For millennials, the idea of a pension plan that pays benefits from the time you retire to the day you die is an unheard-of concept. Fewer and fewer American companies offer this benefit, so if you are among those who have a defined-benefit pension, congratulations! But don’t assume the check is in the mail. A recent investigation by the Department of Labor into some of these large plans shows that more than $500 million is owed to retirees.
Kiplinger’s article, “Missing Pensions Costly to Retirees,”reports that between summer 2015 and 2016, the Labor Department investigated more than four dozen large pension plans and found staggering results: some of them are not doing a very good job of monitoring retired participants and paying benefits when they’re owed. Some plans don’t even have the names or ages of many of their participants.
In addition to poor recordkeeping, corporate mergers, spinoffs and bankruptcies make it difficult for retirees to track down and claim pensions from employers they left years ago. In light of this unfortunate reality, plan members must maintain employment records, plan documents, tax returns and other paperwork to show they’re eligible for a pension. Plus, they must be proactive in claiming their benefits when the time comes. These plans don’t have much motivation to pay benefits when they’re due.
If you’ve earned a pension, hang on to your individual benefit statements and the summary plan description that outlines the requirements for earning benefits. Also, keep your records of employment—including W-2 forms and pay stubs—as well as all of your old tax returns. When you claim your benefits, the plan might say that it’s already paid you a distribution, so you’ll need your old tax returns to show if that’s accurate.
In the event you leave a job before the plan’s retirement age, make certain that you have a vested benefit and get the plan’s most recent summary plan description. This will tell you the benefits you get in retirement. Update the plan for any changes in your contact info and marital status. If your plan is terminating, make sure you know who’s going to be administering the plan. If the plan is sufficiently funded, an insurance company will take over payment of the benefits. If not, the plan will likely be turned over to the Pension Benefit Guaranty Corp.
The first place to look for your pension is https://www.pensionhelp.org, where you will find pension counseling programs that are federally funded. You will also want to locate your former company’s employer identification number (EIN). This is the corporate equivalent of your Social Security number and will be useful in finding the company. Look for a “notice of potential private pension benefits,” which is a reminder from the Social Security Administration for workers with private pensions. Pension plans that are turned over to the PBGC may be found at www.pbgc.gov/wr or click “find an unclaimed pension” to see if you have been included in PBGC’s list of missing participants. Worst case scenario, if you have been left out of your plan’s records, you will need to document your work history and eligibility for the benefit. One way to do this is with your Social Security earnings statements using Form SSA-7050. It will cost you, but getting this information is a necessary part of your fight to obtain the pension you worked for.
One retiree spent years tracking down his pension, with some assistance by the Western States Pension Assistance Project. He had worked for a bank in the 1970s and 1980s, and the bank had been acquired, so the trail of his pension was faded. The Assistance Project found his pension with the Ford Motor Company, a most unlikely place.
These headaches are one reason why we at Family Estate Planning Law Group stress the importance of aligning your assets with your estate plan and tracking them over time. Few people are aware that the way assets are owned determines what happens to that asset after they pass, even superseding instructions in a will or trust. By working together now, your professional team of CPAs, financial advisors, insurance professionals and your estate planning attorney can ensure your assets are owned in a way that’s consistent with your estate plan.
For more information about the importance of asset alignment, explore our website and contact us to schedule your consultation today!
Reference: Kiplinger’s (June 2016) “Missing Pensions Costly to Retirees”