GE Pension Buyout

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dodecahedron
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Re: GE Pension Buyout

Post by dodecahedron » Sat Oct 12, 2019 6:29 pm

InvestorThom wrote:
Sat Oct 12, 2019 6:10 pm
Can lump sum pension payouts be rolled over into an IRA. Or are they considered taxable income in the year received?
I had a lump sum payout on one component of my late husband´s GE pension six years ago. I was able to roll it over into an IRA at Vanguard. I remember calling Vanguard about the best way to handle it. I no longer remember the details with certainty, but I do know that it worked out fine.

(There was another, larger, component to my late husband´s GE pension that I did not have the option to take a lump sum on. I have just been taking that as monthly taxable income. No option to roll that part into an IRA.)

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FIREchief
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Re: GE Pension Buyout

Post by FIREchief » Sat Oct 12, 2019 6:29 pm

InvestorThom wrote:
Sat Oct 12, 2019 6:10 pm
Can lump sum pension payouts be rolled over into an IRA. Or are they considered taxable income in the year received?
I believe that in many/most cases they can be rolled over.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Stinky
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Re: GE Pension Buyout

Post by Stinky » Sat Oct 12, 2019 6:44 pm

InvestorThom wrote:
Sat Oct 12, 2019 6:10 pm
Can lump sum pension payouts be rolled over into an IRA. Or are they considered taxable income in the year received?
Yes, taxes can be deferred by rolling a qualified pension into an IRA.
Last edited by Stinky on Sat Oct 12, 2019 7:26 pm, edited 1 time in total.
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Re: GE Pension Buyout

Post by JAZZISCOOL » Sat Oct 12, 2019 6:47 pm

InvestorThom wrote:
Sat Oct 12, 2019 6:10 pm
Can lump sum pension payouts be rolled over into an IRA. Or are they considered taxable income in the year received?
Most pension lump sums can be rolled over to an IRA. Here is a good review of common options on Schwab's public website (you can read even if you don't have an account.) Your lump sum paperwork should document all options specifically as each pension plan has specific terms.

https://www.schwab.com/resource-center/ ... -annuity-1

"Taxes: If you opt for a lump-sum payout, one option could be to roll it over to a traditional IRA and continue to defer taxes. If you take a lump sum and don’t roll it over, you’ll pay a large, single tax bill. Check to be sure a rollover is permitted, whether you could roll over the lump-sum into your employer’s retirement plan. "
Last edited by JAZZISCOOL on Sat Oct 12, 2019 6:54 pm, edited 2 times in total.

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FiveK
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Re: GE Pension Buyout

Post by FiveK » Sat Oct 12, 2019 6:48 pm

InvestorThom wrote:
Sat Oct 12, 2019 6:10 pm
Can lump sum pension payouts be rolled over into an IRA. Or are they considered taxable income in the year received?
See Publication 575 (2018), Pension and Annuity Income | Internal Revenue Service: "If you withdraw cash...from a qualified retirement plan in an eligible rollover distribution, you can generally defer tax on the distribution by rolling it over to...a traditional IRA."

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Re: GE Pension Buyout

Post by killjoy2012 » Sat Oct 12, 2019 6:55 pm

I'm another ex-GE. Debating what to do, but likely will just leave it in the program another ~20 years until I retire. I'm well under the PBGC limits and it represents a pretty small portion of my overall retirement funding. I could lump sum it now, but I question how some people on here seem to think earning >> 6% per year for next 2 decades is a cakewalk and for sure thing.

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FIREchief
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Re: GE Pension Buyout

Post by FIREchief » Sat Oct 12, 2019 7:01 pm

FiveK wrote:
Sat Oct 12, 2019 6:48 pm
InvestorThom wrote:
Sat Oct 12, 2019 6:10 pm
Can lump sum pension payouts be rolled over into an IRA. Or are they considered taxable income in the year received?
See Publication 575 (2018), Pension and Annuity Income | Internal Revenue Service: "If you withdraw cash...from a qualified retirement plan in an eligible rollover distribution, you can generally defer tax on the distribution by rolling it over to...a traditional IRA."
Key word is "qualified." Some pension payments fall under Non-qualified deferred compensation.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: GE Pension Buyout

Post by orhkaf » Sat Oct 12, 2019 8:18 pm

If it were me I would take the pay out. God knows if I’ll even be alive in 5 years.

