pension froze..select few get lum sums

[SandyC_01]

Pennsylvania
My husband has worked for a company for 18 years, Last summer the company merged with another company, A meeting was held and all the employees we told the the pension money from the old company was going to be froze and everyone would be given their lump sum check in the next 10 months and could do with it what they wanted... cash it....or roll it over in the new merged companys 401k plan or roll it over into another retirement plan within 60 days and not pay tax on it. They said they didnt know how much everyone would get and thats why it would take 10 months or so it "figure" it out.Well we went the route of talking to accountants and trying to figure what was the best place to put our retirement money in because my husband cant retire for another 18 years. We heard nothing until my husband went and asked a few days ago. And was told Ohhh well you have more than 10,000 in it so it will remain frozen until you retire. It will "not" accure any intrest or anything just sit there for 18 years and then get a little check per month when he turns 65. He was told that if you had less than 10,000 he would have recieved a check that he could invest in somother kind of reirement account. when my husband said well thats not what we were told last summer we were told that everyone was getting thier money...when did things change...well the benifits admin didnt say anything... shouldnt we have documentation about this froze account. My question is : can they pick and choose who gets to invest their pension money? shouldnt they have known about some not getting their money after a certain dollar amount? Can they change things from a pension plan at will ? and shouldnt we have had to sign something about this ? when my husband was noticably upset that his money the will sit in an account doing nothing while others can choose where to put theirs and make money ....the benifits admin person said well you might get the lump sum in a few years. we will have to wait and see.. Does that sound right? under the old pension plan before the merger the employer put the money for each employees pension. under the newly merged company its a 401 k that we contribute and they put so much of a percentage in per month to match ours. Lastly...I did make a call and found out that the pension is not called what the old company was its the new merged its under the new merged company, should it always be under the old name since its frozen? thanks in advance !

 

[Beth3]

Here's the thing. A true pension plan is a "defined benefit" plan. There is no money sitting in an account with your husband's name on it as there would be if he had a 401(k), which is a defined contribution plan.

A pension/defined benefit plan represents a FUTURE LIABILITY on the part of the employer. Through some formula based on years of service and earnings, your husband will be entitled to a yet-to-be determined monthly pension benefit when he retires. That's a very different situation than a 401(k) where the contributions are based on a formua reflective of his present annual income (i.e. the company matches, say, 4% of his present annual salary) and real money goes into an investment account in his name.

It is perfectly legal for his employer to decide to "freeze" the pension account and pay him a monthly pension benefit down the road when he retires and institute a 401(k) going forward. My guess is that when the company calcuated the amount of money they'd have to come up with at present to cash out the pension plan for all participants, they decided they just couldn't do that and instead would hold off doing so for the forseeable future. They could opt to cash out the pension plan down the road or freeze it indefinitely until all the present participants retire and all liabilities are met.

As far as I can tell from what you've shared, nothing the employer has done is prohbited.

 

[SandyC_01]

thanks beth3.....

thanks Beth...But what i dont understand is out of 225 employees only about 20 or so arent getting their lump sum like everyone else is, If they cant calculate exactly how much everyone will get , then why did tell my husband and 20 others that they had over 10,000 dollars worth of pension and they wouldnt get their pension in lump sum now, and in my husbands case his will sit there and gain nothing over these 18 years until he retires while the others can reinvest their money and gain. every year we got a summary annual report stating what he would get at retirement age...and the reports were filed with the internal revenue service as required under ERISA. I just feel like if the account was frozen why wouldnt they just hold everyoones until they retire instead of picking and choosing the people to give lum sums to. my husband feels that after 17 years of loyal service to this company he isnt being rewarded he is being punished by not being allowed to invest his money for his retirement while others can...Thanks

 

[Beth3]

I don't have answers to those questions because I don't know the particulars of your husband's pension plan and I'm not a "defined benefit" expert. Most of my experience has been on the defined contribution side.

What I suggest your husband do is to contact the individual at his company who adminsters their benefits or retirement plans and ask him or her to please explain why he can't get a distribution on the Plan. If your husband still has questions or think something improper is taking place, then he can contact the Pension Benefit Guarantee Corporation in Washington DC - 202-326-4040. wwwpbgc.gov

 

[SandyC_01]

hope im not being a pain beth but....

hi beth..i sure hope im not being to much of a pain, But this thing really has me nuts. My husband did as you said and asked the benefit admin why he didnt get a lump sum like most of the other employees and she told him it was because there wasnt enough money in the pension plan to pay everyone and the company would have had to put the rest of the money in to pay everyone so he and some others would not be paid until they retire in my husbands case 18 years, and then recieve a monthly check .she said it was a deferred vested benefit ,My husband said you mean my money has to sit there and gain nothing while others got their money to reinvest ? she said the company was going to put 20.00 per year in his account. this whole thing is so unfair...at least 3 other people that have more years at the company than my husband does got lump sum checks...Is it legal for the trustee's of the pension ( which happen to be the owners ) to just give any employee they want their pension money now? Also since they payed out all but a few peoples pension money now, does that mean the pension plan is terminated or could they have opened a whole new account with all new rules? I feel like if they couldnt pay off everyone then why did they bother paying off 3/4 of the people in cash now? why wouldnt they just tell everyone that they would get this deffered vested pension when they retire. The Benefit admin got an attitude with my husband because he is asking so many questions and talking to the other employees to find out who got their money now...thats how he is finding out that people with more years in than him got a lump sum now...We are kind of worried that they may try and fire him or something for stirring up the pot..But it is his retirement and our future they are toying with.. well thanks in advance for answering my questions !

 

[Beth3]

Sandy - we're at the limit of what I can advise you on a defined benefit plan. As I said, nearly all my experience has been on the 401(k) side and apparently none of the other regular responders can answer your question either, or they would have by now.

I strongly suggest your husband contact the PBGC whose phone number I've given above. They are the branch of the federal DOL who are specifically charged with overseeing and regulating pension plans.