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Private company going out of business question.
Old 12-15-2009, 07:47 AM   #1
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Private company going out of business question.

Hey Everyone,

Here are some details before my question.
Planning to RE in mid-2010.
I work for a small private business.
Business is not doing very well. Worried that company may fold right before my RE.
Would receive a small lump-sum pension, less a certain amount because I am retiring before age 65. Will keep the dollar amount to myself.
Have worked at the company for 32 years.
If the company went belly-up before I took my RE, would I be entitled to any of the pension funds?
Don't want to leave anything on the table.
Thanks for any comments.
Rob
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Old 12-15-2009, 08:16 AM   #2
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robls,

is it a defined benefit pension? If so it should be covered by the Pension Benefit Guaranty Corporation.

Do your pension documents lay out what happens in the event of a bankruptcy?
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Old 12-15-2009, 08:28 AM   #3
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robls,

is it a defined benefit pension? If so it should be covered by the Pension Benefit Guaranty Corporation.

Do your pension documents lay out what happens in the event of a bankruptcy?
Talked to the HR person here at work. It is not covered by Pension Benefit Guaranty Corporation. She said the plan is separate from the company finances. It is run by a local company that has been in business for 50+ years.
Plan on meeting with my financial advisor in the 2nd week of January to go over the numbers, to see exactly the timing of my RE.
Thanks.
Rob
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Old 12-15-2009, 08:36 AM   #4
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My guess is that the lump sum option might be eliminated in a bankruptcy although the payout on accrued benefits beginning at 65 should be covered subject to a monthly cap.

The Pension Protection Act of 2006 was instituted to cover exactly this type of situation.
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Old 12-15-2009, 08:41 AM   #5
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My guess is that the lump sum option might be eliminated in a bankruptcy although the payout on accrued benefits beginning at 65 should be covered subject to a monthly cap.

The Pension Protection Act of 2006 was instituted to cover exactly this type of situation.
This is exactly why I love being part of this community. Wish I was half as smart as the majority on this board. A big thanks. Will look into this bill.
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Old 12-15-2009, 02:34 PM   #6
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Originally Posted by robls View Post
Hey Everyone,

Here are some details before my question.
Planning to RE in mid-2010.
I work for a small private business.
Business is not doing very well. Worried that company may fold right before my RE.
Would receive a small lump-sum pension, less a certain amount because I am retiring before age 65. Will keep the dollar amount to myself.
Have worked at the company for 32 years.
If the company went belly-up before I took my RE, would I be entitled to any of the pension funds?
Don't want to leave anything on the table.
Thanks for any comments.
Rob
An ancient proverb says "a bird in the hand is worth two in the bush". I sympathize with your desire not to leave anything on the table, but with the company in questionable health, perhaps it is more prudent to pick up what is on the table now, while the table and its contents are still there.

In your position I think I would be inclined to retire now rather than take a chance on my pension evaporating at the last minute. Is there a specific reason that doing so would work out to your disadvantage?
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Old 12-15-2009, 02:46 PM   #7
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Originally Posted by robls View Post
Talked to the HR person here at work. It is not covered by Pension Benefit Guaranty Corporation. She said the plan is separate from the company finances. It is run by a local company that has been in business for 50+ years.
Plan on meeting with my financial advisor in the 2nd week of January to go over the numbers, to see exactly the timing of my RE.
Thanks.
Rob
If it were me I would ask the HR person if the plan is "fully funded" and are you fully vested in those outside funds funds...which are held by an outside company I would also call the "local company" that is "separate from the company finances" and ask them the direct question...What happens to your retirement lump sum payment if the Co has financial trouble and is there ANY way that your vested equity in the plan could be at risk due to company finances?

Also, I am curious what specific type of Plan you are dealing with? 401(k)? Pension?...should be some "reading" material and personal account information for you to review.

FWIW...TomCat
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Old 12-16-2009, 05:35 AM   #8
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An ancient proverb says "a bird in the hand is worth two in the bush". I sympathize with your desire not to leave anything on the table, but with the company in questionable health, perhaps it is more prudent to pick up what is on the table now, while the table and its contents are still there.

In your position I think I would be inclined to retire now rather than take a chance on my pension evaporating at the last minute. Is there a specific reason that doing so would work out to your disadvantage?
Cold feet and doubts. Even after going over the numbers, still have not convinced myself 100%. Mental block "I" will have to overcome.
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Old 12-16-2009, 05:42 AM   #9
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If it were me I would ask the HR person if the plan is "fully funded" and are you fully vested in those outside funds funds...which are held by an outside company I would also call the "local company" that is "separate from the company finances" and ask them the direct question...What happens to your retirement lump sum payment if the Co has financial trouble and is there ANY way that your vested equity in the plan could be at risk due to company finances?

Also, I am curious what specific type of Plan you are dealing with? 401(k)? Pension?...should be some "reading" material and personal account information for you to review.

FWIW...TomCat
Pension plan. I have been funding a separate 401k fully for years through the company. The pension plan was set aside when the 401k was implemented. Not talking about a lot of money in the pension. Yes, the pension fund is fully funded and insured through the Pension Benefit Guaranty Corporation. The pension will not make or break my RE decision. The mid-2010 deadline is still in place.
Thanks.
Rob
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