This will make it much easier for my heirs to get what’s rightfully theirs.

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Re: GE Pension Buyout

Post by ixohoxi » Sat Oct 12, 2019 10:48 pm

InvestorThom wrote:
Sat Oct 12, 2019 6:10 pm
Can lump sum pension payouts be rolled over into an IRA. Or are they considered taxable income in the year received?
In my case, I think the base pension that the company funded can be rolled over, and the component called PPA/VPA (personal/voluntary pension account) that was funded by my contributions could not.
Henceforth, content shall be my aim, and anticipation my joy. -Alfred Billings Street

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Re: GE Pension Buyout

Post by whodidntante » Sat Oct 12, 2019 10:58 pm

Is this option guaranteed by someone more reliable than the GE executive team?
Option 3: receive monthly annuity payments at age 60 (I am almost 55 now). $737/month starting in 5 years
If so, I think I would do that.

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Re: GE Pension Buyout

Post by criticalmass » Sat Oct 12, 2019 11:00 pm

ixohoxi wrote:
Thu Oct 10, 2019 1:56 pm
I started my career at GE in 1987 and worked there for 12 years. During that time i vested in their DB pension plan.

This week GE froze its pension for current employees, and offered a buyout to former employees who have not started receiving benefits. I received (online) a buyout letter which spelled out my options.

Option 1: lump sum payable in December 2019. $74,992
Option 2: begin receiving reduced monthly annuity payments now. $383/month
Option 3: receive monthly annuity payments at age 60 (I am almost 55 now). $737/month starting in 5 years
Option 4: receive monthly annuity payments at age 65. $761/month starting in 10 years

I went on immediateannuities.com and found that a SPIA that begins paying $737/month starting in 5 years (comparable to option 3) would cost $139k if purchased now. I feel like options 1, 2, and 4 are inferior to option 3. Is there anything else I should take into account?

Options 1 and 2 will be expiring next month but 3 and 4 will stay on the table (unless GE''s pension fund becomes insolvent, which could happen. In that case there is PBGC with a significant haircut)

Is it likely that GE will sweeten the deal next year to get more takers?
No, it is not likely that GE will sweeten any deals. (my opinion only).
  • Option 2 and 4 are inferior to Option 3.
  • Option 1 is inferior to Option 3 IF GE survives and is able to make the payments in the future AND you are alive to receive.
  • Option 1 wins if you don't know that GE will still be around and the pension fund will not be raided between now and your last payment. You have money in your account, and are separated from GE's future. Roll over and invest the money in a retirement investment of your choice.
GE has had an awful 10 years, and it doesn't look much better on the horizon. I would expect them to keep shedding or closing business lines.

Ask folks who worked at Polaroid who didn't grab a lump sum how their pension worked out when the company went south.

If you roll the dice on GE's future, and they do well (including a fully funded pension fund), then you win. But that's a big 'if.' GE today is not the stable, boring, slow expanding company it was long ago.

Even their not-finished Boston headquarters is shrinking before it can be built. Reminds me of super successful Sun Microsystems (we're the dot in .com) building their new campuses in California and Massachusetts. Ten years after their future headquarters began construction, what was left of Sun was absorbed somewhere into Larry Ellison's company.

This short article is a good description of the bottom line at GE this year:

The struggling light bulb and jet engine maker announced on Thursday it ditched a plan to build a 12-story office building in the Fort Point neighborhood of Boston. Instead, GE and Massachusetts have agreed to jointly sell the campus.
GE is even returning $87 million to Massachusetts, reimbursing the state for most of the $120 million incentive package that attracted the storied company to move from its Connecticut home in August 2016.
The shift reflects how much has changed at GE since then.

