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Former employee thinks scheduled cash-out distribution is not all that


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An employee terminates service say 6/1/2000. He intends to receive a lump sum, but has discovered that in his opinion the lump sum payable is several thousand dollars lower than he feels it should be. What are his options (or best options)? Should he try and correct error prior to distribution or is it best to take distribution and then file a claim for additional benefits? Interested in hearing strategies as well as any legal aspects and citings.

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Seems to me always advisable to address the issue up front. He may be misinformed about something. At any rate, getting the questions out in the open is probably a good idea, especially since others may have the same questions.

My experience is that most EEs do not understand how DB plans work and my think of them more as "accounts" thus giving rise to "expecting more" especially at the younger ages.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Assuming it wasn't provided, employee should if possible get the calculation worksheet with as much detail as is available. Presuming the plan sponsor's not up to something, this kind of info's often provided along with "the number" [the payment amount].

I agree with PAX--most employees are flat clueless re: DB plans--and when they do "understand" them, they "know" they wuz robbed; witness the uproar over cash balance plans.

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Actually, I the actuary think he may have been shortchanged, since the lump sum is just based on the account balance, and not 417(e) as a minimum. Any thoughts w/r to handling this situation?

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