Prior to 1996, a participant's balances were converted to an annuity at an 8% conversion rate. In 1996, the annuity conversion rate was changed to 7%.

 

An effort was made to protect the benefits of those who were in the plan at the time. It was decided that all account balances in the plan on December 31, 1995 would continue to be converted using the 8% annuity conversion rate. These balances would also be credited with interest at a rate of 5% (which was the regular interest rate at the time) going forward to ensure that no one was adversely affected by this change.

 

If the Fund credits less than 5% interest, the pre-1996 balances will still be credited with the 5% interest rate. Any other money in the participant's accounts will receive interest at the rate declared by the Board.

 

If the interest rate credited by the Fund is higher than 5%, the total balance of the participant's account is credited with that rate. However, only the first 5% of interest is considered "pre-1996" contributions (money that is guaranteed an 8% annuity conversion rate). All interest above 5% is treated as "post-1996" money, and is combined with the "post-1996" contributions to be annuitized at 7%.

 

The current annuity rate is a blend of two rates - participant account balances prior to 1996 are annuitized at 8%; and account balances from that point going forward are annuitized at 7%. Even if the Fund were to adopt a third tier, it would be applied to account balances from the date of declaration going forward. Accordingly, a third tier addition to the annuity rate would have very little effect for any long-tenured participant retiring in the next several years.