GE's share price, despite a surge in early 2019, is down 60% over the past three years. Its dividend has been slashed to a penny.

https://www.cnn.com/2019/02/15/business ... index.html

Sconie
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Re: GE Pension Buyout

Post by Sconie » Sun Oct 13, 2019 5:09 am

I'd go with #3.
I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant. - Alan Greenspan

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Re: GE Pension Buyout

Post by LadyGeek » Sun Oct 13, 2019 9:36 am

Colorado740 has a pension buyout question which I've moved into a new thread: GE Pension Buyout - which option?

It's important to keep everyone's situation in a stand-alone thread. Otherwise, the replies may get confused with the wrong member.
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Re: GE Pension Buyout

Post by chicago_meatball » Sun Oct 13, 2019 9:48 am

killjoy2012 wrote:
Sat Oct 12, 2019 6:55 pm
I'm another ex-GE. Debating what to do, but likely will just leave it in the program another ~20 years until I retire. I'm well under the PBGC limits and it represents a pretty small portion of my overall retirement funding. I could lump sum it now, but I question how some people on here seem to think earning >> 6% per year for next 2 decades is a cakewalk and for sure thing.
Especially maintaining the 6% on approach to retirement.

And for those asking the question if I would invest in this opportunity if I had cash to invest in a govt backed annuity that effectively earns 6-7% and eventually pay out as a monthly annuity. It’s an easy yes.

Im not banking on GE paying this. I’m banking on govt reinsurance and being well underneath the monthly limits.

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Re: GE Pension Buyout

Post by JAZZISCOOL » Sun Oct 13, 2019 9:50 am

For those who are interested in the GE pension buyout situation, you may want to listen to this podcast by two Wharton professors:

GE’s Pension Freeze: Will It Help — or Hurt?

https://knowledge.wharton.upenn.edu/art ... ight-ship/

Olivia S. Mitchell, Wharton professor of business economics and public policy and Marshall W. Meyer, Wharton emeritus professor of management. Ms. Mitchell has an expertise in pension plans. She mentions an 80% funded ratio for GE which is higher than the WSJ story.

https://en.wikipedia.org/wiki/Olivia_S._Mitchell

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Re: GE Pension Buyout

Post by fru-gal » Sun Oct 13, 2019 10:01 am

In my experience, offers from a shaky company get worse as time goes on, not better.

Am I correct in believing the lump sum #1 can be rolled over into an IRA? If so, that's what I would do. (Not #4, which is clearly worse than #3.) I have had the take the money and run philosophy as then I don't have to worry about whether the company will go down the tubes, and I have complete control over the money.

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Re: GE Pension Buyout

Post by JBTX » Sun Oct 13, 2019 8:26 pm

Assuming amounts are guaranteed by PBGC, C is by far the best choice.

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Re: GE Pension Buyout

Post by windrose » Tue Oct 15, 2019 12:25 am

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?

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Re: GE Pension Buyout

Post by Valuethinker » Tue Oct 15, 2019 9:39 am

windrose wrote:
Tue Oct 15, 2019 12:25 am
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?
Hands clapping. :beer

What an incredibly useful post for the Original Poster.

Thank you.

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Re: GE Pension Buyout

Post by LadyGeek » Tue Oct 15, 2019 3:48 pm

New member robinmarie has a question which I've moved into a new thread: [GE Pension Buyout - Calculation of lump sum]
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Re: GE Pension Buyout

Post by ixohoxi » Wed Oct 16, 2019 12:41 pm

windrose wrote:
Tue Oct 15, 2019 12:25 am
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?
I can't find the SPD from when I quit in 1999. I will try to track down a copy or request from Benefits department.
My understanding is that option 3 and 4 match what was in the original plan although I can't find this documented. The retirement age was originally 60.
Henceforth, content shall be my aim, and anticipation my joy. -Alfred Billings Street

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Re: GE Pension Buyout

Post by CnC » Wed Oct 16, 2019 1:46 pm

Longdog wrote:
Thu Oct 10, 2019 2:25 pm
ixohoxi wrote:
Thu Oct 10, 2019 1:56 pm
I started my career at GE in 1987 and worked there for 12 years. During that time i vested in their DC pension plan.

