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bradlymathews

Employee contributions to a frozen pension?

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We are trying to sort out my uncle's estate. The company he worked for since 1967 was sold in 1999. He continued working there until his passing last November.

He had a Quickbooks account he called Frozen Pension Fund and there are 23 contribution to the fund AFTER the merger with the latest in 2018 all totaling 5x the original shares.

This uncle told his brother that he thought he "owned" this pension free and clear. He passed a couple of months before his retirement. A person we talked to at the pension office says the estate is not entitled to any funds.

This all seems a bit weird. Was the pension frozen in 1999? How do I find out? If it was, why was he making additional contributions to it? Was he giving away his money or is the estate entitled the the post freeze assets? Am I asking ignorant questions - what should I be asking and of whom?

Thanks for your help!

- Brad

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If you have the PRECISE name of the company or the PRECISE name of the pension plan (preferably both), you can search the linked page from the U.S. Department of Labor website and find the most recent Form 5500 filed for the pension plan.  If the pension plan has enough participants the 5500 will include an auditor's report that contains a narrative that describes the plan in some detail. 

https://www.efast.dol.gov/portal/app/disseminate?execution=e1s1

 

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Long-time users of these message boards know that terminology is often mixed up.  In particular, the word "shares" jumps out.  Since that is (almost) never a characteristic of a defined benefit plan, it's possible something else is being discussed. 

In addition, note the link above will reveal the Form 5500 only for qualified plans; it's possible the "plan" under discussion is non-qualified, perhaps even an executive plan.

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28 minutes ago, david rigby said:

Long-time users of these message boards know that terminology is often mixed up.  In particular, the word "shares" jumps out.  Since that is (almost) never a characteristic of a defined benefit plan, it's possible something else is being discussed. 

Agree with this.

Were checks written?  If so, who is the payee?

Good luck and keep us posted.

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If he is not entitled to anything, then that sure sounds like a DB pension, assuming he had no spouse and no designated beneficiary.  Not sure what to do with "shares" but that could mean different things.

Frozen can mean different things. Sometimes it just means closed to new participants. Sometimes it means no new benefits accruals but only for certain participants.

You can ask for the plan SPD.  You could ask the plan sponsor to write up a quick explanation of why the estate is not entitled to benefits, and tell them it's for your records to show you investigated the pension.  My guess would be it's a DB that was only partially frozen and he is entitled to nothing because he had no spouse and either the plan did not allow other beneficiaries to be designated or it did but he declined to designate one.

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21 hours ago, bradlymathews said:

A person we talked to at the pension office says the estate is not entitled to any funds.

This might simply be because the estate is not his beneficiary, as opposed to because there was no benefit due. Ask the plan administrator who the beneficiary is.

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If there is a legally-appointed personal representative for the estate that individual should make the inquiry.  I still favor doing the 5500-search first, but whether or not that is done the personal representative has a bit more clout in asking for a Summary Plan Description and other information concerning the decedent's benefits than the decedent's nephew has (unless the nephew happens to be the personal representative).   

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Thank you all for your information and advice so far. And yeah, I always assume the terminology used by non-experts (like myself) might not be accurate and may be misleading.

I will get the exact name of the pension from my other uncle who is the administrator (I am doing leg work for him.)

We have the Summary Plan Description and my uncle has read most of it (I have not yet). I also asked him to see if they can provide some kind of statement showing contributions (employee and employer) over the duration of his employment.

We think that it is a Defined Benefits plan. He did not designate a beneficiary, he was a widower with no kids.

This is the language from the SPD relating to additional contributions.

... if you do not have a spouse,  domestic partner, or minor child who qualifies for
a survivor benefit when you die, no death benefit is payable if you die before 
your benefits begin (unless provided in a QDRO or except to the extent of your 
own contributions to the Plan (if any)).

So if he put in his own contributions while the fund was active and even more after (still assuming, for now, that it was frozen for him) then the estate should be entitled to those?

- Brad

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If they were truly employee contributions (that is deductions from his paycheck), then he would be entitled to that money back, with interest.  That is always the case, even in a plan that has no employer provided death benefit.

It is not uncommon to have a pension plan that provides no death benefits for non-married participants.  These are "retirement" plans by definition and only pay spousal benefits because Congress makes them.

Was this a union plan?  I ask that because sometimes union contribution rates are expressed as a $/hour contribution and negotiated.  The members often think of this as their money and their contributions, but technically, they are employer contributions and therefore could be forfeit on death.  

The SPD likely contains the answer to all of your questions.  If there are employee contributions, there would be a section in the SPD related to them.

 

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On 6/4/2019 at 5:38 PM, bradlymathews said:

So if he put in his own contributions while the fund was active and even more after (still assuming, for now, that it was frozen for him) then the estate should be entitled to those?

Check the form of benefit in the SPD.  Typical DB plans pay a benefit as one of a few types of life annuity.  Typical life-annuity benefits are paid out regularly until one or both annuitants die.  This is good if you live a long time, because you might get a check every month for 40 years.  This is bad if you die early and you might get monthly checks for a few years or maybe even die before you commence benefits.

The DB plan will have a death benefit, including a death benefit if you die before commencing the benefit checks start coming.  You already found that and it looks like it only applies to spouse, partner, or minor child.  So your uncle was in the worst bucket for being a DB plan participant - died before commencing benefits and had nobody to collect after him.  DB plans are akin to old age insurance and since there is nobody covered by the uncle's accrued benefits in the plan, there is apparently nothing to pay.

If it were a DC plan, then the money would be his and it would either go to his designated beneficiary, or if he had not named one, then to his heirs or legatees.

On 6/5/2019 at 7:26 AM, Effen said:

If they were truly employee contributions (that is deductions from his paycheck), then he would be entitled to that money back, with interest.  That is always the case, even in a plan that has no employer provided death benefit.

This rule applies to DC plans, but this rule does not ordinarily apply to DB plans, does it?

DB plans pay a benefit defined by the plan document.  The benefit is usually a life annuity plus some death benefits.  If the uncle's death benefits do not go to anybody, and there are no lives covered by a valid life-annuity to collect the uncle's accrued benefits, then what benefits are supposed to be paid by the plan?  It's nothing, right?

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