Pension question, former employer

[usd2bmd]

So I received a mailing from a former employer. I worked for them for 11 years and was fully vested. They reorganized and I was let go about 9 years ago.

Not sure if it makes a difference but this form is a very large (tens of thousand employees nationally).

I am entitled to a pension from them but without pulling out my annual reports I do not know exactly how much.

So I received a mailing from them offering me three choices regarding my pension;

1. take a lump sum payment and with that I could: rollover the whole thing into the account of my choice; take the payment via check made payable to me: split it and take part of it and roll the rest over.

2. begin annuity payments now. (For the record I am nowhere near retirement age)

3. do nothing and wait to collect my pension.

I am now considering rolling it over, but my question is what would the possible benefits be to them (my former employer) for me to take the money and roll it over?

I wasn't even aware this COULD be a possibility.

I had previously taken my 401K and rolled it over, but it never occurred to me that It could be done with a pension.

So has anyone else ever had this happen? TIA

 

[distherapy]

For your company, they want to take a known liability now (your lump sum payment) rather than an unknown liability X number of years down the road (as you said, you're far from retirement age) - we're doing this now at my company. About half of the people have opted for the lump sum.

https://www.fidelity.com/viewpoints/retirement/how-to-take-a-pension-payment

 

[tvguy]

For your company, they want to take a known liability now (your lump sum payment) rather than an unknown liability X number of years down the road (as you said, you're far from retirement age) - we're doing this now at my company. About half of the people have opted for the lump sum.

https://www.fidelity.com/viewpoints/retirement/how-to-take-a-pension-payment

What is their financial health? Will they be around to pay you a pension when you are ready for it? Sound like you need to sit down with a financial adviser.
Only advise I would give, don't take a penny of it and spend it. Keep it all set aside for retirement.

 

[barkley]

pull out your documents-check to see if your vesting entitles you to anything in addition to your pension. with some employers the older plans entitle a retiree to health insurance for themselves and their dependents w/the former employer making a significant contribution. my former employer ended this provision for retirees almost 10 years ago so anyone whose hired in since needs to stay employed till their Medicare eligible or pay for their own coverage, but those of us who were hired in before and vested are still entitled to it-and they LOVE it when someone opts to cash out vs. taking their traditional monthly pension cuz they save HUGE bucks (with some of the health and dental plans my employer's share of cost for a retiree w/dependents can be as much as $1800 per month).

 

[georgina]

I worked for a company for 5 years and would have received a pension of about $100 a month. We joked when I quit there in 1990 that it would maybe pay the phone bill when I retired. That was before cell phones and the family plan! I did opt to take the lump sum a few years ago when it was offered, since it was a small amount. I rolled it into a traditional IRA so no taxes were owed. (I would not have received any medical benefits.) I'm sure the company was happy to get a small pension off the books for administrative purposes.

 

[tvguy]

with some employers the older plans entitle a retiree to health insurance for themselves and their dependents w/the former employer making a significant contribution.

A past employer had a deal like that, but they eliminated it for everyone back in 1979 along with the pension plan. But I think the IRS actually forced them to dump it because it didn't treat everyone equally.

 

[lisaross]

I just got an offer like this as well from a former employer. Usually it's better to leave it as a pension unwill get at 65. I will get about 700.00 a month starting at 65 I could of taken a lump sum of 50,000 now

 

[dcfromva]

This topic comes up quite frequently on the Bogleheads discussion board:
http://www.bogleheads.org/ (you can google the topic on bogleheads if you want to do more research)


There are a lot of factors to consider such as your age, how soon you are eligible for the pension, your overall health, whether your pension is insured by the PBGC (and whether your pension would exceed their maximum payout), is your pension indexed for inflation, how well the pension plan is funded, et'c.