This week GE froze its pension for current employees, and offered a buyout to former employees who have not started receiving benefits. I received (online) a buyout letter which spelled out my options.

Option 1: lump sum payable in December 2019. $74,992
Option 2: begin receiving reduced monthly annuity payments now. $383/month
Option 3: receive monthly annuity payments at age 60 (I am almost 55 now). $737/month starting in 5 years
Option 4: receive monthly annuity payments at age 65. $761/month starting in 10 years

I went on immediateannuities.com and found that a SPIA that begins paying $737/month starting in 5 years (comparable to option 3) would cost $139k if purchased now. I feel like options 1, 2, and 4 are inferior to option 3. Is there anything else I should take into account?

Options 1 and 2 will be expiring next month but 3 and 4 will stay on the table (unless GE''s pension fund becomes insolvent, which could happen. In that case there is PBGC with a significant haircut)

Is it likely that GE will sweeten the deal next year to get more takers?
I agree with your assessment. I’d pick what’s behind door number 3. Not sure why you think there’d be a haircut if PBGC takes over since you’re well under their cap.
The PBGC will be bankrupt in a heartbeat if many more big pensions fail.

Look at Central States. If and when that goes bankrupt it likely will bankrupt the pension protection plan itself.

My father is covered by central states and from everything I have read even with the PBGC haircut it will bankrupt the fund as is.

Now granted they could get bailed out but this forum doesn't allow discussion of possible laws.

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Re: GE Pension Buyout

Post by windrose » Thu Oct 17, 2019 1:03 am

ixohoxi wrote:
Wed Oct 16, 2019 12:41 pm
windrose wrote:
Tue Oct 15, 2019 12:25 am
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?
I can't find the SPD from when I quit in 1999. I will try to track down a copy or request from Benefits department.
My understanding is that option 3 and 4 match what was in the original plan although I can't find this documented. The retirement age was originally 60.
It seems like 60 is what the other posters are saying as well. But the married people who are putting up their offers do not seem to be showing any figures with a 50% joint survivor benefit. For a married person, this is the default under the ERISA rules. In order to get the single life version, you must provide a signed/witness document from your spouse, signing off on their survivor benefit.

So now I am wondering--are these offers going to be paid out by an financial/insurance company? If that is the case, I did not understand that from the initial posts.

I have been reading these with the view that GE is keeping the pension and making these payments. But if this offer means they are buying an annuity from a financial/insurance company, that changes things. I do not believe this type of life annuity has any protections from the PBGC, nor does it have to follow ERISA rules....which would explain why no one is quoting any survivor benefit numbers.

If that is the case, it will certainly simplify things, but also gives you yet another decision to make. You would also have to factor in the financial health of this organization. Since you are leaning towards the annuity, and the numbers seem similar, you will have to decide if you should stay in, and roll the dice on the stability of the GE/PBCG combo, or take a chance on the stability of whatever company is taking this over, while giving up some retiree protections.

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Re: GE Pension Buyout

Post by Valuethinker » Thu Oct 17, 2019 8:18 am

DarthSage wrote:
Fri Oct 11, 2019 12:13 pm
Another vote for Option #1--take the money and run.

I have very little faith in GE at this time. When I worked there, back in the Stone Age, it was like they had a license to print money. Today, not so much.

That said, I don't think they're going to fall off the Stock Exchange or anything. I just don't trust them. If the OP has more faith than I do, Option #3 is the best of the remaining choices.
Chapter 11 is a process commonly used to shed old liabilities.

In the case of GE this will include pension & healthcare liabilities to retirees, and these losses on a sold insurance subsidiary, I believe.

