Community Chat

[CrazyDaisy]

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@seaBreeze wrote:

Wow, my head is spinning from all of this information. 

Simply put, pensions are protected by E.R.I.S.A. (except for most govt & church employees).

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ERISA is concerned with the administrative aspects of a plan, not the funding/investments/longivity portion. 

[Lynnster67]

en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation

www.pbgc.gov

The DoL/PBCG has different warning labels for pension plan underfunding.

* Critical. This is code red for pensions, meaning that your plan is < 65% funded and faces either a funding shortfall in the next 5 years or insolvency within 5-7 years.

* Severely Endangered. The next level down, this translates into < 65% funding and a projected shortfall within 7 years.

* Endangered. This is akin to a yellow alert, meaning the plan is < 80% funded and will face a projected shortfall within 7 years.

"If a plan is in critical status, adjustable benefits may be reduced and no lump sum distributions can be made. Pension plans in critical and endangered status are required to adopt a rehabilitation plan aimed at restoring the financial health of the pension plan."

In most cases there's not much you need to do. Still, this is something you should know and become proactive about with your employee representatives and plan administrators.

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The Pension Benefit Guarantee Board (part of Dept of Labor) will take over a defined benefit pension under certain circumstances.  Once the PBCG takes over a DB plan, it will pay pensions up to a max of ~$60K/yr (YMMV).  The PBCG is mainly funded by employer premiums.  DB plan assets must be held in a separate trust and NOT be commingled w/general corporate assets, so they are protected from employer bankruptcy.

I too have read that the PBCG is in danger of running out of $$$.  There is a bigger risk if your hubby is in a multi-employer plan (common for unions), as it is becoming easier for them to cut benefit levels (which is not true of single-employer plans).

My company terminated its pension (after first closing it to new hires and then freezing it).  I chose to roll over the lump sum to an IRA, mainly b/c you don't know what insurance company they will pick to administer the annuity.  Also, IRA provides more flexibility in terms of investment choices and I have been gradually converting it to Roth IRA while tax rates are relatively low.

[CrazyDaisy]

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@Lynnster67 wrote:

en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation

www.pbgc.gov

The DoL/PBCG has different warning labels for pension plan underfunding.

* Critical. This is code red for pensions, meaning that your plan is < 65% funded and faces either a funding shortfall in the next 5 years or insolvency within 5-7 years.

* Severely Endangered. The next level down, this translates into < 65% funding and a projected shortfall within 7 years.

* Endangered. This is akin to a yellow alert, meaning the plan is < 80% funded and will face a projected shortfall within 7 years.

"If a plan is in critical status, adjustable benefits may be reduced and no lump sum distributions can be made. Pension plans in critical and endangered status are required to adopt a rehabilitation plan aimed at restoring the financial health of the pension plan."

In most cases there's not much you need to do. Still, this is something you should know and become proactive about with your employee representatives and plan administrators.

* * * * * * *

The Pension Benefit Guarantee Board (part of Dept of Labor) will take over a defined benefit pension under certain circumstances.  Once the PBCG takes over a DB plan, it will pay pensions up to a max of ~$60K/yr (YMMV).  The PBCG is mainly funded by employer premiums.  DB plan assets must be held in a separate trust and NOT be commingled w/general corporate assets, so they are protected from employer bankruptcy.

I too have read that the PBCG is in danger of running out of $$$.  There is a bigger risk if your hubby is in a multi-employer plan (common for unions), as it is becoming easier for them to cut benefit levels (which is not true of single-employer plans).

My company terminated its pension (after first closing it to new hires and then freezing it).  I chose to roll over the lump sum to an IRA, mainly b/c you don't know what insurance company they will pick to administer the annuity.  Also, IRA provides more flexibility in terms of investment choices and I have been gradually converting it to Roth IRA while tax rates are relatively low.

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Reducing benefits has become necessary in order to keep the funds operational.  Multi-employeer funds have a many issues these days.

