A GM Pension offer

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Carl53
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Re: A GM Pension offer

Post by Carl53 » Sat Jun 16, 2012 5:47 pm

umfundi wrote:
GregLee wrote:
umfundi wrote:They can legally divest themselves of pension obligations by buying equivalent annuities.
Well, so long as it's legal, I guess it must be okay.
Greg,

I happen to think that "Legal" does not generally equate to "OK".

In this case, the choice is:

1. Rely on a pension from GM, backed by the PBGC. This option will be gone, replaced by:
2a. Rely on an equivalent annuity from Prudential, backed by whatever your state covers.
2b. Take the lump sum. You're on your own.

Keith
If it were me in your shoes, I'd be glad that '1. Rely on a pension from GM, backed by the PBGC. ' as an option is gone. Right now, at age 61, PBGC would only guarantee you $3015.41/month as an joint and 50% survivor pension if GM went down today. I guess I would expect that Prudential is more likely to be around rather than GM 30 years from now. Most likely if Prudential lasts but 10 to 15 years, that the annuity would drop down in value to a few hundred thousand that would be covered by I believe most states, reflecting the reduced remaining expected life span.

As a note, if there are 3% inflation adjustments to PBGC benefits for the next four years, and GM failed at that time, PBGC would then pay $4576/month joint and survivor benefits since you would now be 65. So it looks like you could be almost made whole, but not quite completely if it failed at that time and if GM were still administering the pension at that time. So even in this case the Prudential option would have been slightly better.

umfundi
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Re: A GM Pension offer

Post by umfundi » Sat Jun 16, 2012 6:08 pm

If it were me in your shoes, I'd be glad that '1. Rely on a pension from GM, backed by the PBGC. ' as an option is gone.
Greg,

Yes, as I noted in a post some time ago on a different thread, I took early retirement at age 57 yr 11 mo. If my pension had been turned over to the PBGC at the time GM went bankrupt, I would have lost 2/3 of my benefit. At age 65, that deficit all but disappears.

At this moment in time I am leaning towards the lump sum. That will allow me to diversify away from all Prudential. To be sure, I intend to then apply the lump sum towards an assured income stream.

Keith
Déjà Vu is not a prediction

investomajic
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Re: A GM Pension offer

Post by investomajic » Sat Jun 16, 2012 6:16 pm

How dependent are you on these income streams? IE, will you depend 100% on this income for living expenses? Or do you already have your living expenses covered (so, 0%)

Let me re-ask your question, to you, another way.
If you were forced to take option A, and you could take the proceeds and write an $800,000+ check to prudential to receive an annuity similar to all of your other options, would you do it? Or would you keep the cash?
Would you be able to sleep at night knowing you tied up $800,000 into the future financial state of a single entity (Prudential?)

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GregLee
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Re: A GM Pension offer

Post by GregLee » Sat Jun 16, 2012 6:28 pm

umfundi wrote:
If it were me in your shoes, I'd be glad that '1. Rely on a pension from GM, backed by the PBGC. ' as an option is gone.
Greg,
...
Not me. Carl53.
Greg, retired 8/10.

Carl53
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Re: A GM Pension offer

Post by Carl53 » Sat Jun 16, 2012 6:47 pm

GregLee wrote:
umfundi wrote:
If it were me in your shoes, I'd be glad that '1. Rely on a pension from GM, backed by the PBGC. ' as an option is gone.
Greg,
...
Not me. Carl53.
I say that since I question GM's solvency and PBGC besides being underfunded (but probably politically covered) would not replace it all if it went before the OP reached 65. As I noted above, that's the situation I fear I'll be facing. Dodged a bullet on it this year, but need three more years to come out unscathed.

umfundi
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Re: A GM Pension offer

Post by umfundi » Sat Jun 16, 2012 8:34 pm

investomajic wrote:How dependent are you on these income streams? IE, will you depend 100% on this income for living expenses? Or do you already have your living expenses covered (so, 0%)

Let me re-ask your question, to you, another way.
If you were forced to take option A, and you could take the proceeds and write an $800,000+ check to prudential to receive an annuity similar to all of your other options, would you do it? Or would you keep the cash?
Would you be able to sleep at night knowing you tied up $800,000 into the future financial state of a single entity (Prudential?)
investo,
I would use the lump sum to buy some kind of income stream similar to the annuities of the other options. I would diversify to three or four companies, not just Prudential.

If I consider some "floor" amount that we need for minimum but comfortable living expenses, it would be this pension plus my and my wife's Social Security. Beyond that, we have ample savings. My first priority is to fund that floor.

Does that answer your question?

Keith
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umfundi
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Re: A GM Pension offer

Post by umfundi » Sat Jun 16, 2012 8:43 pm

Carl53 wrote:
GregLee wrote:
umfundi wrote:
If it were me in your shoes, I'd be glad that '1. Rely on a pension from GM, backed by the PBGC. ' as an option is gone.
Greg,
...
Not me. Carl53.
I say that since I question GM's solvency and PBGC besides being underfunded (but probably politically covered) would not replace it all if it went before the OP reached 65. As I noted above, that's the situation I fear I'll be facing. Dodged a bullet on it this year, but need three more years to come out unscathed.
To be clear, for GM to now shed this pension obligation to the PBGC, GM would have to go bankrupt (again). The pension obligation takes precedence over much of their other debt.

