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Pension Lump Sum adjustment- Actuaires
Old 10-24-2016, 02:23 PM   #1
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Pension Lump Sum adjustment- Actuaires

Got news that my pension lump sum just got a 7.8% bump and went to the managing site's estimator and lo and behold...... .

It was explained that by law they had to apply new actuary/mortality tables that showed life expectancy for men increasing and thus the bump in the lump sum. The monthly annuity offered did not change.

I am retiring 12/22 this year and will be eligible for the pension Feb 1 next year.

Was this something that was done for all pensions? Did anyone else with a pending lump sum get a bump? It was not communicated to me by the managing fin company either, I heard it via a co-worker. (if you have one, go check it!!)

As it was explained to me, this is mandated by law..... and "oddly" (not), my megacorp just tried to buy off pensions by offering an early, while still employed lump sum payouts this past summer. For me and many co-workers who were eligible it was an insulting offer, about 40% of what I am eligible for next year. It was a no-brainer to pass up the offer, but it makes me wonder if they knew this bump was coming??
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Old 10-24-2016, 02:44 PM   #2
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As it was explained to me, this is mandated by law..... and "oddly" (not), my megacorp just tried to buy off pensions by offering an early, while still employed lump sum payouts this past summer. For me and many co-workers who were eligible it was an insulting offer, about 40% of what I am eligible for next year. It was a no-brainer to pass up the offer, but it makes me wonder if they knew this bump was coming??
Given the glacial pace of enacting laws I'd wager they knew full well it was coming. But hey, it's a business, and if a few chumps take the bait it's worth the effort to the company.
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Old 10-25-2016, 08:08 AM   #3
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Given the glacial pace of enacting laws I'd wager they knew full well it was coming. But hey, it's a business, and if a few chumps take the bait it's worth the effort to the company.
They may not be chumps.

If you had no one to leave a survivor benefit to, and you were diagnosed with a condition that practically guaranteed a short life span, taking even a normally non-optimal lump sum might be absolutely the smart thing to do.

Though some will be chumps, 1 in the hand is worth 100's in the bush?

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Old 10-25-2016, 09:19 AM   #4
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the 2017 minimum lump sum mortality table is still rp2000 with a static projection. Your interest rate basis for 2017 lump sum payments may be the segment rates for September 2016 which have decreased since September 2015.

thanks, please drive through
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Old 10-25-2016, 09:41 AM   #5
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the 2017 minimum lump sum mortality table is still rp2000 with a static projection. Your interest rate basis for 2017 lump sum payments may be the segment rates for September 2016 which have decreased since September 2015.

thanks, please drive through

Effective January 1, 2017 there is a proposal per IRS all companies must utilize updated mortality chart, it is being appealed by many companies as not giving enough time (this has been challenged since first proposed in 2006, Treasury has not yet officially responded. It adds 2 years to the average lifespan of a male retiree. By law the 2000 table cannot be used beyond 2017 so a new table by law is required by 2018. Expect companies to do whatever possible to avoid this increase in liabilities. Waiting until 2017 at a minimum would be prudent for anyone considering a lump sum.

https://markleyactuarial.com/2016-mo...les-announced/
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Old 10-25-2016, 09:55 AM   #6
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yes the new table has been delayed at least one year. the increase in the ls mentioned by the op has to be primarily due to the decrease in segment rates

notice markley's news release is over a year old
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Old 10-29-2016, 10:19 AM   #7
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It took me along time to get my retire fund folks to explain the IRS segment rates and how they effect my lump sum for next year.
They use the average of 2016 August, September and October rates for the 2017 lump sum TTL.
If I wait until my birthday in March 2017, there is another big bump up.

2016 segment rates may be lowest we will see in our lifetime. They are at historical lows since going to corporates from treasury bond rates as the index.

I wish this was common knowledge but it is not. Pensioners are not serving themselves well if they do not ask lots of questions before deciding on pension vs lump distribution.

Make sense?

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