Tuesday, April 04, 2006
SPECIAL TO THE MONITOR (Sunday 4/2)
As LANL moves toward a new regime, many changes face current and retired employees. Some of those topic are:
In the transition to LANS, you have two options. If you choose to stay employed and transfer, you keep your defined benefit plan, Option A. If you retire and hope to be re-hired, your pension option will now be a defined contribution plan, Option B.
Option A specifies that you will receive a set monthly amount-a defined benefit-until your death, with no cost-of-living adjustments. The employer is responsible for the investment risk.
At first blush, Option A sounds like real peace of mind, but it should be balanced against other factors and conditions. You surrender your lump sum to the plan-and with it your chance at capital preservation. Income-wise, you lose your spending power as inflation erodes your fixed income. And, once you go with Option A, you can't back out of it.
Many people believe the Pension Benefit Guarantee Corporation insures 100 percent of their benefit if the employer files bankruptcy. In fact, the PBGC guarantees a maximum monthly benefit of $3971.59 per month for someone age 65 taking the straight life annuity in a plan terminating in 2006. This is fine, if you are at or below that level. If your monthly benefit was supposed to be, say, $7,000, you will simply lose the difference.
What happens when PBGC takes over a plan. Note sliding table ( http://www.pbgc.gov/workers-retirees/find-your-pension-plan/content/page789.html#2006 )
PBGC reviews your plan's records to determine what benefits each person will receive. To ensure PBGC has the correct information, we will ask you to complete an information form.
If you are already receiving a pension, we will continue paying you without interruption during our review. These payments, an estimate of the benefits that PBGC can pay under the insurance program, may be less than you were receiving from your plan but will be paid in the annuity form you chose at retirement.
If you have not yet retired, we will pay you an estimated benefit when you become eligible and apply to PBGC to begin payments. About four months before you are ready for your benefits to begin, contact PBGC by calling the Customer Contact Center toll-free at 1-800-400-7242 (for TDD/TTY users call toll-free at 1-800-877-8339).
We pay most benefits by Electronic Direct Deposit, sending your monthly payments directly to your financial institution. If you do not want to use direct deposit, you may still receive your benefit by check.
I saw this in Sunday's monitor and it sure was confusing because of errors. It implies no COLA if you retire from UC or LANS-TCP1. This is not true. Retirees under UCRP do get a COLA every July 1st and LANS-TCP1 is "supposed" to match that COLA (significantly equivalent). The only way you do not get a COLA is if you take the UCRP lump sum as a retiring UC employee. You will not be able to take the lump sum under LANS-TCP1 and, of course, LANS-TCP2 has no pension so, of course, no COLA.
Anyway, the latest info appears to be contained in the "LANS Pension Calculation Examples" on the LANL Transition and LANS websites, and the "LANS Benefits Summary," Rev 1, March 22, 2006, on the LANS website.
It seems as though the LANS Pension Calculation Examples document is more up-to-date. For example, pg 7, essentially precludes going inactive vested to TCP2, taking the UCRP lump-sum later, and getting the LANS contribution to retiree medical if applicable. In other words, you must take an annuity from UCRP at some point to get the LANS retiree medical subsidy if you go to TCP2. Taking the lump-sum from UCRP eliminates the subsidy, even if you are otherwise eligible.
This is significant. And I might add that going back into TCP2 is not a bad option. Especially the 6% match and the 4.5 or 5.5% contribution. And the fact that you get retiree medical at 100% employer contribution if over 20 years. And that you carry over your sick and vacation and earn at same rate. Granted that is all for right now, but everything in life is for right now.
Personally, I am starting to have good feelings about all this.. not so good to leave my money, but good enough to stick it out for another few years.
It does help if you have a spouse, either at LANL or the state or the schools that medical is or could be based on. At this point in time it's time to look at positives rather than negatives. You can't fight it- nothing to fight, you'll lose. You can leave. Or work with it. Easier to work with it. Don't care for Bechtel, etc but gotta go with the flow.
The decision is more complex and more individualized than any of us would like.
In counseling many families, we have found wide variation in optimal strategies. Changing rules from DOE et al. make the counseling challenging. You can add to the discussion here by reading recent postings in the Reader's forum.