Retirement Benefits from Previous Employers | Rodgers & Associates

Don’t Lose Track of Your Previous Employer Retirement Plans

In December 2018 it was announced1 that MetLife was ordered to pay a fine of $1 million and provide payments, with interest, to 13,500 people nationwide it had wrongly desig­nated as “presumed dead.” MetLife bought the oblig­ation to pay the employees’ pensions from their former employers and was required to keep funds in reserve for these retirees and to make payments when the former workers came of age. In 2017, the company disclosed it failed to make payments to thousands of retired workers because of MetLife’s own inability to locate them.

When changing jobs, you may have choices to make about your retirement money. The choices will depend on your age and the type of plan you are in, as well as the rules of the plan. If you are in a tradi­tional pension plan, you may not be able to receive your benefits until you meet the plan’s require­ments for retirement, or early retirement if the plan rules allow it. You must keep track of the pension and make sure the admin­is­trators of the plan know how to contact you.

Some people lose track of their pension plan from a prior job. A company might merge with or be bought by another company and change its name, move to a new location in a different city or go out of business. It might take a little research to find out what happened to your plan. Here are some tips to make sure you don’t lose track of your pension.

Educate Yourself about Your Plan

While you are still working for a company with a pension, educate yourself about how your plan works. Contact your company’s benefits officer and ask for a Summary Plan Description. This will show how your pension is calcu­lated. Request a personal statement of benefits which will tell you what your benefits are currently worth and how many years you’ve been in the plan. It may even include a projection of your monthly payment amount. Check the statement for accuracy. Is the plan crediting you with the correct number of years of service? Do the state­ments show all the contri­bu­tions you have made?

”Pension File”

Create a “pension file” to store all your documents from your employer. Also keep records of the dates you worked and your salary since this type of data is often used by employers to calculate the value of pensions. All corre­spon­dence including any notices or documents relating to the retirement plan and your benefits should be retained.

Summary Plan Description

If you leave the employer before retirement age, verify you are vested in the plan and make sure you have a copy of the most recent Summary Plan Description. Before leaving, verify your benefi­ciary election and keep it in your pension folder.

Now it will be up to you to keep track of your former employer and pension admin­is­trator. Summary Plan Descrip­tions are updated every year. Make sure you contact the employer to get a copy of the latest update every year. Use this oppor­tunity to verify they have your correct contact infor­mation on file.

Search for Unclaimed Retirement Benefits

Your plan could be termi­nated before you reach retirement age. Tradi­tional defined benefit pension plans that are fully funded are generally sold to companies like MetLife to pay all promised benefits as workers qualify. Under­funded plans are likely to end up with the Pension Benefit Guaranty Corpo­ration (PBGC). The PBGC guarantees benefits in most tradi­tional pension plans, but not all benefits are protected. The PBGC maximum guarantee for partic­i­pants in single-employer plans is deter­mined using a formula prescribed by federal law that calls for periodic increases tied to a Social Security index. The maximum monthly guarantee in 2019 for a 65-year old retiree is $5,607.95/month for a straight life annuity and $5,047.16/ month for joint and 50% survivor annuity.

Pension Benefit Guaranty Corporation

The PBGC is a good place to start for anyone who has already lost track of their pension. They maintain a database2 of unclaimed pensions that lists approx­i­mately 38,000 people who are eligible for pension payments that could not be located by the PBGC or their former employer.

The PBGC does not have anything to do with defined contri­bution plans like 401(k)s and 403(b)s. To find one of these plans start with your former employer. If the company has gone out of business, try the Department of Labor’s Form 5500 search. Plan admin­is­trators are generally required to file Form 5500 annually. The form should contain the name of the plan admin­is­trator and their contact infor­mation. Unfor­tu­nately, the search only goes back to 2009. This won’t help if the plan went out of business before 2009.

National Registry of Unclaimed Retirement Benefits

The National Registry of Unclaimed Retirement Benefits3 is another free service to assist former employees looking for their unclaimed retirement benefits. A Social Security number is required to perform the search. The registry provides contact infor­mation for former employers when a match is found so the employee can claim their account.

Take Your Assets with You

Probably the best way to keep track of your retirement funds is to take them with you when you change jobs. There are usually limited options with a defined benefit pension. You may be able to take the money as a lump sum if the vested balance is small. Be sure to ask. The lump sum payments are eligible for rollover to an IRA to avoid tax. Defined contri­bution plans like 401(k)s and 403(b)s can also be rolled over to an IRA and sometimes to your new employer’s plan.

Your goal should be to have all your retirement funds working together for you in the most efficient manner possible. Some people think having multiple accounts is a form of diver­si­fi­cation. It is not. The invest­ments within the account are what provides diver­si­fi­cation. Having fewer accounts to monitor makes imple­menting your investment strategy easier and helps to avoid losing track of a plan in the future.

Rick’s Tips:

  • Create a “pension file” to keep all documents related to your employer’s retirement plan.
  • Fully funded tradi­tional plans are often sold to insurance companies to pay benefits when the plan is terminated.
  • All employers are required to provide a Summary Plan Description with important infor­mation about the retirement plan every year.

1MetLife Settles Massa­chu­setts Case Over Unpaid Pensions, by Nate Raymond, US News & World Report, December 19, 2018.