Mayo Clinic Pension: A Simple Guide

Nov 25

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The Mayo Pension Plan helps employees save for retirement with benefits that grow over time. Let’s break down the key parts in easy-to-understand language:

Who Can Join?

You can join the plan if you’re at least 21 years old and work in a regular, full-time or part-time job with Mayo Clinic. Temporary or on-call workers, as well as students like residents or fellows, aren’t eligible (Page 5)

How Are Benefits Calculated?

Your benefits depend on when you joined the plan:

- Before January 1, 2015: Your pension is calculated using two methods: a “Final Average Pay” formula for work before 2015 and an “Annual Accumulation” formula for work after 2015. (Page 6)

- After January 1, 2015, but before January 1, 2023: The “Annual Accumulation” formula applies, where your pension grows with a small amount added each year based on your salary. (Page 9)

- After January 1, 2023: The plan uses a “Stable Lump Sum” formula, which gives you a one-time payment when you retire. (Page 10)

What Does "Vested" Mean?

Vesting means you have earned the right to keep your pension benefits even if you leave Mayo Clinic before retirement age. Here is an excerpt from the Mayo Pension Plan that details vesting requirements:

“The non-forfeitable right to a benefit under the Plan. A participant’s benefit is Vested when the participant is either: (a) age 28 or more with at least three years of Benefit Service, or (b) age 21 or more with five years of Vesting Service and some benefit service.” (Page 35)

This is important because it ensures you’ll receive your pension once you reach retirement age, even if you change jobs.

How to Estimate Your Benefits

You can use the “Your Pension Estimator” tool available on HR Connect or the Mayo employee portal to estimate your pension benefits. This tool calculates your benefits based on your salary and years of service, helping you plan for retirement. You can adjust different factors, like your retirement date or salary changes, to see how these might impact your pension.

What If You Retire Early?

You can retire before the standard age of 65, but your monthly pension will be smaller because it starts earlier. The reduction depends on your age and years of service when you retire (Page 17). This means the earlier you retire, the more your benefit amount will be adjusted down.

Payment Options

When you retire, you have a few choices for receiving your pension:

- Monthly Payments: This option provides consistent payments for the rest of your life. If you choose a joint option, your spouse or beneficiary can continue receiving a part of your pension if you pass away first (Page 23 & 24)

- Lump Sum: You can take your benefit as a one-time payment, but this means you won’t receive monthly income later (Page 23 & 24)

What Happens If You Become Disabled?

If you become disabled while working, your pension keeps growing based on the salary you had before the disability. When you reach age 65, your benefits start based on this adjusted amount (Page 21). This ensures that a period of disability won’t halt the growth of your retirement savings.

Benefits for Your Family If You Pass Away

If you pass away before retirement, your spouse or beneficiary may receive benefits. The amount depends on the option you selected for your pension, like a joint and survivor annuity (Page 22). Reviewing your beneficiary designations and ensuring they reflect your wishes is a good idea.

Cost-of-Living Adjustments

If you meet specific age and service requirements, your pension earned before 2004 might increase a bit each year to keep up with inflation (Page 20). However, any pension amounts earned after 2003 are not eligible for these adjustments.

What Happens If You Leave and Come Back?

If you leave Mayo Clinic and then return, your pension benefits will depend on when you come back:

- If you return within a certain time frame, you may resume accruing benefits under the same formula you were in before you left.

- If you return after a longer break, you may be enrolled under the newer formula, like the Stable Lump Sum formula for employees hired after January 1, 2023 (Page 10)

What If You Have a Dispute?

If you believe there’s been a mistake with your pension calculation, you can file a claim with the Retirement Plan Claims Committee. This needs to be done in writing within one year of when you knew (or should have known) about the issue. If your claim is denied, you have the right to appeal, and you can take your case to federal court if necessary (Page 25)

Are Pension Payments Taxed?

Yes, pension payments are subject to federal, state, and local taxes. If you choose to receive a lump sum payment, 20% will be automatically withheld for federal taxes unless you roll it over into an IRA or another retirement account (Page 24). Planning for these taxes can help ensure you get the most out of your retirement savings.

Plan Amendments and Changes

Mayo Clinic has the right to change or end the pension plan. However, if this happens, you won’t lose the benefits you’ve already earned. Any changes would only apply to future accruals, not to benefits that have already been vested (Page 28). It’s always a good idea to stay informed about updates to the plan, which Mayo Clinic will communicate to employees.

What If The Plan is Terminated

If the Mayo Pension Plan ends, a federal agency called the Pension Benefit Guaranty Corporation (PBGC) may step in to help pay out benefits. Most people still receive their promised benefits, but some adjustments may apply (Page 29).

References:

1. Mayo Pension Plan Summary, January 2024

Disclosures

Fortress Financial Group, LLC (“Fortress”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Fortress and its representatives are properly licensed or exempt from licensure.

All information provided is from sources believed to be accurate and updated. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.