ixohoxi wrote: ↑
Fri Oct 11, 2019 7:57 am
I just realized that the lump sum calculation is based on the Option 4 (age 65) payment, plus interest/mortality. This is not very competitive with option 3. Taking what I learned about PBGC into account, I am going to plan on option 3. I will post back to this thread if other offers materialize.
If the numbers were closer, I would probably use Bigfoot48's Retiree Portfolio Model to analyze the alternatives.
I'm no expert, but I believe the following things to be true, but of course double check with the people handling this--I just want to point out a few things you may want to look into:
1) Do you still have the paperwork, from when you left GE, showing your pension benefit? This is the amount, at age 65, that must be paid to you. I'd check this first, to see if the number matches up with what they are offering in option 4. If you can't find it, you should be able to request it. As I understand it, there are only 2 ways this number can be reduced. One is if you were not vested in the plan. The other--and this is important for you to consider--is if any improvements were made to the plan within the last 5 years.
From the PBGC site:
"If your plan was created or amended to increase benefits within five years before the plan's termination date, your benefit may not be fully guaranteed. PBGC guarantees the larger of 20% of the benefit increase or $20 per month for each full year the benefit increase was in effect."
2) The PBGC follows the stated rules on each particular plan, as they are written (other than their own restrictions as mentioned, such as no lump sum, etc.). In other words, just because they have amounts for ages 55-65, it does not necessarily mean those figures will apply to everyone, only those who had an option to retire between 55-65 per their plan. For example, if FRA for a plan is 62, and there are no early retirement options, than that is what they will follow.
3) Is this offer an actual change to the plan? Or is it just a random offer? You need a copy of the Summary Plan Description. In order to find out how the pension works, and what FRA age is, and if there is an early retirement option, you need to get your hands on this paperwork. I think that If the offer is not actually a change to the plan, and the PBGC ends up with your pension, the PBGC will not follow it, and will instead go by this document. You should be able to request a copy of this, as well. You also need to find out, based on the "5 year" rule, when it was last amended. If it was amended less than 5 years ago, you will probably want to take a look at the one before that as well.
On the other hand, if the offer IS an actual change/amendment, and an IMPROVEMENT to the plan, then "5 year" clock is about to start ticking. Before you make any decisions, you need to do some research, and find this out. Your worst case scenario for option 3 would be that the offer IS a change in the plan, the plan ends up at the PBGC before the 5 years and before you turn 60, and it goes back to the old document which has, let's just say as an example, FRA at 65. Now you'd be stuck waiting. But at least you'd get the promised amount at 65. Once you get that SPD, read it carefully...it may have some unexpected things.
Meanwhile, maybe there are some current/former GE employees who are familiar with what the plan looked like before this offer. Was 60 FRA? Was there an early option at 55? Or earlier?