[newagain888888]

I sympathize with the stress you are going through. Our family is facing a similar situation so I understand. We received a letter from my husband’s former employer advising that they would soon be making a “decision” about pensions in the coming months. With sufficient public notice, private companies have legal avenues to reduce or completely default on pensions. It’s complicated and each situation is different so an attorney might be beneficial.

The Employment Retirement Security Act of 1974 (ERISA) is a federal law that sets minimum pension standards to protect both employers and employees. There is information about this law online that you should read.

The Pension Benefit Guaranty Corporation (PBGC) is an independent agency set up by the US government to “encourage the continuation and maintenance of voluntary private pension plans”. Their website, pbgc.gov has quite a lot of information and a phone number to call with questions. They will be the agency to intercede with financial help if your husband’s pension is decreased or canceled altogether. 

Congress has passed legislation in recent years making it easier for companies to reduce or default on pensions. There are plenty of loopholes in place now to make that happen. For example, my husband’s former company is not in financial difficulty at all. They just merged with Dow and have a very profitable future ahead yet they want to do away with what they refer to as “liabilities”. A legal way to do that (thanks to our Congress) is to divide a company into separate divisions and then push pensions and debts into the weakest division. Once accomplished, they intentionally allow the weakest one to fail, taking the pensions down with it. This is becoming more and more common. Worst of all is that when they do this, pensions are not covered by the PBGC. This is catastrophic for our family since my 61 year old husband worked 35 years before being downsized by his company last year in preparation for their merger.  The pension is our family’s only income and quite likely will soon be gone. 

Since it sounds like your husband’s company pension is being affected by insufficient funding, you should be fully eligible for PBGC benefits. I would read the information on their website and give them a call. Good luck! 

[seaBreeze]

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@CrazyDaisy wrote:

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@seaBreeze wrote:

Wow, my head is spinning from all of this information. 

Simply put, pensions are protected by E.R.I.S.A. (except for most govt & church employees).

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ERISA is concerned with the administrative aspects of a plan, not the funding/investments/longivity portion. 

Crazy ... you need to get your facts straight first.  Thank you.

"Since it sounds like your husband’s company pension is being affected by insufficient funding, you should be fully eligible for PBGC benefits."

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[ROMARY]

I recently heard about recent notifications from a distant acquaintance.  (Chatting at an event; out of state, etc.)

I believe he said it (allegedly) was some sort of union pension fund, but don't quote me.

[CrazyDaisy]

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@seaBreeze wrote:

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@CrazyDaisy wrote:

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@seaBreeze wrote:

Wow, my head is spinning from all of this information. 

Simply put, pensions are protected by E.R.I.S.A. (except for most govt & church employees).

---

ERISA is concerned with the administrative aspects of a plan, not the funding/investments/longivity portion. 

Crazy ... you need to get your facts straight first.  Thank you.

"Since it sounds like your husband’s company pension is being affected by insufficient funding, you should be fully eligible for PBGC benefits."

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Well then all these,posters must be lying about losing pensions and benefits if you are right.  Might want to investigate a little further.  

[pattyc]

Husband's pension was just cut 29% and another family member's got a 70% reduction.....different companies.  As for the PBGC, they are in financial decline and may go bankrupt with all the companies relying on them.  They also pay a small percentage of your original pension, an amount that is difficult to survive on.  

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@seaBreeze wrote:

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@CrazyDaisy wrote:

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@seaBreeze wrote:
 

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Crazy ... you need to get your facts straight first.  Thank you.

"Since it sounds like your husband’s company pension is being affected by insufficient funding, you should be fully eligible for PBGC benefits."

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[lovesrecess]

Not everyone receiving a pension is eligible to get social security; if you are getting a pension from gov't employment, including teaching public school;  you may not have paid into social security, it varies by state....the WEP, or windfall elimination provision, allows you to get less than 60% of the social security that you may have contributed .....this also depends on the state, so you must do your own research; they don't volunteer any info at all.

Many are learning it is never a good idea to rely on or expect a pension or social security to be your only income source when you retire.