The PBGC benefit is based on your status when the obligation is turned over, not on your history. If you are beyond age 65, not in early retirement, you are much better off than if you are at an earlier age.

Keith
Déjà Vu is not a prediction

umfundi
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Re: A GM Pension offer

Post by umfundi » Sat Jun 16, 2012 9:29 pm

Here are some questions for GM. I have answers to some of them, but not in writing.

1. I took an early retirement, and am not yet age 62. My GM statement does not say how or if my current benefits will change at age 62 y 1 m. What gives?

2. My statement includes $165 as a Part B benefit prior to 1985. For all the options, is this included or not?

3. My statement says, "... these changes do not affect your eligibility for GM post-retirement health care ... " Previously, GM promised a $300 per month pension increase to compensate for Medicare / Medicaid at age 65. Where is that $300 in the current options?

4. When I retired, I elected the GM option for 65% survivor benefits. Under that option, if my spouse predeceases me, I can revert to the larger payment of zero survivor benefits. Where is that choice in the Prudential plans?

5. Some of my current pension is not taxable. Presumably it is a return of after-tax Part B contributions. How would that change under the Prudential options?

6. I am a resident of Michigan. What, if any, part of the Prudential options is covered by state insurance or other guarantees? For what it's worth, my lump sum offer exceeds $800,000 which, as I understand it, far exceeds any state guarantee. With the Prudential options, I understand that the PBGC will be out of the picture. Right?

Keith
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gw
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Re: A GM Pension offer

Post by gw » Sat Jun 16, 2012 9:35 pm

umfundi wrote:
GM wrote: Your lump sum and other payment options, if any, shown on page 1 are based on an assumed benefit commencement date of September 1,2012 and assumptions about how long you will live (using a specified mortality table) and interest discounting. The assumptions used are required by the IRS:

• Mortality: The mortality table published by the IRS in Notice 2008-85 for the 2011 plan year.

• Interest Rate: IRS-required interest rates representing three segments of a corporate bond yield curve. The interest rates as of September 1, 2012 are based on rates published by the Treasury Department three months prior to the start of the SRP Plan Year (July 2011). Those rates are 2.23% for payments expected to be made within the first five years; 4.83% for payments expected to be made within 5 to 20 years; and 5.88% for payments expected to be made 20 years or later.
These are the key numbers --- the rates are higher than comparable U.S. treasury bonds (or even total-bond-market indices), so the payouts are going to be worth more than what you could get by purchasing replacement annuities (which you've said is what you'd do with the funds). You can get a pretty direct comparison of the trade-off by just getting some quotes --- I did a quick estimate at http://www.immediateannuities.com/infor ... rates.html.

The cost of replacing Option D (joint survivor payout of $3430 plus single-survivor payout of $1150; other options would work out essentially the same) is about $930K. So you give up about 15% of the value by cashing out now. I'm not sure to discount for the risk of the pension, but 15% ($130K) is a lot. You might still decide you would rather have control of the money, but it's probably going to cost you.

Note that this is really the only valid way to compare values (pension payouts vs. annuity payouts after investing the lump sum), assuming you do in fact want this much "safe" income. It's not fair to compare the payouts to the nominal returns from putting the lump sum in Treasury bonds (because that ignores your ability to draw down the principal); nor is it fair to compare it to a "4% SWR," since that presumes riskier investments (significant equity holdings).

umfundi
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Re: A GM Pension offer

Post by umfundi » Sat Jun 16, 2012 10:26 pm

gw wrote:Note that this is really the only valid way to compare values (pension payouts vs. annuity payouts after investing the lump sum), assuming you do in fact want this much "safe" income.
gw,

Thank you for that, greatly appreciated.

Yes, I do want that much "safe" income. Also, in 10 - 15 years, I need a plan to replace that income which has been eroded by inflation. I plan to do that out of savings, not mentioned here.

In my mind, 15% is not that much of a difference. Which is what really pi***s me off. I had thought this would be an obvious, slam-dunk choice. Not so.

Now, I am into the world of behavioral choices and market timing: Is Prudential safe? Will interest rates go up soon? I hate that.

My current inclination is to take the lump sum. That frees me from having all the eggs in the Prudential basket. Of course, I trust myself to take the lump sum and use it to secure a safe income stream.

I was lucky enough to have profited from the bull market of the 1990's. I was unlucky enough to retire in November, 2008. And, here I am in July, 2012. Arguably, the worst time to buy an annuity in decades, but maybe the best time to get a lump sum?

Keith
Déjà Vu is not a prediction

jack1719
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Re: A GM Pension offer

Post by jack1719 » Sat Jun 16, 2012 10:29 pm

Prudential is an investment-grade company, and GM is not. Prudential must use a separate account to make benefit payments to GM retirees. And those assets would not be subject to claims of general creditors should Prudential fail and file for bankruptcy, the automaker said.

