Corporate pension taken 3 years late - is the money lost?

[soupcxan]

Dad recently found a small corporate pension he didn't know he qualified for. He was eligible to start taking the annuity at 65 but he didn't - he's 68 now and started getting payments. They company is saying they don't owe him anything for those three "lost" years, which sounds wrong to me. Don't they still have the same obligation to the employee even if he waited to claim the benefit?

 

[pb4uski]

I suspect that they are right. Just like if for some reason you didn't file for SS until you were 73 the per month amount stops increasing and I don't think you can recover those lost years.

 

[Big_Hitter]

did he terminate employment prior to attaining age 65, which I assume is normal retirement age under the plan?

 

[soupcxan]

did he terminate employment prior to attaining age 65, which I assume is normal retirement age under the plan?

Yes he quit working there long ago.

 

[Big_Hitter]

traditional db pension plan or hybrid/cash balance?

 

[Ian S]

It doesn't surprise me that this could happen. I'm entitled to a small pension from the first company I worked for and left in the late 1980's. In my case I knew I was entitled to the pension because I worked an extra week before leaving for the new job just so I would qualify. Prior to Jan 1 1989, you had to work 10 years to be eligible for the DB pension; after that date the time required for vesting dropped to 5 years. I worked the first week in 1989 and got HR to give me a memo stating that I was entitled to a pension and how much it would be. Fast forward 25 years or so and I still remembered that pension. The company had gone through mergers and I had never heard another thing from them. When I investigated, I discovered they still had my old address and was able to update things and can now take the pension early if I wish. I can imagine many forgetting they were ever entitled to a pension especially if they were unaware that the vesting rules had changed.

 

[soupcxan]

traditional db pension plan or hybrid/cash balance?

I don't have the SPD but it's from the 1980s so I assume it's a traditional not hybrid.

 

[Big_Hitter]

Actuarial increase after Normal Retirement Age - Defined Benefit Plans, Including Cash Balance - BenefitsLink Message Boards

 

[athena53]

I was with a GE sub from 2003-2006, when it was acquired. Their pension started at age 60 whether you wanted it to or not, an older employee who was still working past age 60 told me she'd looked into that, and found that there was no financial advantage to delaying it, so she was collecting it. I never looked it up but I'm sure it was in the Benefits section of the company Intranet.


I'm still not sure why I was vested in it since I'd worked just shy of 5 years by most definitions (7 months in 2003, which may have been enough to qualify, and 6.5 months in 2006 before the acquisition, plus all of 2004 and 2005). I was 53 at the time of the acquisition so maybe different vesting rules applied to older employees affected by an acquisition. All I know is, I get $933 on the first of every month like clockwork.


My Prudential pension, OTOH, would be $750/month if I took it now and $1,000/month at age 65,so I'm waiting on that one.

 

[robertf57]

I have a state pension that does not increase after 62. You don't take it then, you lose those years.


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[brett]

My pension plan was the same. You get a pension at 62. The amount is static for the life of the pension. If you do not apply until 70 you get the same monthly amount and you do not get retroactive pension payments to age 62.

 

[Big_Hitter]

My pension plan was the same. You get a pension at 62. The amount is static for the life of the pension. If you do not apply until 70 you get the same monthly amount and you do not get retroactive pension payments to age 62.

State plans are exempt from ERISA.

The issue with the OP is that not giving retro payment or an actuarial increase to the benefit payable at NRD is, arguably, an impermissible forfeiture under ERISA.

Disclaimer - do not construe this as legal advice. Please consult a competent ERISA attorney.

 

[ziggy29]

Depends on the plan. My frozen pension from Megacorp 1 allows for me to take the pension as early as 55, with 65 being the "full" or standard retirement age. No additional benefit accrues by waiting past your 65th birthday to file for benefits. Most plans I'm aware of, unlike Social Security, don't give you additional benefit by waiting until after your FRA. (And even SS doesn't give additional benefit past age 70.)

 

[Big_Hitter]

Depends on the plan.

The "plan" would say that the deferred vested benefit must start at NRD, period.

For a terminated employee, providing an actuarial increase after NRD is not an "accrual" as defined in the regs. An accrual is an increase in the accrued benefit.

 

[Davis65]

I would definitely talk to a lawyer. Believe it or not, the company may not have your father's best interests at heart. Their advice may be what is best for the company. I'm not up on American pension law, but I would not assume that Social Security or state pension rules provide any useful guidance when dealing with a private pension issue. They are very different animals.

 

[Patagonia]

Depends on the plan. My frozen pension from Megacorp 1 allows for me to take the pension as early as 55, with 65 being the "full" or standard retirement age. No additional benefit accrues by waiting past your 65th birthday to file for benefits. Most plans I'm aware of, unlike Social Security, don't give you additional benefit by waiting until after your FRA. (And even SS doesn't give additional benefit past age 70.)

+1 same here


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[Big_Hitter]

I'm not up on American pension law, but I would not assume that Social Security or state pension rules provide any useful guidance when dealing with a private pension issue. They are very different animals.

private, corporate pensions are governed by Federal law and the IRC.