Dianna912
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Alright, this may seem like a very obvious question, but I want to make sure I understand this correctly. If she is exactly 62, will her benefit be reduced by the 1/15th or the 1/30th per year? I can't tell whether to interpret this to say: between ages 55-60 it is 1/30 then 60-65 it is 1/15th or if it is the opposite. It seems strange to do it the opposite way. Less of a per year reduction, the earlier someone retires? That doesn't make a lot of sense actuarially, unless I'm missing something, which is likely.
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You are amazing! I had pulled the 5500 on FreeErisa, but that did not have the supplemental plan document. Thank you, this is tremendously helpful!! Pension Benefits Participants are fully vested after five years of service or upon attaining normal or early retirement age. Annual benefits are calculated as follows: Normal Retirement - The Normal Retirement Date for each participant is the first of the month coincident with or next following the attainment of age 65, but not earlier than the five-year anniversary of Plan participation. The amount of annual retirement benefit payable is equal to 1.50% of the participant's average compensation, times their years of service, less 1.50% of their primary Social Security benefit, times their years of service. The average compensation is the average annual compensation during the five consecutive calendar years out of the last ten before the calendar year of retirement which produces the highest average. The Plan agreement details additional restrictions. Effective December 31, 2009, the plan was frozen to additional accrual of benefit. Early Retirement - A participant may retire on the first day of any month following attainment of age 55 and the completion of 15 years of service. The amount of monthly early retirement benefit is equal to the Normal Retirement benefit reduced by 1/15th of each of the first five years and 1/30th for each of the next five years by which the benefit commences prior to the Normal Retirement Date.
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Okay, we will try that. She requested claims forms from the annuity company and they just stated that she isn't eligible, but we did see a claimant packet on the site and requested it. Hopefully that will clarify things. Does a non-profit terminating a pension like this indicate financial issues with the entity? I ask because I know people with 457b deferred comp funds still in their 457 plan, and I realize 457 plans are not technically theirs, and can be lost if the entity becomes insolvent.
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I have another strange one, but this time I made sure to make sure that I have this well documented before asking questions. Client left employer a few years ago, after age 55. She had a pension benefit (Defined Benefit Plan) that was from a frozen plan. In 2019, the pension offered a lump sum buyout. They opted to continue to delay starting the pension. In June of 2023, the pension terminated and sent out elections for, again, lump sum, start income now, or delay. Again, they opted to delay. Their plan was to start the pension now, at 62 years old. Normal retirement age is 65. Every communication at every point indicated that they were eligible for Early Retirement, though, as of both the 2019 documents and the 2023 documents. We have it in writing: "You have met the requirements for Early Retirement as described in the Plan. You are eligible to receive an early retirement benefit at any time between now and your normal retirement date reduced under the terms of the plan." F&G "issued a group annuity contract" for the pension in December 2023. F&G is now stating that they cannot start their benefit until 2027, when they hit 65 years old. I was certain that the person they spoke with must just have been mistaken, so we logged in, and sure enough: the site shows February 2027 as both the "Early Retirement Date" and the "Normal Retirement Age." This is not something they could have changed, correct? This is a screen shot from a video that the sponsor released regarding the plan termination. What recourse does the client have in this situation? Unfortunately, I don't have access to the actual plan documents. The annuity certificate has apparently not been issued yet (or at least isn't available on the site yet) and the previous pension service center does not have any documents available. But we do have the election notices from both 2019 and 2023 clearly stating that they are eligible for early retirement.
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This is amazing, thank you so much to the both of you. A hearty apology, I just spoke to the participant again and got additional information. What she told me originally was not exactly correct. For context, I'm a financial advisor who frequently works with people from this employer. I know their pension plan extremely well, because I work with many of the employees approaching retirement. This particular scenario was just out of left field for me. Unfortunately, their plan is one in which it is nearly impossible to speak with the plan directly. We have to call, they have to submit a ticket for a callback to the participant, and, of course, by the time that happens, I'm not with the participant anymore which makes it difficult. I wouldn't normally get this in depth into something like this, but I felt really bad for her. From what she has now shared with me, it sounds like it likely was actually a "separate interest" QDRO. I asked her to tell me, as close as she could, what the pension plan told her. She told me that they actually said they couldn't give her information about the "$500" (significantly less than 45% of her current benefit amount) and who it was going to. This wasn't how she explained it the first time we talked, but it makes much more sense now. It sounds like the benefit actually did start paying out immediately after the QDRO was approved, and then changed to the decedent AP's beneficiary once the AP died, but she isn't certain because they didn't confirm. It may be that the AP opted for the 10 year certain. The plan does allow for anyone as beneficiary on the 5 and 10 year certain options. This has certainly prompted me to pursue my CDFA, so I can be more knowledgeable and helpful in these situations, before things are finalized. Thank you both again for your help and the wisdom you have shared.
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I have a highly specific question about QDROs and Defined Benefit plans, that I am hoping there is an expert that could speak to this. In the state of Virginia, for reference. I am not a lawyer. I am trying to help someone get a grasp on this, as she is trying to ascertain whether pursuing this legally would be worthwhile. She is very short on liquid funds, and I am would like to know if this is a wild goose chase for her. I know the rules on Defined Benefit Plans are determined by the DOL, and that can be ever changing. I also realize that the verbiage in the QDRO is important, but that there are certain things that can make a QDRO invalid in the eyes of the plan administration, and I'm really hoping that is the case in this situation. I am going to be as non-specific as possible for confidentiality purposes, and I will change some specifics. The Divorce was in 2014. The divorce decree gave the ex 50% of her future pension. She is just now looking to retire, 10 years later, and her pension is significantly larger than it would have been at the time of the QDRO. Alternate Payee never received any payments on the pension, and the plan administrator is calculating that alternate payee would be entitled to 50% of the payments as of the date payments start, not as of the QDRO date. I may be wrong, but I think that that means that that, by default, means this was a "shared payment" QDRO. Here's the big question: The Alternate payee died in 2018. The plan administrator is interpreting the QDRO to pay the Alternate Payee's survivor (a nephew) the payment instead of "reverting it" back to her, the participant. (Technically it isn't reverting since it was never paid to him to begin with, but that's the best term I can think of.) Can a "shared payment" QDRO on a DBP even do that? I thought only "Separate interest" allowed for a survivor. This is a standard pension, with the usual payout options: Single Life, Joint and Survivor 50%, 100%, and a 5 and 10 year life certain option. This pension doesn't even have an option where if the participant herself died her own non-spouse beneficiary could get anything beyond the 10 year life certain option, so how in the heck is the nephew going to be allowed to collect for the rest of the participant's life? I just can't wrap my head around that. The pension amount is enough to make a significant difference in this poor lady's retirement. She will be extremely stretched without it, and she is nearly 70 years old. Her first payment is supposed to be March 31st, and I *think* that she may be out of luck if she doesn't pursue this before then, but does she even have a basis to pursue this? Obviously, an attorney will need to handle it, but I guess what I'm asking is whether it is worth the resources to consult with an attorney to try to fight this. So my big question is whether benefits administration is interpreting this correctly. I did review the SDP and there is nothing specific to this type of situation, I'm assuming there are internal QDRO procedures that I am not privy to.