If the GM salaried retiree annuity funding were to drop, by law Prudential would use funding from its general account to continue making annuity payments to GM retirees, adding another safeguard.

"The plan will be fully funded when it moves to Prudential.

moving it prudential really takes the worry about GMs stability out of the question..cause they are fully funding it on the move..GM is sending $4 billion over..

If you were a retiree would you rather have one of largest professional investment grade retirement companys in US handling the account or would you rather have GM?

The only possible bad side effect is losing the PGBC protection..but GM is fully funding it upon the move(cant say that about many pension funds these days-100% fully funded that is)

GM just wants out of the retirement business aspect ...its like here we are willing to fully fund it upon the move out to prudential if it means we are now free of this area of the business

umfundi
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Re: A GM Pension offer

Post by umfundi » Sat Jun 16, 2012 10:42 pm

jack1719 wrote:Prudential is an investment-grade company, and GM is not. Prudential must use a separate account to make benefit payments to GM retirees. And those assets would not be subject to claims of general creditors should Prudential fail and file for bankruptcy, the automaker said.

If the GM salaried retiree annuity funding were to drop, by law Prudential would use funding from its general account to continue making annuity payments to GM retirees, adding another safeguard.

"The plan will be fully funded when it moves to Prudential.

moving it prudential really takes the worry about GMs stability out of the question..cause they are fully funding it on the move..GM is sending $4 billion over..

If you were a retiree would you rather have one of largest professional investment grade retirement companys in US handling the account or would you rather have GM?

The only possible bad side effect is losing the PGBC protection..but GM is fully funding it upon the move(cant say that about many pension funds these days-100% fully funded that is)
Jack,

"Fully funded" is not the point. Prudential assumes the obligation, having accepted whatever GM pays them. GM is then out of the picture.

What is not clear to me, is what insurance or guarantees there are for Prudential's obligations. (I love you, but what does the pre-nup agreement say?)

Keith
Déjà Vu is not a prediction

jack1719
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Re: A GM Pension offer

Post by jack1719 » Sat Jun 16, 2012 10:51 pm

Prudential's obligations follow state laws for insurance companies,must have enough cash in capital on hand to cover the amount of the annuity etc.....the state by law also has its own fund that acts as insurance coverage backup(that amount varies by state-you would have to look up your own state to get exact amount by law)

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Watty
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Re: A GM Pension offer

Post by Watty » Sun Jun 17, 2012 12:03 am

umfundi wrote:
Watty wrote:
I am 61, and in excellent health. My wife's health is less than excellent, but good. Let's just say, there is no reason to believe our life expectancy is different than our peer group.

You have to be careful of how you look at this when you are looking at the annuity.

The problem is that if you have exactly average health for someone your age then you will have less than average health for the people that actually select the annuity and this would make the annuity less favorable for you. This is because the people who know they have significant health issues will always select the lump sum.

It would also be good to ask if you can split the money and do something like take half in a lump sum and half in an annuity. If not then one option would be to take the lump sum, but then buy an annuity with half of it.

Another thing to consider is if you actually need the money right way. If you are just going to be saving the monthly annuity payment then taking the annuity is less favorable.
I may have posted that, but there is no health test, and there is a unisex life expectancy table. In this case, the government rules do not allow them to select among participants.

Keith

The company cannot do the selection but the people like you can and will self-select which will skew the pool of people in tha annunity option and the payout calculations are likely weighted for this.

partyfish
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Re: A GM Pension offer

Post by partyfish » Sun Jun 17, 2012 8:10 am

Has anybody considered the possibility of Prudential re-SELLING this Group annuity to one of PRU's competators in a few years? Could this be the end game plan all along? I have not seen this question addressed anywhere. If GM can play hot potato with GM retirees then why wouldn't PRU if PRU could 'sell' this contract to the highest bidder in a year or two? Everyone seems to be so cought up in the comfort that PRU seems safe but can they sell for a profit to a lower rated insurance company or hedge fund of something with NO default protection? If the answer is NO they cannot then I'd ask why not? Can we trust PRU to do what is in the best interest of GM retirees instead of what may be in the best interest of PRU shareholders?

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cheese_breath
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Re: A GM Pension offer

Post by cheese_breath » Sun Jun 17, 2012 11:49 am

partyfish wrote:Has anybody considered the possibility of Prudential re-SELLING this Group annuity to one of PRU's competators in a few years? Could this be the end game plan all along? I have not seen this question addressed anywhere. If GM can play hot potato with GM retirees then why wouldn't PRU if PRU could 'sell' this contract to the highest bidder in a year or two? Everyone seems to be so cought up in the comfort that PRU seems safe but can they sell for a profit to a lower rated insurance company or hedge fund of something with NO default protection? If the answer is NO they cannot then I'd ask why not? Can we trust PRU to do what is in the best interest of GM retirees instead of what may be in the best interest of PRU shareholders?
I suppose one could say this about any company. They will do what's in their own best interests. And I suppose anyone with an annuity might see it sold off to a different company too. But the difference between Pru and GM is annuities is a Pru core business and core competency. I doubt Pru would enter into this agreement without performng due diligence to assure them GM is putting enough into the pot to enable them to both administer the annuities and make a profit from it. (BTW the agreement is not final yet so it's not unlikely Pru is engaged in the due diligence as I write this.)

