Finance Dave
Thinks s/he gets paid by the post
- Joined
- Mar 29, 2007
- Messages
- 1,864
I work at a Fortune200 company, and am considering leaving in 2012. I've been researching this for about a year now, and have found something unusual.
First let me say that we have a defined contribution pension plan, essentially a cash balance plan that we can get either in a lump sum or annuitized, but the point is that the value is already determined...there is no formula such as x years of service x $xxx/month.
In reading the plan rules for both my 401k and pension, I found that our company defines "retirement" as being either:
1) 55 years of age with 5 years of service or...
2) 30 years of service
Unfortunately, I'm 49 years old, with 23 years of service. I'd have to work 6 more years to meet qualification 1...which I don't want to do.
So then I started thinking...."ok, so I guess if I leave, I won't really be "retiring" by their standards, just "separating service"...which is a separate definition.
So then I started researching "ok, what benefits to I lose, or what are the implications of that", and I found some interesting things.
1) Our company pays variable compensation (essentially a bonus based on profitability) annually. The value is DETERMINED in about early March each year, for the prior year, and then PAID OUT in late March. Our company documents say that if you "separate service" prior to when the variable compensation is PAID OUT, you don't get it. WOW! My bonus target is 20% of pay, but can be as high as 40% (I'm anticipating for March 2012 a payment of around 30%). That means if I leave on March 15th, I get ZERO, but if I stay until March 30th, I get 30%!!!
2) You may leave your 401k money in the company, and if you "retire", the company pays your administration fees, plus the "guaranteed" fund pays prime + 2%, but if you "separate from service", you must pay $75/year in admin fees, and the "guaranteed" fund pays prime MINUS 1% to a minimum of zero. Obviously I'd want to either avoid that fund or roll my money out to an IRA.
3) Our company also makes contributions to an HSA early each year for us...I'd lose this if I "separate from service" too early in the year also.
I'm wondering if you folks have any experience with these "definitional" things. This is not a small company where I can go ask for an exception...we have 45,000 employees and they won't even entertain any exceptions for me I'm sure...so my goal is simply to plan around these events to my benefit...am I missing anything?
Oh, one other poing....even if I wait until April 1st to leave, I'd effectively still be giving up some of my bonus...the part that would be paid out the FOLLOWING year in 2013...but there's no way to avoid it completely obviously....other than leave in a year when we lose money and would not get a bonus anyway.
First let me say that we have a defined contribution pension plan, essentially a cash balance plan that we can get either in a lump sum or annuitized, but the point is that the value is already determined...there is no formula such as x years of service x $xxx/month.
In reading the plan rules for both my 401k and pension, I found that our company defines "retirement" as being either:
1) 55 years of age with 5 years of service or...
2) 30 years of service
Unfortunately, I'm 49 years old, with 23 years of service. I'd have to work 6 more years to meet qualification 1...which I don't want to do.
So then I started thinking...."ok, so I guess if I leave, I won't really be "retiring" by their standards, just "separating service"...which is a separate definition.
So then I started researching "ok, what benefits to I lose, or what are the implications of that", and I found some interesting things.
1) Our company pays variable compensation (essentially a bonus based on profitability) annually. The value is DETERMINED in about early March each year, for the prior year, and then PAID OUT in late March. Our company documents say that if you "separate service" prior to when the variable compensation is PAID OUT, you don't get it. WOW! My bonus target is 20% of pay, but can be as high as 40% (I'm anticipating for March 2012 a payment of around 30%). That means if I leave on March 15th, I get ZERO, but if I stay until March 30th, I get 30%!!!
2) You may leave your 401k money in the company, and if you "retire", the company pays your administration fees, plus the "guaranteed" fund pays prime + 2%, but if you "separate from service", you must pay $75/year in admin fees, and the "guaranteed" fund pays prime MINUS 1% to a minimum of zero. Obviously I'd want to either avoid that fund or roll my money out to an IRA.
3) Our company also makes contributions to an HSA early each year for us...I'd lose this if I "separate from service" too early in the year also.
I'm wondering if you folks have any experience with these "definitional" things. This is not a small company where I can go ask for an exception...we have 45,000 employees and they won't even entertain any exceptions for me I'm sure...so my goal is simply to plan around these events to my benefit...am I missing anything?
Oh, one other poing....even if I wait until April 1st to leave, I'd effectively still be giving up some of my bonus...the part that would be paid out the FOLLOWING year in 2013...but there's no way to avoid it completely obviously....other than leave in a year when we lose money and would not get a bonus anyway.