employees covered by the General Employee Retirement Plan, including JEA employees, that meet certain conditions now have a new option available to them. Should you take advantage of the 2021 Limited Retirement Option?

Since originally publishing this article, the City of Jacksonville has provided an excellent PDF that reinforces much of what is written here. You can find their PDF here.

What is the Limited Retirement Option?

The 2021 Limited Retirement Option provides for a 6-month window to declare Normal or Early retirement. For JEA employees, that window is between May 1st and October 31st.

Not every employee has the opportunity to take advantage of the new option. In order to apply for Normal retirement, you must be 60 years old with 5 years of credited service or be 55 years old with 10 years of credited service. If you meet these age / time of service milestones, you will be able to retire with a benefit equal to 2.5% of your final monthly compensation for each year of service.

That is at least 12.5% for those age 60 with 5 years or 25% for those of you age 55 with 10 years of service.

If you have 20 years of credited service, but less than 30, and regardless of your age, you are now eligible for Early retirement. The benefit under this option is 2% of your final monthly compensation for each year of service.

There Are Requirements

Before you can take advantage of the 2021 Limited Retirement Option, you’ll need to meet certain requirements.

  • You must meet the age and/or time service requirements;
  • You must submit written notice by June 30th, 2021;
  • All time service credit must be completed no later than the date of retirement;
  • Generally, you will be prohibited from being re-employed with the City for a period of one year;
  • If re-employed after one year, you will be prohibited from becoming an active member of the General Employee Retirement Plan

An Alternative Option

In addition to the above retirement option, the Limited Retirement Option also allows employees meeting the age and time service milestones to convert to the General Employee Defined Contribution plan. Electing to do this would mean moving your accrued pension balance into employee directed retirement plan. In exchange for taking control of retirement account, you would be forfeiting a monthly annuity backed by the City pension plan.

Should You Elect the Limited Retirement Option?

The question of taking advantage of this one-time limited retirement option is a tricky one. In my opinion it comes down to your personal retirement plan. Were you already considering retiring but didn’t meet the normal requirements? Were you already planning on making an employment change? If either of these fit you, then taking advantage of the option could be a good idea.

If you’ve been putting in your time and were planning on taking advantage of the BACKDROP, then this option is not for you. You still need to have 30 years in before being eligible for BACKDROP so don’t retire now.

What about the option to convert into the GEDC plan? This really depends on the type of person you are. Are you comfortable for directing your retirement savings? Or would you prefer to have a monthly annuity backed by the City in retirement? There are pros and cons to both approaches, but once the decision is made its basically irrevocable. Maybe that’s a topic for another blog article?

There’s no doubt the City is trying to reduce their ongoing pension liability by incentivizing employees with the 2021 Limited Retirement Option. If you meet the age and time of service milestones and were considering making a change, this might be a good option for you. But you only have until June 30th to make your decision.

If you have questions about whether this is right for you, I’d be happy to answer your questions. Shoot me an email or give me a call.

We had a tremendous reaction from JEA members over the webinar we hosted a couple weeks ago. If you missed it, be sure to check it out here.