But I appreciate OP's concerns about not wanting to put all his eggs into one basket. In this respect, the GM offer includes the option of taking part of the buyout as a Pru Annuity and the rest as a lump sum. So one possibility might be to take a Pru annuity up to the guaranteed limit in his state and take the rest as a lump sum he could manage himself.
The surest way to know the future is when it becomes the past.

umfundi
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Re: A GM Pension offer

Post by umfundi » Sun Jun 17, 2012 12:22 pm

cheese_breath wrote:But I appreciate OP's concerns about not wanting to put all his eggs into one basket. In this respect, the GM offer includes the option of taking part of the buyout as a Pru Annuity and the rest as a lump sum. So one possibility might be to take a Pru annuity up to the guaranteed limit in his state and take the rest as a lump sum he could manage himself.
I do not have the option of taking part as a lump sum and part as an annuity.

By the way, GM hired an "independent third party" (I believe it is Fidelity) to certify that the annuity offer meets legal requirements. Also, the deal needs to be approved by the PBGC.

Keith
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cheese_breath
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Re: A GM Pension offer

Post by cheese_breath » Sun Jun 17, 2012 2:41 pm

umfundi wrote: I do not have the option of taking part as a lump sum and part as an annuity.
Yes, I see the error of my ways. I was confusing splitting the lump sum between cash and an IRA rollover. You are right.
The surest way to know the future is when it becomes the past.

Bongleur
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Re: A GM Pension offer

Post by Bongleur » Sun Jun 17, 2012 5:57 pm

If you purchase an annuity while residing in one state, then move to a different state, and the company fails -- which state insurance fund is responsible?

One might game the system by residing in a state with low protection (cheaper to buy the annuity) and moving to one with high protection. Or vice versa.
Seeking Iso-Elasticity. | Tax Loss Harvesting is an Asset Class. | A well-planned presentation creates a sense of urgency. If the prospect fails to act now, he will risk a loss of some sort.

umfundi
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Re: A GM Pension offer

Post by umfundi » Sun Jun 17, 2012 6:29 pm

Bongleur wrote:If you purchase an annuity while ...
I don't know. There's a lot I need to find out in the next month.

Keith
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umfundi
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Re: A GM Pension offer

Post by umfundi » Sun Jun 17, 2012 8:42 pm

More questions: According to the GM Election Form, I may choose:

100% Rollover

If so, I need to select (among others)

a) A rollover IRA
b) A Roth IRA

Really? Can I roll this lump sum into a Roth? All $800,000 of it?

What are the tax implications? They are not explained in the GM documents. Will this be taxed like a regular IRA to Roth conversion?

Keith
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cheese_breath
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Re: A GM Pension offer

Post by cheese_breath » Sun Jun 17, 2012 10:42 pm

umfundi wrote:More questions: According to the GM Election Form, I may choose:

100% Rollover

If so, I need to select (among others)

a) A rollover IRA
b) A Roth IRA

Really? Can I roll this lump sum into a Roth? All $800,000 of it?

What are the tax implications? They are not explained in the GM documents. Will this be taxed like a regular IRA to Roth conversion?

Keith
On the GM Pension Tools website
[*]Under Choice 1* 100% Roll Over to an IRA or Another Employer Plan" click "Learn More".
[*]Scroll down to the section headed "Things to Think About"
[*]You should see a bullet item "Taxes — in most cases, income tax will be deferred until withdrawn. However, the amount rolled over into a Roth IRA is subject to income tax."

Nothing suggests the tax treatment is any different than for a normal Roth conversion, so I would wager it's the same. But you probably want to add it to your list of questions to ask them just to be sure.
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umfundi
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Re: A GM Pension offer

Post by umfundi » Mon Jun 18, 2012 4:44 pm

umfundi wrote:Not to get too much into the politics, but:
http://www.freep.com/article/20120615/B ... |FRONTPAGE

http://www.workforce.com/article/201206 ... nsion-plan

Personally, I understand why GM wants to be a car company, not an insurance or pension company.

Keith
Here is GM's response:
http://view.exacttarget.com/?j=fe651772 ... 751674&r=0
Keith
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umfundi
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Re: A GM Pension offer

Post by umfundi » Mon Jun 18, 2012 6:11 pm

umfundi wrote:Here are some questions for GM. I have answers to some of them, but not in writing.

3. My statement says, "... these changes do not affect your eligibility for GM post-retirement health care ... " Previously, GM promised a $300 per month pension increase to compensate for Medicare / Medicaid at age 65. Where is that $300 in the current options?

4. When I retired, I elected the GM option for 65% survivor benefits. Under that option, if my spouse predeceases me, I can revert to the larger payment of zero survivor benefits. Where is that choice in the Prudential plans?

Keith
I called GM today. Here are the partial answers.

The bottom line is, if you do nothing (choose to continue your current benefits) those benefits will be unchanged, but will come from Prudential. So, details previously agreed with GM will continue.

