On June 17 our speaker was Ellen A. Bruce, JD, Director of the Pension Action Center, Gerontology Institute, McCormack Graduate School of Policy Studies at UMass Boston. She gave us a clear and comprehsive overview of pension rights and benefits.
The Pension Action Center, which Ms. Bruce founded in 1993, serves all of New England, and has helped more than 4,600 people recover over $34 million in retirement benefits. Services are free, and most issues can be handled by phone. If you have a pension question, call them at (617) 287-7307 (toll-free: 888-425-6067).
Ms. Bruce first reviewed the different types of pensions: Social Security, Employer Sponsored (defined benefit and defined contribution), IRAs (including Roth IRAs), and non taxed-deferred savings.
For any pension you (or your spouse) has, follow a “50 year rule” for keeping documents, particularly for employer-sponsored plans: employment history, pay stubs, summary plan description, individual benefit statements, and statements of vesting status.
ERISA (The Employee Retirement Income Security Act) became effective in 1976; before this pension rules were set by individual companies. It provides protection for employees in pension plans, as well as disclosure rights.
Defined benefit plans ( or “traditional” pensions) pay a monthly “defined benefit” for life (or a lump sum payout), benefits are determined by a formula, there are spousal protections, and the pension is normally completely funded by the employer.
Defined contribution plans (such as a 401(k)), on the other hand, have a benefit defined by the amount contributed (by the employee or company). There may be a company match (full or partial) for employee contributions, but not always. With defined contribution plans, the benefit amount is not guaranteed, but the account is usually portable if you leave the company.
As the number of workers with defined benefit plans has decreased, there has been a massive shift of responsibility to individuals to fund and manage their pensions.
Rules for vesting in plan benefits (your non-forfeitable right to benefits) were set by ERISA beginning in 1976 (before that, look to the plan), and vary by date. You should pay attention to when you will become vested in an employer-sponsored plan; i.e., be careful about leaving a job if you are close to being vested.
Ms. Bruce also discussed survivor-related issues. The amount for a joint-and-survivor benefit (one that a spouse continues to receive after the pension-holder dies), must be actuarially equivalent to an individual benefit, but companies sometimes give a subsidy if you choose the joint-and-survivor benefit option. Be careful before signing a waiver (which requires the spouse’s consent) of a joint-and-survivor benefit (except in some cases, e.g. if the spouse is terminally ill), because people often regret this choice later, and it cannot be changed.
The Pension Protection Act of 2006 set requirements for notifications about pensions (including funding status, for defined benefit plans), and put restrictions on plans that are less than 80% funded. This is to protect the Pension Benefit Guaranty Corporation (PBGC)–which protects pension benefits–from under-funded plans. It also set new interest rates for calculating lump-sum payouts, and made permanent the Saver’s tax credit (Retirement Savings Contributions Credit) for those with lower incomes who contribute to IRAs, 401(k)s, 403(b)s, etc.
Ms. Bruce concluded with steps we all should take:
- Save, save, save!
- Work as long as you can
- Marry well
- Notify former pension employers of your address
- Keep retirement documents in one place
- Contribute to employer sponsored plans
- Start an IRA (investigate the Saver’s Credit)
- Calculate your projected retirement income, from both Social Security and any pensions
Posted by newtonreference 
Posted by newtonreference 
Posted by newtonreference 
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