You can compare how much of an annuity your lump sum would buy you compared to what your pension would pay for a frame of reference.
https://www.immediateannuities.com/

 

[bdcp]

Yep, DH just received a mailing from a company he worked for about 18 years ago for about 9 years total. Anyway, he was offered a buy out also. He left the company to take another position with a different company. Our oldest DS works for DH's prior company and they are offering it to everyone who worked for them during the time that pensions were still available. They've gone to 401's only. DH has scanned our paperwork which does show what the lump sum would be and is sending it to our Financial Planner to get his opinion on whether to leave it in place or roll it. The company is a very large well known one that has merged a few companies together over time so no real worries, but we'd like to maximize our profit. There's still two more pieces from two prior iterations of this company that also give pensions so we're waiting for those to do the same thing. Our lump sum is around 65K which is a small part of our overall portfolio. We're waiting to hear back from our FP who has helped us make good money over the years, even halfway decent returns during the market dips. Health insurance isn't an issue for us since DH is a retired Naval reserve officer which means at age 60 we're entitled to Tricare.

There are a few things to consider and honestly, a professional opinion is what you need.

 

[NinaBella]

Yep, DH just received a mailing from a company he worked for about 18 years ago for about 9 years total. Anyway, he was offered a buy out also. He left the company to take another position with a different company. Our oldest DS works for DH's prior company and they are offering it to everyone who worked for them during the time that pensions were still available. They've gone to 401's only. DH has scanned our paperwork which does show what the lump sum would be and is sending it to our Financial Planner to get his opinion on whether to leave it in place or roll it. The company is a very large well known one that has merged a few companies together over time so no real worries, but we'd like to maximize our profit. There's still two more pieces from two prior iterations of this company that also give pensions so we're waiting for those to do the same thing. Our lump sum is around 65K which is a small part of our overall portfolio. We're waiting to hear back from our FP who has helped us make good money over the years, even halfway decent returns during the market dips. Health insurance isn't an issue for us since DH is a retired Naval reserve officer which means at age 60 we're entitled to Tricare.

There are a few things to consider and honestly, a professional opinion is what you need.

As a retired military member he would have to pay a premium for Tricare.

 

[usd2bmd]

Thanks everyone. I am still waiting for the detailed statement before talking with my Financial Advisor. that should be coming in the next couple of weeks.

I am not entitled to health benefits and it is not indexed for inflation. to be totally honest, it wasn't an amount we had even been counting when we plan for retirement. Not because we don't plan on the company being around (they have been around for almost 100 years and very strong financially) but just because it was a small amount and wouldn't have covered much by the time we are ready to collect it.

I remember reading somewhere that you should plan on 80% of your income for retirement and we are on target for above that so I am not worried.

I was just surprised to have gotten the mailing as I wasn't even aware they could do something like that with a pension account.

 

[barkley]

As a retired military member he would have to pay a premium for Tricare.

I don't know what Tricare coverage is like now, but back in the day when my former employer offered the vested at 5 years got you retiree medical benefits we had a constant stream of employees who were retired military-they were on what we called "the 5 year plan". they hired in and stayed 5 years to the day just so they could retire (again) with non military health care (seemed like the biggest complaint was finding preferred providers where they lived or were planning on living).

 

[disney1990]

Personally, I would roll the money over into an individual account that you control. If you are not near retirement age, you would pay penalties if you took the money now (pre 59-1/2).

Best if you get in touch with a financial company - such as Fidelity, etc. They will help make an educated decision.

 

[ellochka]

My company (also a very large company with tens of thousands of employees) is being taken over by a company that has no pension plan, and it is trying to do the same with former employees. One of those employees is my former boss, who was an SVP, and that guy is very-very good with his money. His opinion is that it is almost always a sucker's deal for the employee to take a lump sum. So unless you are in really bad health (cancer, severe diabetes, heart disease) it makes no sense to get the lump sum. Generally speaking, regular pension at retirement age is the best option for the employee - that's exactly the reason why the company is offering you "options" - they know people live longer and pensions are getting expensive.

My recommendation is to look at the options with all due skepticism.

 

[bdcp]

As a retired military member he would have to pay a premium for Tricare.

Um, did I say we wouldn't have to pay? The point is, we have access to it. Bye "entitled" I meant we were given access to it by virtue of him being a retiree

And, that's all you got out of my post? You pulled something to "correct" me on? Geez.

I also think we'll probably just leave the pension in place, but we'll see what our FP suggests.