Then:

Question 3: If you continue your GM option, the $300 will kick in at age 65. If you choose the lump sum or the new Prudential 50% and 75% annuities, the $300 is priced in. For the GM plan, the $300 continues as a survivor benefit.

Question 4: Don't know! They will get back to me. The belief is, if you continue with the GM benefits, that option will be available. It is not in the Prudential 50% and 75% annuities. That is the belief, they will send me a written answer.

Keith
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cheese_breath
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Re: A GM Pension offer

Post by cheese_breath » Mon Jun 18, 2012 9:22 pm

Do you know if they intend to provide written answers to our questions, or are we to trust the verbal answers they give over the phone to stand up ten years from now?
The surest way to know the future is when it becomes the past.

umfundi
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Re: A GM Pension offer

Post by umfundi » Mon Jun 18, 2012 10:08 pm

cheese_breath wrote:Do you know if they intend to provide written answers to our questions, or are we to trust the verbal answers they give over the phone to stand up ten years from now?
cb,

They told me there will be an answer TO ME (not to you) for the predeceased spouse question in writing. By e-mail and by snail mail.

For the rest of it, I do not have the reset at age 62 + 1 month in writing, nor do I have the age 65 $300 supplement, if I choose no change.

I will be sure to get documentation for whatever choice I make.

By the way, I have sent the questions also to a few advisers, and we'll see what they say. If you are in the Detroit area, you may have noticed them, like an angry swarm of bees looking for honey. We should soon know if there are inconsistent answers to any of the questions.

For example, I will be here on Thursday evening:

http://events.r20.constantcontact.com/r ... vnd7d9728c

Best wishes,

Keith
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GregLee
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Re: A GM Pension offer

Post by GregLee » Mon Jun 18, 2012 10:39 pm

umfundi wrote:For example, I will be here on Thursday evening:

http://events.r20.constantcontact.com/r ... vnd7d9728c
What you guys really need is a union. Is it too late?
Greg, retired 8/10.

Onslow
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Re: A GM Pension offer

Post by Onslow » Tue Jun 19, 2012 5:57 am

umfundi & cheese_breath,

Just wanted to thank you for all the information so far. I am also a GM retiree, but due to multiple errors at Fidelity I have not yet received my lump-sum offer. Hopefully this week. And thanks to your posts I will be well informed when it does arrive.

Onslow

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cheese_breath
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Re: A GM Pension offer

Post by cheese_breath » Tue Jun 19, 2012 8:20 am

umfundi wrote:
cheese_breath wrote:Do you know if they intend to provide written answers to our questions, or are we to trust the verbal answers they give over the phone to stand up ten years from now?
cb,

They told me there will be an answer TO ME (not to you) for the predeceased spouse question in writing. By e-mail and by snail mail.
I was hoping they might publish something more than the FAQ that included answers to other questions the retirees have asked, But I should have known better. Guess I'll have to get on the phone and ask them the same question myself so I can get the answer in writing too.
The surest way to know the future is when it becomes the past.

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Frugal Al
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Re: A GM Pension offer

Post by Frugal Al » Tue Jun 19, 2012 8:21 am

It certainly appears they did a good job pricing this offer, which is part of what makes it a difficult decision. Umfundi, given that the stable cash stream is important to you, and the fact that if you take the lump it sounds like you're just going to purchase multiple immediate annuities from various other companies, I'm not certain it's worth taking the haircut they'd be giving you.

Prudential is assuredly on the "to big to fail list," or will be once it's finalized. It's one of the largest insurers in the world. Moreover, if there were a problem with Prudential being unable to maintain payments, would the haircut be as bad as the one you're considering taking voluntarily? Maybe, maybe not. I guess what I'm saying is that the limited upside (avoiding Prudential's company risk) might not be worth the cost of taking the lump sum if you're just going to place it in other annuities. Too bad a partial lump sum isn't available.

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SpringMan
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Re: A GM Pension offer

Post by SpringMan » Tue Jun 19, 2012 9:02 am

I was not aware of anything stating, if my spouse passes first, that my pension would be increased as though there was no survivor option ever selected. If this is true, I hope Prudential also incorporates it. My situation is different than the OPs, I am not entitled to the $300 supplement to help pay for Medicare since I was an EDS transitioned employee and did not retire directly from GM. The size of my GM pension annuity falls well below the state insurance amount. My EDS pension is even lower since I took a "level Income" option at age 57 which resulted in higher payments until age 62, then dropping way down, assuming SS would make up the difference. I have decided to take the status quo option letting Prudential continue the payments.
Best Wishes, SpringMan

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cheese_breath
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Re: A GM Pension offer

Post by cheese_breath » Tue Jun 19, 2012 10:52 am

SpringMan wrote:I was not aware of anything stating, if my spouse passes first, that my pension would be increased as though there was no survivor option ever selected. If this is true, I hope Prudential also incorporates it.
At least it applies to some of us. Did you see my post on the first page of this thread? When did you take your retirement? I took my EDS retirement with the 1996 ERO but waited until I turned 60 in 2001 to take my GM retirement. Maybe they changed this benefit between our retirement dates? Check your GM retirement materials to see if you have the following document:

NOTICE RELATING TO SURVIVOR COVERAGE
THE GENERAL MOTORS RETIREMENT PROGRAM FOR SALARIED EMPLOYEES
SRP-60 (Rev 12/98)
(Note: Caps are intended. The title is all caps.)

