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Pension estimate question
Old 11-18-2018, 11:32 PM   #1
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Pension estimate question

what to do if you think the pension estimate for you is not right
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Old 11-19-2018, 03:20 AM   #2
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Is this an employers estimator?
Is this the first time that you have used it?

Do they provide a listing of all the values of the parameters that go into the formula? If so, are they correct?

This is where I would start. Take their input data, and crunch it by hand or with Excel to see if you can match what comes out of their estimator.

Is this a major difference or something subtle. DW's pension modeler allowed you to specify future raises, but it then did the calculations wrong, so I never used that feature.

-gauss
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Old 11-19-2018, 06:13 AM   #3
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what to do if you think the pension estimate for you is not right
It depends. Why do you think that your estimate is incorrect?

You would have to get the plan formulas and your information on hire date, earnings history, etc and calcuate it yourself or hire someone else to do so. You can compare earnings history data to your SS statement. Another step might be to compare your pension to any peers with similar length of employment and earnings history if you can find any.
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Pension estimate question
Old 11-19-2018, 06:19 AM   #4
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Pension estimate question

It could be wrong for a number of reasons. Megacorp pension formula was quite easy even though the factors varied for different periods of service. The length of service calculation seemed to trip some folks due to situations like disability, lay-off, absences or change in pay status that reduced the service time used in the calculation. We got regular estimates through the years and they were consistent so there was no surprise for me.
What to do ? Ask pension administrator to show you a manual calculation.
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Old 11-19-2018, 06:34 AM   #5
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I worked in that business for many years. Errors do occur, like with anything. As already mentioned, I would check all the inputs and the calculation itself. You should also have annual statements that you can use to help also.

You should be able to ask someone in your HR area and or the record keeper to explain the calculation if you still have questions or don't agree.
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Old 11-19-2018, 09:34 AM   #6
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Have you went to the HR dept and asked the person(s) that work on pension calculations to show you how it is calculated? Once you understand where they get the numbers, you can then compare to what you thought and determine where the differences are. It could be a mistake on company's figures. But until you understand where the company is getting the numbers, it is difficult to say why the difference.
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Old 11-19-2018, 09:51 AM   #7
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Ask them to show you the calculations. Make sure the numbers they use are right - years of service, earnings each year, etc. etc. etc.

Ideally do the calculations yourself, have a math minded friend do them for you, or pay a CPA to do them to see if they are correct.
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Old 11-19-2018, 01:05 PM   #8
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My pension number was inaccurate. The company was not trying to cheat me.
We had two mergers. The DB pension membership was small. The pension admin had been outsourced. I suspect the employer took the least expensive admin outsource option. It showed.

My issue was very straightforward. For the last ten years I was on salary plus bonus. My bonus ranged from 0 to 60 percent of salary. The pension admins claimed that bonus was not part of 'pensionable earnings'. The difference was substantial because my last five years had been very good from a bonus perspective.

I resorted to getting the pension plan document and the amendments. It became clear to me that prior to my retirement bonus was to be included in pensionable earnings. A pension plan amendment after I retired changed this (I retired early but did not take my DB for a few years). I had six months of back and forth with no resolution.

I wrote to the VP legal, explained the situation. He was also responsible for the pension plan. He responded immediately. The issue was resolved in my favor within ten business days. It meant a 35 percent increase in my pension. As a result, several of my former colleagues also had their pensions adjusted to reflect this. They had simply accepted the firm's original pension number without question. A few years prior I had done a quick audit on some auxiliary matching funds and realized that after the merger the firm was not depositing the matching amounts. This was quickly corrected. The difference was $10K total at that point and $1800 for each successive years (eight of them).

I guess my accounting, audit, and contract background shows. It pays to double check your numbers.
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Old 11-19-2018, 02:04 PM   #9
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Ideally do the calculations yourself, have a math minded friend do them for you, or pay a CPA to do them to see if they are correct.
CPA?
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Old 11-19-2018, 02:40 PM   #10
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I agree... while some CPAs could do it (for example I think I could with the right information) it is really more in the sweet spot of a pension actuary I would think.
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Old 11-19-2018, 02:51 PM   #11
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I agree... while some CPAs could do it (for example I think I coudld with the right information) it is really more in the sweet spot of a pension actuary I would think.
that's who I would hire - I heard they are really smart
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Old 11-19-2018, 02:54 PM   #12
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Most are. But they are stubborn too.
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Old 11-19-2018, 02:55 PM   #13
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I had pension calcs in my daily tracking spreadsheet when I worked for Mega-corp. Basically I took the pension calc rules and entered my pensionable earnings - and updated it monthly or if/when I got a raise etc.

My calcs were accurate w/i a few pennies when compared to my actual pension calc done by mega-corp when I retired.

I also had a nice chart which showed my pension #'s for each month I worked as I approached the magic 30 year number, so I could see the hit I would take if < 30 years as well as how much more I would get by working an extra month. It did provide some incentive while counting down the days.
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Old 11-19-2018, 03:33 PM   #14
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Once you know the formula I would suspect that the rest is straightforward....

....definition of employment earnings in your plan

....calculation...sometimes average of past five. In my case it was average of best five of the past 10 years

....amt per year of service-in my case a percentage of pensionable earnings

....any extras- as an example if your age and service add up to say 80 your percentage reduction for taking early pension drops for five percent to three percent per year, if they add up to 90 you are eligible for full pension regardless of age, 30 years and out with full pension, etc, COLA if applicable, etc

might be different for a multi employer pension or trades pension based on hours worked.

I am no pension expert but that would be my guess. All of this data should be available in both short readable form from HR. In our jurisdiction the employer also has to provide a soft copy of the pension plan plus amendments if requested by a pension member.
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