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Can pension plans be rolled over into a IRA or 401k
Old 11-14-2020, 09:37 PM   #1
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Can pension plans be rolled over into a IRA or 401k

Hi, All

So for several years after graduating HS, instead going to college like most folks, I worked retail for a number years. Eventually, I decided to return to school but continued to work my retail job while getting my BS/MA degrees. While working retail, I was part of the Southern California United Food and Commercial Workers Union. In 2015 I received a letter from the union with fund ID number and my status as vested. At the time my estimated accrued monthly normal retirement benefit was $362.89 payable at the normal retirement age of 65. Granted, not much it might have gone up a bit since I worked there a few years after but likely still under $400. If you figure 10yrs hopefully I live past 75 that's still decent at $350 a month comes out to $42,000 a nice beer fund!

The estimated monthly benefit is based on the benefit being paid as a Single Life Annuity at Normal Retirement Age paid for the duration of your life and monthly payments cease upon death.... if you take and Early Retirement your monthly benefit will be reduced to provided benefit for longer period of time.

This may be a question for the pension department of the union, but was wondering can this money be rolled over into another retirement account traditional IRA/401k. I plan to call them up and ask about this but wondering what else I should ask?
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Old 11-14-2020, 09:44 PM   #2
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So you are asking if you can receive a lump sum instead of the monthly payments? That is a question for the pension administrator. If, and that is the question, you can get a lump sum in lieu of the pension, it will have some reduction in payout.
The amount of lump sum vs pension is where the forum members can help you determine which option is better. But first you need to ask if the lump sum is even a possibility.
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Old 11-14-2020, 09:50 PM   #3
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Yes, I'm just unfamiliar with how pensions work.

So if I can get a lump sum payment, depending on the amount of course, and invest that money for say 30yrs it may be worth it depending how much money we're talking.
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Old 11-14-2020, 10:19 PM   #4
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Not directly related, but found this: https://www.dol.gov/sites/dolgov/fil...nsion-fund.pdf

which indicates that this pension fund might have some financial issues.
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Old 11-15-2020, 01:15 AM   #5
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When I was working for a Fortune 500 tech company, they had a pension which they chose to dissolve. At the time, they gave me the option of receiving a lump sum and rolling that lump sum into my existing 401(k) with them, which is what I chose to do. The transaction was tax free. I later rolled that 401(k) into a traditional IRA when I left the company in 2005.

So it can be done. Whether your pension will do so is probably something you'll just have to ask them. I don't know if my experience is common or uncommon.
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Old 11-15-2020, 01:41 AM   #6
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One thing you might look into is whether you want to put it into a Roth and pay the taxes now. It's good to have some money in a Roth so you can manage income later in life to reduce taxes. But you'd have to come up with the money to pay the taxes to do this.

As for whether you can roll it, ask the pension group at your company. And I recommend if you do that...do it via a "trustee to trustee" rollover, where the company sends the money directly to the IRA company rather than to you...this will minimize the risk of any problems of a disbursement being taxed and penalized. Talk to your rep at the company where your IRAs are, such as Vanguard/Fidelity/etc. to start this transfer.
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Old 11-15-2020, 05:43 AM   #7
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You do realize that if you were indeed allow to cash this out as a lump sump today (which I suspect you will not) that you would be,in all likely hood, offered significantly less than the $42,000 figure that you mention.

You would have 2 issues driving this.
#1) The time value of money - a dollar owed you 50 years from now will be worth a lot less than a dollar today due to inflation.

#2) Mortality credits - A certain amount of the people involved with the pension plan will "die young". The current actuarial fair value of a lump sump will take this into account since you will no longer benefit from this.

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Old 11-15-2020, 06:06 AM   #8
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If you can get a lump sum, you could roll it to an IRA. To roll to a 401(k), that 40(k) plan would need to allow the rollover.
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Old 11-15-2020, 07:33 AM   #9
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I suspect there are some differences in how 401k plans are managed but in my case I rolled my lump sum into an IRA... No tax (until RMD's kick-in) No problem at all.
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Old 11-15-2020, 09:25 AM   #10
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Pension plans differ from one to another. It is possible that they will not allow cash-out at this time. Of course it is possible that they will. I was faced with this at one time in the past. I chose to request the full pension plan for which I had to pay copying fees. The summary plans are not complete. Some HR people that you call may not give you the correct answer.

I would call your plan administrator and ask if, and how to get a cash-out before full retirement age (as in NOW). Be prepared for a "No, can't be done" answer. If you do, and want to get the definitive answer, request the full document and be prepared to read lots and lots of pages of fine print.

My plan allowed a lump sum at the time of leaving. After that, no change in choices could be made until retirement age. Unless....... there was a change in plan ownership/management. That did occur some years later and I had another set of choices to make. I took the cash-out option at that time and did a direct transfer made into a Rollover IRA. YMMV.
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Old 11-18-2020, 11:48 PM   #11
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Quote:
Originally Posted by CRLLS View Post
Pension plans differ from one to another. It is possible that they will not allow cash-out at this time. Of course it is possible that they will. I was faced with this at one time in the past. I chose to request the full pension plan for which I had to pay copying fees. The summary plans are not complete. Some HR people that you call may not give you the correct answer.

I would call your plan administrator and ask if, and how to get a cash-out before full retirement age (as in NOW). Be prepared for a "No, can't be done" answer. If you do, and want to get the definitive answer, request the full document and be prepared to read lots and lots of pages of fine print.

My plan allowed a lump sum at the time of leaving. After that, no change in choices could be made until retirement age. Unless....... there was a change in plan ownership/management. That did occur some years later and I had another set of choices to make. I took the cash-out option at that time and did a direct transfer made into a Rollover IRA. YMMV.
I did contact them and was told "No, can't be done" looking into it further. There's a form I need to fill out and return so they can calculate my monthly benefit. May need to read the fine print stuff as I'm sure they just don't want to do the lump sum payment. Ideally they want that money to collect interest or whatever it does. Assuming its invested in something.

I can start collecting at age 50, but would receive less per month. Will need to calculate that out because even if its less per month you're getting paid 15yrs earlier so may actually be worth it.
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Old 11-19-2020, 01:30 AM   #12
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Pension plans are allowed to offer lump sum buyouts, but they are not required to. In addition, to offer lump sums the pension has to meet minimum funding requirements. The typical requirement is 80% funded, which a great many pensions do not meet. Most likely, your pension can not offer a lump sum even if they wanted to because of their funding status.

If your pension met the requirements and also wanted to offer lump sums, then you could elect to take it. If you took it, you have the option to roll it into an IRA within 60 days of the distribution. If you do not roll it into an IRA within the required time, the distribution would be counted as earned income on your income taxes for the year it was distributed.

I have rolled two pension lump sums into an IRA and have another one I could elect to do so, so it isn't that unusual. But it also isn't typical because of the underfunded status of many pension plans. Just because a pension is underfunded doesn't mean you won't get the pension, but it makes it highly unlikely you'll get a buyout offer.

If there is an offer on the table, they will contact you. Pensions that have the funding to buyout some of their obligations have been doing so a lot in recent years. Make sure you keep your contact info current with the pension administrator.
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