The information I quoted in my previous post should be on page 1 of the document if you are entitled to the benefit.
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SpringMan
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Re: A GM Pension offer

Post by SpringMan » Tue Jun 19, 2012 12:12 pm

cb,
I took the 1999 ERO that EDS offered, unfortunately I can't put my finger on the paper work. I went to work for Compuware for 6 more years, then fully retired at 57.5, after getting laid off by Compuware. I took the level income EDS pension option. I think there may have been some differences in the 1999 ERO from the earlier ERO. I started the GM pension at 60 and did qualify to have GM pay me more per month from age 60 to age 62 allegedly to make up for SS. I don't think the earlier ERO had that provision. If I recall the difference from the single life GM annuity and the 65% survivor annuity was not too much. Seemed like the EDS annuity dropped more for survivor options.
Best Wishes, SpringMan

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cheese_breath
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Re: A GM Pension offer

Post by cheese_breath » Tue Jun 19, 2012 12:47 pm

Springman,

If you can't find the paperwork all I can suggest is call the service center and ask. Maybe you will get lucky and get someone who says "Yes" and will send you hardcopy confirmation. Couldn't hurt.
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Re: A GM Pension offer

Post by umfundi » Tue Jun 19, 2012 6:10 pm

Onslow wrote:umfundi & cheese_breath,
Just wanted to thank you for all the information so far. I am also a GM retiree, but due to multiple errors at Fidelity I have not yet received my lump-sum offer. Hopefully this week. And thanks to your posts I will be well informed when it does arrive.
Onslow
Onslow,

Thank you for that. One reason I started this post (and posted my own numbers) was in the belief others might find it useful.

Keith
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umfundi
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Re: A GM Pension offer

Post by umfundi » Tue Jun 19, 2012 6:16 pm

cheese_breath wrote:
umfundi wrote:
cheese_breath wrote:Do you know if they intend to provide written answers to our questions, or are we to trust the verbal answers they give over the phone to stand up ten years from now?
cb,

They told me there will be an answer TO ME (not to you) for the predeceased spouse question in writing. By e-mail and by snail mail.
I was hoping they might publish something more than the FAQ that included answers to other questions the retirees have asked, But I should have known better. Guess I'll have to get on the phone and ask them the same question myself so I can get the answer in writing too.
There are two sites you might look at. The usual netbenefits.com, and gmpensiontools.com.

Post a personal inquiry there. That should get a personal response from GM.

By the way, notice that if you want to continue your current benefit, you do not have to make any response nor sign anything. In that case, GM says your previous benefits will be unchanged, so I expect that all your previous retirement terms apply.

Keith
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Re: A GM Pension offer

Post by umfundi » Tue Jun 19, 2012 6:50 pm

Frugal Al wrote:It certainly appears they did a good job pricing this offer, which is part of what makes it a difficult decision. Umfundi, given that the stable cash stream is important to you, and the fact that if you take the lump it sounds like you're just going to purchase multiple immediate annuities from various other companies, I'm not certain it's worth taking the haircut they'd be giving you.

Prudential is assuredly on the "to big to fail list," or will be once it's finalized. It's one of the largest insurers in the world. Moreover, if there were a problem with Prudential being unable to maintain payments, would the haircut be as bad as the one you're considering taking voluntarily? Maybe, maybe not. I guess what I'm saying is that the limited upside (avoiding Prudential's company risk) might not be worth the cost of taking the lump sum if you're just going to place it in other annuities. Too bad a partial lump sum isn't available.
Al,

Thank you for that thoughtful response. You have summarized my current thoughts perfectly!

I will spend the next couple of weeks getting more information, and then decide.

Thanks again,

Keith
Déjà Vu is not a prediction

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Re: A GM Pension offer

Post by cheese_breath » Wed Jun 20, 2012 10:21 am

umfundi wrote:
cheese_breath wrote:
umfundi wrote:
cheese_breath wrote:Do you know if they intend to provide written answers to our questions, or are we to trust the verbal answers they give over the phone to stand up ten years from now?
cb,

They told me there will be an answer TO ME (not to you) for the predeceased spouse question in writing. By e-mail and by snail mail.
I was hoping they might publish something more than the FAQ that included answers to other questions the retirees have asked, But I should have known better. Guess I'll have to get on the phone and ask them the same question myself so I can get the answer in writing too.
.......................

By the way, notice that if you want to continue your current benefit, you do not have to make any response nor sign anything. In that case, GM says your previous benefits will be unchanged, so I expect that all your previous retirement terms apply.
Yes, thanks. I'm aware of this. But if I do have to deal with this some years in the future I figure the more documenattion I have the better, especially since GM will be completely out of the picture by then. So I phoned them this morning, and they agreed to send me a letter confirming the coverage.
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Re: A GM Pension offer

Post by umfundi » Thu Jun 21, 2012 9:06 pm

I have made my decision, which is to continue my original benefits. I will compose a message with my reasoning over the weekend.

