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Old 12-15-2015, 06:45 PM   #21
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Originally Posted by Delawaredave5 View Post
So what would you do ? Spouse would take a haircut if passed to PBGC. Megacorp is DuPont - been around forever but now has a corporate raider splitting up company.

Can either take level payments (100%) or get accelerated payments (117%) for 4 years and then 93% for rest of life.

Don't need the extra money now - was planning on straight 100% payments - but precariousness of DB pensions makes me wonder if I should "take the extra money" - especially of PGBC haircut possibility.
Dupont will be split into 3 companies, Warning flag would be if they loaded up the Agriculture division post split with all of the pension liabilities for all employees already retired. If they go by division then either of the other two divisions will be one of the largest and most successful companies around and in no danger. It is the AG business that is limiting income that had both Dupont and Dow wanting to put this together.

As to the options the Extra 17% on a $5000 monthly pension is $850 a month for 4 years or $40,800 which will then be reduced by $4,200 a year forever over the base pension of $5000. Much would depend on what that extra income would do to your tax rate when taken. If taxes are in the 35-45% range which is not hard to do with state taxes depending on your state then early option is really not providing much benefit. You should look at the tax effect on Social Security as well, if you are already passed the taxability of SS benefits then level income could be the best choice, unless the benefits are in the AG division.

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Old 12-16-2015, 10:09 PM   #22
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Things may have changed, but when my pension was turned over to the PBGC in 2005 they used some very creative math to reduce the amount of money you get.

From memory:

They use the worst retirement "contract" you had within the last 5 years, not the one in effect when the plans is terminated.

They presume you retired two years prior to the plan termination, and they say normal retirement age is 65. So if you had just retired at 60, they will combine those two penalties to create a penalty of 7 years early on your retirement "date". Many retirement plans have a penalty of 6%/year for early retirement, so just that portion would reduce your benefits by 42%.

The calculations are very complex, and it's almost impossible to calculate your "new" pension until after the fact. In my case, they came up with an estimate within a few months, then re-calculated after a couple of years, and then another re-calculation a couple of years after that.

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Old 12-17-2015, 07:45 AM   #23
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Originally Posted by Gearhead Jim View Post
Things may have changed, but when my pension was turned over to the PBGC in 2005 they used some very creative math to reduce the amount of money you get.
Yes, but your situation was likely far from typical. As I recall from previous discussions, you were a pilot. From what I understand, the normal pensions were a pretty high $ amount (and I'm not saying they weren't earned/deserved, I'm just talking numbers here), and some rules that forced retirement at 60 (I think?) play into the formulas. So this complicated things, and from what I recall, the pilots really did take a big haircut from the move to PBGC.

But someone with a more modest pension, and no special rules will probably be OK. At least from what I understand.

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Old 12-17-2015, 08:12 AM   #24
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Pilots have a NRD of 60 so yes, PBGC haircuts can be more severe

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