So it's not impossible. Under American bankruptcy law, a company does not have to be dead broke to go into "receivership" (UK term).

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Re: GE Pension Buyout

Post by niners9088 » Thu Oct 17, 2019 8:23 am

Does anyone know if the lump sum is taken if it can be rolled into a 401k? If it is rolled into an IRA that may eliminate the persons ability to do a backdoor Roth IRA.

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Re: GE Pension Buyout

Post by mvilleguy9 » Thu Oct 17, 2019 9:37 am

As Steve Miller once sang "go on, take the money and run". Typically they figure interest at between 2-4%. You can roll into an IRA and likely do better.

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Re: GE Pension Buyout

Post by grenadaRocks » Thu Oct 17, 2019 10:20 am

The estimated non-taxable portion of your benefit, which represents your contributions to the Plan, is $XX,XXX.XX.

If you elect the lump sum payment, the non-taxable portion of the benefit will be included in the payment and reported on the tax form GE issues to you.

If you elect the early monthly payment, GE uses the "IRS Simplified General Rule" to determine the non-taxable portion of your benefit. Under this method, your total contributions to the Plan are divided by the expected number of payments (based on your age when you begin your benefit and IRS life-expectancy tables) to determine the non-taxable portion of your benefit.

You will receive a Form 1099-R showing your taxable pension income for the year.
What is the implication of this.....We are considering a lump sump, I would have expected they would give 2 checks, one for taxable and the other for the non-taxable portion. But they are going to do 1 check. Talking to Vanguard, they say they don't split a check across Rollover and Roth IRAs.

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Re: GE Pension Buyout

Post by grenadaRocks » Thu Oct 17, 2019 11:25 am

So I finally got a hold of them over the phone after waiting 75 minutes :!:

For lump sumps, they can send 2 checks.
One for non-taxable, made out to the pension holder, no penalties, no taxes withheld (i assume there would be a 1099R). This seems equal to the Voluntary Pension deductions that were made, minus the interest.
One for taxable, made out to the pension holder and payable to the IRA custodian.

  • Rollver to a traditional IRA or qualified employer plan:not taxable until you receive payment from the IRA or plan
  • Rollover to a Roth IRA: no federal or state taxes withheld; however, you may have to pay federal and state taxes for the year of the rollover.
What type of IRA does this get moved to?

When it says "qualified employer plan", does that mean its okay to use the Rollover IRA accounts?

Some of the old paychecks indicate the withholdings for the Pension and the Voluntary Pension plan were all after-tax...does that imply they should go to a Roth IRA?

I have an old traditional IRA, a Roth IRA that was set up for GE's 401(k) transfer (it had a taxable component), and a Rollover IRA from the earlier rollouts - so while I don't need new accounts, I can't figure out where to move the money to.

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Re: GE Pension Buyout

Post by ABS » Mon Oct 28, 2019 6:16 pm

I am an ex-employee of a GE Capital business that was sold. My vested pension benefit is with a GE retirement plan ("Retirement Plan for Select GE Businesses") that includes several GE Capital businesses that were divested. Are there any ex GE Capital individuals on this forum who are aware of how the recent developments may affect the pension plan? I have not received any communication from the pension plan so am I right in believing that my pension plan will remain as is?

Dresden
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Joined: Tue Oct 29, 2019 5:28 am

Re: GE Pension Buyout

Post by Dresden » Tue Oct 29, 2019 5:36 am

ABS wrote:
Mon Oct 28, 2019 6:16 pm
I am an ex-employee of a GE Capital business that was sold. My vested pension benefit is with a GE retirement plan ("Retirement Plan for Select GE Businesses") that includes several GE Capital businesses that were divested. Are there any ex GE Capital individuals on this forum who are aware of how the recent developments may affect the pension plan? I have not received any communication from the pension plan so am I right in believing that my pension plan will remain as is?
You can login in to onehr.ge.com and check. You must know your SSO but you can reset the password after being prompted for security questions.