In the meantime, I think anyone who has this same choice should simply ask the question: I have a choice of a lump sump or an annuity. Can my lump sum buy me that annuity on the open market? (For my personal numbers, see the OP.)

The general answer is that your lump sum cannot buy your annuity.

If you want a different deal, so be it.

Keith
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Re: A GM Pension offer

Post by Dingle » Thu Jun 21, 2012 9:21 pm

umfundi wrote:I have made my decision, which is to continue my original benefits. I will compose a message with my reasoning over the weekend.

In the meantime, I think anyone who has this same choice should simply ask the question: I have a choice of a lump sump or an annuity. Can my lump sum buy me that annuity on the open market? (For my personal numbers, see the OP.)

The general answer is that your lump sum cannot buy your annuity.

If you want a different deal, so be it.

Keith
Your question makes no sense. You have a choice of taking a lump sum OR an anniuty and you're going to turn around and invest the lump sum in an annuity??????
:shock:
You would be taking the lump sum INSTEAD of the annuity so you would not to turn around and invest it in an anniuty.

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Re: A GM Pension offer

Post by Bongleur » Thu Jun 21, 2012 9:30 pm

Seems to me that if the GM via Prudential money is less than buying directly from Prudential, then Prudential must be accepting a lower profit margin for the GM account ???
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Re: A GM Pension offer

Post by GregLee » Thu Jun 21, 2012 10:07 pm

Dingle wrote: Your question makes no sense. You have a choice of taking a lump sum OR an anniuty and you're going to turn around and invest the lump sum in an annuity??????
:shock:
You would be taking the lump sum INSTEAD of the annuity so you would not to turn around and invest it in an anniuty.
No, he's going to take the annuity (which makes sense to me, though I confess I didn't work through the figures). He evaluated the lump sum alternative (that was option A, as I recall) by finding out whether that sum would be enough to buy an annuity equivalent to the one he has, found that it would not, and so decided not to take the lump sum, since its value is apparently less than that of the annuity he already has. (Also, if he does not choose any of the Prudential alternatives, perhaps it's a little clearer that GM will continue to be responsible for some benefits not mentioned in the offer, such as health and the survivor "pop-up" benefits.)

I hope I got that straight.
Greg, retired 8/10.

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Re: A GM Pension offer

Post by cheese_breath » Thu Jun 21, 2012 10:29 pm

umfundi wrote: The general answer is that your lump sum cannot buy your annuity.
I also discovered (at least for me) if I took the lump sum and invested it in stocks & bonds there's a decent chance it would run out of money before both my wife and I ran out of life. I'm continuing my original benefits with the Pru annuity too.
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Re: A GM Pension offer

Post by cheese_breath » Thu Jun 21, 2012 10:32 pm

Bongleur wrote:Seems to me that if the GM via Prudential money is less than buying directly from Prudential, then Prudential must be accepting a lower profit margin for the GM account ???
Or maybe GM is giving Pru more money than the lump sum they offer the retirees??? Maybe that's why they offered the lump sum? So they could get rid of us for less? Just wondering.
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Re: A GM Pension offer

Post by cheese_breath » Thu Jun 21, 2012 10:37 pm

Dingle wrote:
umfundi wrote:I have made my decision, which is to continue my original benefits. I will compose a message with my reasoning over the weekend.

In the meantime, I think anyone who has this same choice should simply ask the question: I have a choice of a lump sump or an annuity. Can my lump sum buy me that annuity on the open market? (For my personal numbers, see the OP.)

The general answer is that your lump sum cannot buy your annuity.

If you want a different deal, so be it.

Keith
Your question makes no sense. You have a choice of taking a lump sum OR an anniuty and you're going to turn around and invest the lump sum in an annuity??????
:shock:
You would be taking the lump sum INSTEAD of the annuity so you would not to turn around and invest it in an anniuty.
No he was concerned about having all his money tied up in a single annuity whose value would be far greater than the state guarantee. I think he was looking at the possibility of purchasing several annuities with the lump sum, each one with value less than the state guarantee.
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Re: A GM Pension offer

Post by Dingle » Fri Jun 22, 2012 11:16 am

cheese_breath wrote:
Dingle wrote:
umfundi wrote:I have made my decision, which is to continue my original benefits. I will compose a message with my reasoning over the weekend.

In the meantime, I think anyone who has this same choice should simply ask the question: I have a choice of a lump sump or an annuity. Can my lump sum buy me that annuity on the open market? (For my personal numbers, see the OP.)

The general answer is that your lump sum cannot buy your annuity.

If you want a different deal, so be it.

