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Widow(er)'s Initial Minimum Amount - Continued

• As an example of the widow(er)’s initial minimum amount, assume the employee was receiving $1,900 at death ($1,400 tier I and $500 tier II).
• Under previous law, the widow(er) would have initially received $1,650
  ($1,400 tier I and $250 tier II).
• Under current law, the widow(er)’s initial minimum amount is $1,900
  ($1,400 tier I, $250 tier II and $250 additional amount).
• With an initial tier I Cost-of-Living Adjustment (COLA) of 2.6 percent, widow(er)’s tier I rises to $1,436 and with an initial tier II COLA of 0.8 percent, tier II rises to $252. The additional amount is reduced to $212 by the dollar amount of the tier I and tier II increases.
• After 6 COLAs, the widow(er)’s tier I is $1,632, the tier II is $262.25 and the additional amount is $5.75.
• After the 7th COLA, there is no longer an additional amount, as the $1,675 tier I and $264.35 tier II total $1,939.35 and now exceed the initial minimum amount of $1,900.

Notes:

• Assumes employee died in 2010.
• Assumes first Cost-of-Living Adjustment (COLA) of 2.6% tier I and 0.8% tier II. Assumes future COLAs to also be 2.6% tier I and 0.8% tier II.
• The $250 additional amount is reduced each year by the dollar amount of the increases applied to tier I and tier II. For example, if tier I increases by $36 (2.6% cost-of-living) to $1,436 and tier II by $2 (0.8% cost-of-living) to $252, the additional amount will decrease by $38 to $212. The total amount payable of $1,900 will not change. The annuity payable will increase only when the tier I and tier II amounts with their subsequent cost-of-living increases exceed $1,900.
• Assumes no reductions of any kind. If there are Medicare premiums, for example, total amount is lowered for amount of premium. If premium increases from year to year, total amount will be reduced by the increase in the premium.
• COLA figures used above are for example only. No COLA payable in 2011.