They also provided this # to call: 1-866-597-2273.

psy1
Posts: 135
Joined: Thu Jan 31, 2019 1:40 am

Re: GE Pension Buyout

Post by psy1 » Tue Oct 29, 2019 11:02 am

Have skimmed an am no expert but I am an expert in my own retirement!

Reading the above reveals a couple things:

Option #3 is the best choice.

Option #1 (lump sum) is the best choice.

I would say that if you can fund your own retirement independent of GE, have a sense of humor and the bizarre, then take #3 which has the odds of paying out the most.

If you cannot fund retirement without GE and you have no stomach for tendentious minutiae, legalisms, and risk then take #1 and run. The rest is details.

sonar230
Posts: 10
Joined: Fri Jul 20, 2018 5:59 am

Re: GE Pension Buyout

Post by sonar230 » Sat Nov 02, 2019 1:50 pm

windrose wrote:
Tue Oct 15, 2019 12:25 am
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?
Thanks for the insights related to PBGC. I am a former GE employee who recently left the company after 28 years and am 9 years away from 60. My FRA is 60 and I believe some employees who started with the company later may have an FRA at 65. I do not believe that this latest offer represents a change/amendment to the pension program, but plan to request the SPD next week to verify. However, GE is choosing to freeze the pension for existing employees which I assume has required an update to the SPD. Assuming that GE does not go bankrupt and the pension fund becomes better funded as planned, the defined pension annuity seems to make the most sense for me as I do not need the money today and the lump sum represents a 50% reduction in benefit if I live into my 80's. I certainly am tempted by the lump sum due to the unknown risks with GE's future and I have some outstanding questions that I'm hopeful someone familiar with PBGC and ERISA law can help with:

1. It is my understanding that GE will be required going forward to make sure that their pension liability meets some minimum requirements of solvency. In other words, GE added $6B to the fund last year and anticipates this latest round of changes will add an additional $6 to $8B to the fund. The current fund covers approximately 80% of the anticipated liabilities and this will improve over time with these changes. They have also indicated that lump sum payments will not decrease their % of coverage to the outstanding liabilities. My primary question is will GE be required by law to maintain the pension fund at a certain level of solvency going forward?

2. If GE should go bankrupt, my understanding is that the pension fund cannot be "raided" by creditors or the company. In other words, the fund is in a separate trust independent from the company financials. GE could limit their contributions to the pension fund (which actually created the deficit that they are now trying to correct), but that is backstopped by the laws governing the funding levels to remain solvent - right?

3. After 2021, no active GE employees will be contributing to their pension fund anymore. This means that the liabilities are funded purely through investment growth in the fund without reliance on any new contributions. I imagine this is the primary reason that GE is actively contributing to the fund now to try to secure long-term viability. My thinking is that if GE should go bankrupt after 2021, the viability of the fund is not diminished too much since there will be no employee contributions coming in anyways. Does this logic make sense?

4. Assuming GE goes bankrupt, what happens to the money in the pension trust? Can these monies be used to pay pensions and does the PBGC make up the difference up to the legal limit outlined in their tables? If I'm reading the tables correct, the 2019 limit for someone 60 years old is $3,778.13 for a single employer plan without survivor benefit. This is within $100 of my pension annuity benefit at 60 according to GE. Is it safe to assume that the GE pension fund would likely provide some benefit? If so, then I see limited risk to not getting my full benefit even in a bankruptcy.

I have done my research on PBGC and for the first time in over 10 years, the fund has the money to meet all of its obligations. A recession can change that relatively quickly especially since the insurance premiums they are receiving are likely on the decline and bankruptcies will increase. I think that the government will likely back PBGC in a catastrophic situation.

I appreciate everyone's insights up to this point and look forward to some of the questions above.

Thanks,
Devin

orangeandwhite
Posts: 45
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Re: GE Pension Buyout

Post by orangeandwhite » Sun Nov 03, 2019 1:37 pm

psy1 wrote:
Tue Oct 29, 2019 11:02 am
Have skimmed an am no expert but I am an expert in my own retirement!