Keith
Your question makes no sense. You have a choice of taking a lump sum OR an anniuty and you're going to turn around and invest the lump sum in an annuity??????
:shock:
You would be taking the lump sum INSTEAD of the annuity so you would not to turn around and invest it in an anniuty.
No he was concerned about having all his money tied up in a single annuity whose value would be far greater than the state guarantee. I think he was looking at the possibility of purchasing several annuities with the lump sum, each one with value less than the state guarantee.
You completely missed the point of my post but thats ok because you raised another. He's concerned about having his money tied up in a single annuity but his conclusion is to tie up all his money in a single annuity????? :oops:

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Re: A GM Pension offer

Post by cheese_breath » Fri Jun 22, 2012 12:24 pm

Dingle wrote: You completely missed the point of my post but thats ok because you raised another. He's concerned about having his money tied up in a single annuity but his conclusion is to tie up all his money in a single annuity????? :oops:
Because the single Pru annuity would pay more than the total of all the smaller annuities his lump sum could fund. Apparently he decided assuming the risk of the single higher paying annuity outweighs the other option. We have to remember GM is contributing whatever funding is necessary to duplicate his current pension. And I suspect this is more that the lump sum they are offering.
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Re: A GM Pension offer

Post by Dingle » Fri Jun 22, 2012 12:38 pm

cheese_breath wrote:
Dingle wrote: You completely missed the point of my post but thats ok because you raised another. He's concerned about having his money tied up in a single annuity but his conclusion is to tie up all his money in a single annuity????? :oops:
Because the single Pru annuity would pay more than the total of all the smaller annuities his lump sum could fund. Apparently he decided assuming the risk of the single higher paying annuity outweighs the other option. We have to remember GM is contributing whatever funding is necessary to duplicate his current pension. And I suspect this is more that the lump sum they are offering.
Yeah I get that. I thought he was worried about the company going belly up and the state guarantee and that is the reason for smaller annuitites? He's not concerned about a single annuity now and willing to take that risk for the higher amount?

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Re: A GM Pension offer

Post by cheese_breath » Fri Jun 22, 2012 12:57 pm

Dingle wrote:
cheese_breath wrote:
Dingle wrote: You completely missed the point of my post but thats ok because you raised another. He's concerned about having his money tied up in a single annuity but his conclusion is to tie up all his money in a single annuity????? :oops:
Because the single Pru annuity would pay more than the total of all the smaller annuities his lump sum could fund. Apparently he decided assuming the risk of the single higher paying annuity outweighs the other option. We have to remember GM is contributing whatever funding is necessary to duplicate his current pension. And I suspect this is more that the lump sum they are offering.
Yeah I get that. I thought he was worried about the company going belly up and the state guarantee and that is the reason for smaller annuitites? He's not concerned about a single annuity now and willing to take that risk for the higher amount?
Hope I'm not putting words in his mouth, but I think that's basically it. Maybe he's still concerned about the risks of the single annuity, but on a risk-benefit analysis he's decided that the higher benefits provided by the Pru annuity outweigh the risks of Pru going belly up. At least that's my take on it, right or wrong.
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Re: A GM Pension offer

Post by umfundi » Fri Jun 22, 2012 2:03 pm

It's kind of interesting to watch other people argue about what they think I think! :P

My basic concern is to provide an income stream that I and my wife will not outlive, at some low level of risk.

Let me also say that I am a huge fan of what Michael Zwecher says in "Retirement Portfolios" (ISBN 978-0-470-55681-8). Figure out your needs for your desired lifestyle, and then put that funding in place. If you can't assure at least that level of funding, you are at risk of running out of money. (My paraphrase.)

So with the GM offer, I first figured out that the defined benefit / annuity options are equivalent.

I then figured out that the lump sum I WAS OFFERED (yours may vary) was equivalent to the annuities IF I could get a 4.8% annual return before inflation and after expenses over the next 30 years. Seems not too difficult, that's what makes it a hard decision.

Then, I pondered the imponderables. What about insurance? (Who is more likely to go bankrupt, Prudential or the State of Michigan?) What about the reversion to a single life annuity if my spouse predeceases me? With the annuity, is GM really out of the picture?

Next, if I took the lump sum, what could / should I do? First, as one kind soul pointed out, if I wanted to buy the annuity, the lump sum is about 15% short. What else could I do?

Well, the vultures are circling. I have been getting two calls a day from financial advisers I have never heard of, offering to help me. The local newspapers are full of opinions. What turned me off was the preying on people's behavioral fears: If you die, the pension stops and there is nothing. What if you die early? Don't you want to leave a legacy? And, by the way, that will be 2.5% per annum.

What they are touting is a variable annuity that promises less than 5% but which has upside potential. Add to that life insurance on both you and your spouse that restores the lump sum when either / both of you dies. Voila! Take the lump sum now, get an income and, in the end, the lump sum is intact for your heirs. All it takes to do this is your lump sum plus 25%. Go raid your 401(k) / IRA.

(Where are the customers' yachts?)

So, my Boglehead reflex kicked in. What is the lowest risk, lowest cost, least complicated option? I think it is to go with the annuity that continues the terms of my previous pension.

If I really do want fries with that, I have other money I can use to buy insurance.

By the way, I think the demise of defined benefit plans (in favor of essentially optional savings) is a disaster in the making.

Thank you to all of you for all your help and advice. I really do think I am making a much better informed decision. And, I hope others have (and will) find this thread helpful.

Best wishes,

Keith
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