In the next month or so I will need to decide whether to take a pension as a lump sum versus a monthly payment. The monthly payment would be the equivalent of about 8.5%, which is about double the return of the lump sum if it was invested at relatively low risk (according to my financial advisor).

The problem is it looks like my former employer's pension fund is underfunded (see link), and being a "Church Plan", is not subject to ERISA regulation. The company has agreed to ERISA protection through 2022, but nothing is mentioned beyond that. I've contacted a local attorney for his take on the situation and have attempted to contact Cohen Milstein, the legal firm that handled the 2013 litigation but haven't had any feedback yet. I don't completely understand the implications. If the fund is depleted after 2022 would I lose everything?

My gut instinct is to take the money (lump sum) and run, but am trying to gather as much info as possible before making a lifelong decision.

Thanks

https://www.cohenmilstein.com/...urch-plan-litigation

quote:

Originally posted by NOCkid:
My gut instinct is to take the money (lump sum) and run

"Eight-point-five per-cent of nothing leaves nothing . . . "



Link to original video: https://www.youtube.com/watch?v=G_DV54ddNHE

Take the lump and run.

You'll control it, you'll invest it, and it will survive you.

Otherwise, they can "fold up", mismanage the funds, and the pension dies with you.

Andrew

Do not take the money and run WITHOUT checking out the tax consequences. See if you can TRANSFER the funds to another pension plan. If not Uncle Sam thanks you!

When you 'TAKE' your money and run you should actually be rolling over your funds into another retirement type account in your own name. Talk to Fidelity, Schwab, Vanguard, or one of the other investment retirement type businesses and they will lead you through the process to avoid giving your money to the tax monster too soon.

If I'm not mistaken an IRA of some type will be the result.

quote:

Originally posted by thezoltar:
When you 'TAKE' your money and run you should actually be rolling over your funds into another retirement type account in your own name. Talk to Fidelity, Schwab, Vanguard, or one of the other investment retirement type businesses and they will lead you through the process to avoid giving your money to the tax monster too soon.

If I'm not mistaken an IRA of some type will be the result.

Yes, talk to a financial advisor!! A "rollover" is what I did, there may be other tax free options. I was an Army civilian 33+ years and put lots into our 401K called the Thrift Savings Plan (TSP). I could have left it there when I retired, but I decided to do a roll over (100% of the account) into an IRA.

It was a traditional (not Roth) 401K, so we're now paying taxes when we make withdrawals from the IRA.

If I do take the lump sum it would definitely be rolled over into an IRA.

(And by "run", I mean "roll the lump sum into a retirement or investment account as recommended by your financial advisor". )

another vote for take the money and invest it yourself

Contact Vanguard.

I'm sure they could walk you through a transfer to an appropriate Vanguard low cost mutual fund. Something like the Vanguard Balanced Index Fund. Or a Target Date Fund. Basically something stable with low fees that could be a cornerstone of your retirement distributions.

Fidelity would work too.

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You always take the lump sum. You can get a better ROI investing yourself than any pension plan. I plan for 6-8% return. You can get 10+% with good growth stock mutual funds.

My father took the lump sum when offered and rolled it into an investment retirement account.

He figured if it was underfunded, he should take it now while he could before it just went away. It was a fair offer based on his age and "life expectancy"

since he was already at retirement age he had to take an annual distribution which was the only aspect that was taxable

Take the money and get out fast. All the advice here has been spot on. One of may friends got screwed in a church retirement plan and got nothing. At 62 he was working for me as a security guard.

what is a "church plan?". I have never heard that term.

Church operated health care systems do not have to comply with ERISA (Employee Retirement Income Security Act) Because of this our pensions are not protected by ERISA. The link in the original post explains it in greater depth.

NOC,

Are you a participant in the Ascension plans that are the subject of your link? If so, your question is compounded by the unresolved status of the allegation that Ascension improperly claimed exclusion as a church plan.

Notwithstanding, you haven’t specified the exact nature of the plan nor your upcoming distribution (ie retirement, employee termination, settlement from plan termination, etc.).

I think the “church” plan label can be overly broad and mostly relates to the exceptions afforded (for many good reasons) to churches. But there are still a large host of plan types that might be used by a given church. Take a look at the document in the below link which better describes the various types of plans.

For example, I normally don’t think of “underfunded” in the context of a defined contribution plan. A DC plan defines the “input” (say, an employer contribution equal to 5% of your annual salary) into a plan account maintained on your behalf. Those annual contributions, plus any salary deferrals that you elect, are contributed timely to your plan account. At any point, that account balance is fully funded and determinable. It is also portable if you terminate and go work for another employer.

By contrast, a defined benefit plan defines the “output” that you receive in retirement (example - an annual retirement benefit = 1% x your final average pay x # of years worked). Balancing tax and labor regulations, the employer makes minimum contributions into the plan. At any point, the plan is often underfunded, with an expectation that plan investment returns and future contributions will accumulate the needed balance to pay the plan benefits when due. Furthermore, a participant is unable to determine his current “balance” in the plan and it is not portable. Instead, he knows what he has earned as to years worked and his current average pay in relation to that defined benefit formula.

Those are the two basic types and there are hybrids that bridge / blend the characteristics.

That’s all I got from last night’s stay at Holiday Inn Express.

https://www.icemiller.com/Medi...ans-(w-002-8456).pdf

Thanks all, this pretty much confirms what I've been thinking. I appreciate your advice.

Plenty of pensions are going to be in trouble soon.

https://seekingalpha.com/artic...d&utm_content=link-0

My reasons for my earlier response was this:

For a DB plan, the promised future payout is determinable. Akin to a $1,000,000 lottery “payoff” which is really paid via 20 $50,000 annual installments. You’ve won (ie earned) the right to a future, specified annuity stream of payments. If you instead elect a lump-sum distribution, then you are arguing as to the appropriate discount rate to use for computing that present single sum. As the recipient, you argue (or hope) for a lower rate, which yields a higher PV. The payer, of course, argues for a higher discount rate.

For a DC plan, the current account balance represents what you’ve earned (accumulated). Such amount is the present value and would be the LS distribution. There really isn’t any guesswork or argument as to that present LS amount. (The guesswork instead relates to the magnitude & duration of a future income stream to be yielded from that current balance. But the employee always bears that investment risk for a DC plan.)

Thus, I think it’s helpful to determine if the original plan promised (defined) a present “input” or future “output”. Then you can better assess the latest proposal as to whether it impairs your original promise.

As stated above, roll it over. But talk to someone more knowledgeable about it than us.

I know in many roll-over situations, the money goes from one plan directly into another. THIS MEANS YOU CANNOT HAVE THE CHECK MADE OUT TO YOU, AND THEN PUT IT INTO ANOTHER PLAN! (Yes, shouting intended.) You cannot "touch" the money, it has to be rolled from one plan directly into another. If you do touch it, there will be serious tax consequences.

This may or may not be the case with your plan, I have no idea. I just know it *could* be the case, and *could* be an expensive mistake, regardless of intentions.