Mayo Clinic is offering its employees a significant opportunity to impact their future financial stability. A critical decision point is at hand concerning the method of calculating future pension benefits. This announcement is aimed at providing Mayo Clinic staff with comprehensive guidance to navigate this change effectively.

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Key Update: Introduction of the Stable Lump Sum Formula

From August 14 to September 15, 2023, Mayo Clinic employees have the option to switch their pension benefit calculation to the Stable Lump Sum Formula. This decision could considerably affect retirement finances by altering the amount received, which will depend on the chosen payout option and the prevailing interest rates at retirement. For detailed information and to explore this option, staff members are encouraged to visit www.mayoemployees.org.

Continuity in the Pension Plan

Despite this new development, several aspects of the pension plan will remain consistent:

• Employees still have the option to choose between a lump sum payment or monthly disbursements at retirement.
• Benefits accrued before 2024 will continue to be computed using the Annual Accumulation Formula.
• If employees do not make an explicit choice, their pension calculations will automatically follow the Annual Accumulation Formula after 2023.

Pension Formula Choices for Mayo Clinic Staff

• Annual Accumulation Formula (Current Option): This formula calculates 1.4% of monthly pay (2% above the Social Security wage base of $160,200 in 2023). For an employee earning a $150,000 salary annually over 10 years, this would mean a monthly benefit of approximately $1,750 starting at age 65. This benefit is consistent and not influenced by interest rates. At retirement, there is an option to convert this into a lump sum, although the exact amount will be dependent on the interest rates at that time.
• Stable Lump Sum Formula (New Option): Under this new formula, 18% of an employee’s pay (26% above $160,200) is accrued. For an employee with an annual salary of $150,000, this would result in a $270,000 lump sum after 10 years. This sum is fixed but can be converted into monthly payments, the amount of which will be influenced by interest rates at retirement. To select this option, employees are required to log in to mayoemployees.org during the designated period.

Making an Informed Choice

Selecting between these formulas requires careful consideration, particularly of the interest rates at the time of retirement. Given the unpredictability of these rates, Mayo Clinic employees should base their decision on their preferred pension payout method. The Annual Accumulation Formula is recommended for those who prefer a stable monthly income, while the Stable Lump Sum Formula is more suitable for those inclined towards a one-time lump sum.

Regardless of the formula currently chosen, Mayo Clinic employees will retain the ability to select either a lump sum or monthly payments at the time of retirement. The decision made now will primarily influence how the pension benefits are calculated from 2024 onwards.

Lump Sum vs. Monthly Payments: Factors to Consider

Mayo Clinic staff should carefully evaluate several key factors when deciding between a lump sum and monthly payments. These include expected longevity, estate planning goals, tax implications, liquidity needs, risk tolerance, and personal financial planning needs.

Summary: Making a Strategic Decision for Retirement

The pension formula selected by Mayo Clinic employees at this juncture will significantly affect their future benefit amount. However, the flexibility to choose between monthly payments or a lump sum at retirement provides an opportunity to tailor the pension plan to individual retirement needs and financial goals.