Pension question

[suesinfl]

Without giving out too much information, I need some help. This is very long and convoluted, sorry.

I am enrolled in a pension plan with one entity, but work for another entity. In 1999 the entity that I now work for took the department over from the first entity. Several of us were offered to stay with the first entity’s pension plan or we could start fresh with the entity that took us over. Those of use that were vested choose to stay with the first pension plan sense the agreement was that the second entity would pay the first entity the contributions to the pension plan for us. (confused yet?)


I now have 21 years in the first pension plan. The first entity’s actuary tells the second entity what the contributions need to be. Since 2012 the second entity has been required to pay 80% of my salary to the pension. This year and for several years to come that percentage has risen to 100% of my salary.


The kicker is that the first entity only calculates the monthly payment for retirement at current salary for the last three years, times the number of years, times a rate of 2.55%. So the amount that second entity pays had nothing to do with my monthly amount, just how long I would be able to receive the payments over my life time. I don’t believe that I will live longer than mid-70s based on family history. (Confused even more?)

There is a lot of pressure to eliminate my position, because they can either save the money or hire two people for what they are paying me and the contributions. From a business stand point,

I totally understand their position.

So, should I stop the quit the first entity’s pension plan and pick up the second entity’s pension plan even though the vested time is 8 years? I’m 52 and don’t plan on retiring until 65-67.

[nittanycheme]

The formula for your old pension is pretty generous.  Would your new entity credit your other time served against your pension, or do need to be in the pension 8 years to be vested?  It sounds as though you've already been working at the second place for at least 5 years.

Assuming that your salary was $75,000 for the last 3 years (I assume that they average your salary over 3 years) x 21 x 0.0255 = $40162.    Every year you work at that salary you add another approx $1913 (75000 x 0.0255) to your annual pension (again, assuming you make $75K and it doesn't ever change).  How much would switching over to your new entities's pension plan earn you per year?  How much better are the odds that you can keep your job for another 13 to 15 years if you switch to their pension vs. staying in the old one?  Is it worth the difference in the $$ between the old pension and new one?  You probably will need to do the math, and make a call on those odds for yourself. 

And, I thought that if a pension plan had cliff vesting, you had to be vested after 5 years, and if they used phased vesting they could drag it out to 7 years.  You may want to follow up on that vesting schedule to make sure its accurate.  That would likely play into your decision if you can be vested (even partially) at an earlier time.

[suesinfl]

Apr 27, 2017 20:35:08 GMT -5 nittanycheme said:

The formula for your old pension is pretty generous.  Would your new entity credit your other time served against your pension, or do need to be in the pension 8 years to be vested?  It sounds as though you've already been working at the second place for at least 5 years.

Assuming that your salary was $75,000 for the last 3 years (I assume that they average your salary over 3 years) x 21 x 0.0255 = $40162.    Every year you work at that salary you add another approx $1913 (75000 x 0.0255) to your annual pension (again, assuming you make $75K and it doesn't ever change).  How much would switching over to your new entities's pension plan earn you per year?  How much better are the odds that you can keep your job for another 13 to 15 years if you switch to their pension vs. staying in the old one?  Is it worth the difference in the $$ between the old pension and new one?  You probably will need to do the math, and make a call on those odds for yourself. 

And, I thought that if a pension plan had cliff vesting, you had to be vested after 5 years, and if they used phased vesting they could drag it out to 7 years.  You may want to follow up on that vesting schedule to make sure its accurate.  That would likely play into your decision if you can be vested (even partially) at an earlier time.

Thank you! You've given me some place/questions to start. I'll run the numbers and other information this weekend. I'm not sure what "cliff vesting" is, but will be researching that also.

The second entity that I now work for has a state pension, the first entity who my pension is a city plan. I "think" that I may be able to shorten the vesting time with the state, but it would be at a cost to me. I need to check into that more.

[nittanycheme]

Cliff vesting means you get vested 100% all at once and you get nothing before that time; the other type is called something else that I don't remember, but you get gradually vested over time, say 0% after year 1, 20% after year 2, 40% at year 3, etc., until you build up to 100%.   The cliff vesting name is just a lot more memorable of a name to me since I can imagine it better. 

I hope your new place has a formula that is as easy to understand as your old one.  My old company had a straightforward pension - you got 1.75% of your salary each year you participated.  My new company has some crazy formula but there's a computer model that spits out a "your pension will be worth $$$ at your full retirement age" that I am hoping is correct.

[Deleted]

I thought the post was about the possibility of getting fired if you didn't switch to Company B's pension plan because they were having to pay too much because you were grandfathered into Company A's.

I would want to know if I could still collect from A and then B.  Then decide if you are willing to work for B long enough to collect their pension.  If not, hang in there while looking.  

[gs11rmb]

Is it legal to fire someone just so they company doesn't have to pay the required contributions?

[resolution]

Most states are "at will" states where people can be fired for any reason, as long as its not due to membership in a protected class. I think maybe Montana isn't an at will state, but it seems like the odds of her living there are quite low.

[gs11rmb]

I would recommend the OP puts in a call to the EEOC just to check out what rights she has in this rather unusual circumstance.

[suesinfl]

Well, they wouldn't actually "fire" me unless there was a legit reason, but I have seen them eliminate positions. Then that person could apply for other positions within the organizations, but they are seldom hired.

[Deleted]

How is the job market in your area?  It sounds pretty certain that if you don't go with Entity 2 or an outside company your job will go away but you're already vested in Entity #1's pension. 

From there, you need to weigh what you might have at the end of your career at Entity #2 and also factor in your chances of staying that long, and weigh it against what you might get elsewhere.  Lots of uncertainty but you're sitting pretty since you're already vested in what looks like a generous pension from Entity #1.

And I agree with checking with the EEOC.

[suesinfl]

Thank you everyone! I've done some thinking and talking with a person I trust and who is aware of this type of situation and I will be running the numbers (which really don't matter at this point since I'll never see the money), this weekend. I'm 99% sure that I will be switching to entity #2's pension.

It's a state pension and will give me more opportunities to seek employment elsewhere, if I so choose.

[dee27]

Apr 28, 2017 20:20:54 GMT -5 suesinfl said:

Thank you everyone! I've done some thinking and talking with a person I trust and who is aware of this type of situation and I will be running the numbers (which really don't matter at this point since I'll never see the money), this weekend. I'm 99% sure that I will be switching to entity #2's pension.

It's a state pension and will give me more opportunities to seek employment elsewhere, if I so choose.

Do you still get credit for the first pension if you switch to the second one?

[suesinfl]

Yes, I will still be able to receive the average of my last 3 years times the years of service (21 years) times the % that is set. So I will have a retirement payment because I am vested.