Reading the above reveals a couple things:

Option #3 is the best choice.

Option #1 (lump sum) is the best choice.

I would say that if you can fund your own retirement independent of GE, have a sense of humor and the bizarre, then take #3 which has the odds of paying out the most.

If you cannot fund retirement without GE and you have no stomach for tendentious minutiae, legalisms, and risk then take #1 and run. The rest is details.
I don’t understand this line of thinking. It seems emotional. He should take a huge NPV haircut and take on the risk of investing this money..... for piece of mind?

By far the most risk averse approach here is to leave the money in the government-insured pension. The odds of a loss here are remote. You need three things to go wrong at the same time: GE has to fail; the plan has to be severely underfunded at the time of failure; and the PBGC has to be unable to meet its guarantee. You could argue this is even less risky than a government employee pension, which leans entirely on the third leg of this.

Taking the lump sum means you have to invest it yourself. This is not without risk. The discount rate used for these buyouts is a corporate bond interest rate; you have to beat that rate to just keep up. Pension sponsors lobbied for this rate to be used (enacted in the PPA) as it allows them to absolutely hose people who take cash outs - that’s why they pitch them to former employees so aggressively - the more people cash out, the better the plan funded status will be.

States of the world where the government allows the PBGC to collapse are probably financial crisis environments where your equity and credit investments do badly. The pension likely strictly dominates self investment, by a long shot. There are a lot of people posting disaster-movie stories on this thread but my guess is most of them are long tons of equity risk and will be in distress if any of these scenarios realize.

I think the best practice advice here, if the amount is small in your overall portfolio, is to leave it where it is, treat it like a government bond allocation, and reduce your fixed income allocation elsewhere accordingly... Different issues come up if you are otherwise broke or if you have some reason to have a low life expectancy.

agupta661
Posts: 1
Joined: Sat Nov 16, 2019 7:38 pm

GE Early Pension - Feedback

Post by agupta661 » Sat Nov 16, 2019 7:44 pm

[Merged here -- moderator oldcomputerguy]

Hi,

I know there have been a lot of these. My option is to take Option 1: $184K for the lump sump and I am 43 years old versus:

Option 2: $643/mth beginning now
Option 3: $2,404 / mth beginning at 60 in 16 years
Option 4: $3,200 / mth beginning at 65 in 21 years

From everything I see, I think most folks are saying if you can grow the portfolio at 5-6% a year and you believe you will live past 75, then take Option 3, but if you foresee a shorter lifespan or concerns, then take the lump sum. What do folks think? Thank you.

Oregano
Posts: 36
Joined: Fri Nov 22, 2019 9:30 pm

Re: GE Pension Buyout

Post by Oregano » Fri Nov 22, 2019 9:44 pm

I've come out of a deep hibernation because this thread has some of the worst advice I've ever seen on Bogleheads and I felt compelled to point out the flawed logic.

The OP had a completely appropriate analysis and yet more than half of the people here are trying to convince him/her to take the deeply suboptimal choice.

Orangeandwhite's review is the only one that the OP should be paying attention to, but I will add one critical point to all of the fear mongering: despite what you think you know about GE from reading the WSJ or Bloomberg news, Mr. Market says that GE's odds of bankruptcy in the next five years are extremely low. GE 5-year bond yields are less than 3.0%.

I can't believe so many here are saying that the remote risk of a GE bankruptcy in under 5 years, on top of a highly improbable catastrophic failure of PBGC in the not-too-distant future, is worth a 45% haircut to get the money out now. IF that unlikely scenario occurred, any lump sum investment you put into stocks will most likely have lost money anyway!

Oregano
Posts: 36
Joined: Fri Nov 22, 2019 9:30 pm

Re: GE Pension Buyout

Post by Oregano » Fri Nov 22, 2019 10:06 pm

P.S. If you plan on dying fairly soon and have no spouse, then go ahead and take the lump sum and spend it all in the next couple years.

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