How healthy is your company's pension plan -- Page 2

But with so many companies drowning and their pensions being taken over by PBGC, the rescuer is now in need of a life preserver.

"The PBGC surplus is gone," says spokesman Jeffrey Speicher. "We have $25 billion in assets and $29 billion in liabilities, so we have a shortfall.

 

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"We had a very big year in 2002. We terminated or began the process of taking over three of the largest plans in our history -- LTV Steel, National Steel and Bethlehem Steel. We also took over Polaroid's plan, which was under-funded by about $400 million.

"We have enough assets to pay benefits for a number of years, although I can't say how many more years we can continue paying benefits. It's not a crisis now, but there are long-term financial problems that need to be addressed," Speicher says.

Individuals have virtually no say in the structure of a defined-benefit plan, which is why it's always smart to have a separate savings plan and participate in a 401(k) if it's available. But there are things employees can do to make sure they're not the last to know their full pension is in jeopardy.

How to stay informed
Employees must receive a copy of the summary of their pension plan when they become participants. It's called the summary plan description (SPD.) It tells when you begin to participate in the plan, when your benefits become vested, how service and benefits are calculated, when you will begin to receive payments and how to file for benefits.

The plan administrator is required to make the SPD available to plan participants within 90 days of the time they're covered under the plan or at any time upon request.

Companies that have 100 or more employees covered by a defined-benefit pension must file Form 5500, which is a detailed financial statement that, among other things, shows how the plan's investments have performed. Smaller companies can file the less-detailed version Form 5500-C/R.

The summary annual report (SAR) is a summary of the 5500. Your company must make it available to you each year. If your company files 5500 C/R, you should get the SAR about every three years.

Each year, you should also request, in writing, your individual benefit statement. It tells what benefits you have accrued and vested.

Some companies make employees ask for these pieces of information. Others, especially the biggest companies, are very good at keeping employees informed.

In addition, carefully read any additional pension notices you may receive, either by mail or at work.

For instance, all pensions covered by PBGC insurance pay premiums. Under-funded pensions pay an additional premium if they are less than 90 percent funded for two out of three years. If a company is paying the under-funded pension premium, it has to notify the participants.

Don't be shy about questioning the plan administrator, especially if recent developments at work have you concerned.

"If employees hear or see indications of cutbacks at the company, ask the plan administrator what that means for the benefit program. Participants have the right to go to the administrator and ask about the plan. If they don't get an answer, then they should contact us," says Della.

If you have a financial adviser, make sure he or she reviews your pension plan and gives you guidance.

"All of our clients go to their Human Resources department to constantly get updates on their plans, particularly as they near retirement," says Kresh.

"If your plan is unique and allows a lump sum withdrawal, and you have a feeling the firm is in jeopardy, taking advantage of that option is very important, rather than retire and then the company goes into bankruptcy."

Even if bankruptcy isn't an issue, perhaps your company is merging or being acquired and you're not sure what would happen to your pension. Independent professional advice may be warranted.

Kresh recently advised a 59-year-old client whose company is being acquired to take his pension in a lump sum and retire early.

"There has been no specific guarantee that what I have now would follow me to the new company," says the client, who prefers to remain unidentified.

"A job with the new company isn't guaranteed. I'd have to re-interview with the new company. If I leave now I have the option of a lump sum. I'm not in the position to let anything out of my grubby fingers. It's my money; I earned it.

"Federal law says your pension is guaranteed, but it's not the whole thing. What they pay is just a fraction of my pension."

The Department of Labor has a wealth of pension information on its Web site. Its publication, " What You Should Know About Your Pension Rights," has information on defined benefit and defined contribution plans.

If you want to speak directly with someone at the Employee Benefits Security Administration division of the DOL about your pension, call (866) 444-3272.

Or, check for a DOL field office in your area.

Those offices will also be able to help you get written copies of your pension's summary plan description, summary annual report or a copy of Form 5500 if you're unable to get them from your plan administrator.