Friday, October 24, 2008

Protecting your money: Get your pension out of corporate hands; this retirement money also at risk in downturn from coming bankruptcies

If you no longer are employed by your company and/or are retired, you need to get your pension plan into your own hands and a more conservative investment strategy.

The current financial market downturn has reduced the nation's pension plans from being overfunded by 9 percent to underfunded by 8 percent. That's because these companies invest these monies primarily in the stock market for maximum return.

Any money they make above the needed obligation to retired employees can be used in other parts of company operations and profits.

A pension technically is a gift from the company. And a gift can be taken back because the company is the only one contributing to it. A pension plan should not be confused with a 401k plan which you contribute to for retirement. Companies used to only have pensions for retirees. Now 401ks are more prevalent.

If you retire or leave a company that has a pension, you have the right to remove the money from the company and get into your own hands ... if the pension fund plan is written to allow so.

Or you can leave it with the company and have its future compromised by the investment of those monies or the operation of the company in down economic times.


The company I used to work for, Gannett Co. Inc., never let us employees know how much money we had in our pensions or how much was regularly contributed. You can draw your conclusions why. So I got my pension out last summer along with that of my wife.

But when I tried to get my pension money out of The Daily Oklahoman, I was told plan rules did not allow for withdrawl until age 65. Gannett's rules did. The Oklahoman is owned by a private company; Gannett is a public one.

Contact your company and ask for a rollover of your pension money into an IRA account. You'll have to fill out paperwork and fax it back in.

A check for the money should NOT be made out to you but to the bank or financial company that will be creating the IRA that will hold your money. You don't get to withdrawl and spend it without severe tax penalty until you are 65. But you will have it in your hands to invest and protect as you choose.

There is fear of a number of large corporate bankruptcies in the ongoing downturn expected to last through 2010. Under Chapter 11 bankruptcy reorganization, companies have the power to negate, for instance, union agreements with employees covering wages and work conditions.

In a Chapter 7 liquidation of the company, pension holders would have to fight over remaining assets with other debtors. Some of those creditors may have a priority claim to the money over pension holders. That means you get what is left, which could be 20 cents on the dollar of what you should have gotten.

I've witnessed these tragic things in covering federal bankruptcy court for 10 years as a reporter during the oil bust in Oklahoma during the 1980s.


Some but not all pension funds are backed by the Pension Benefit Guaranty Corporation, a federally created entity. Companies pay insurance premiums to be under the plan and thus have to obey its rules protecting workers' plans in return for insurance securing pension payments.

PBGC, however, has an $11 billion deficit to pay off plans. That's not good for 44 million American workers. But if a participating company plans to terminate a plan, it must give beneficiaries 60-day notice so you can get your money. But if it files for bankruptcy, all guarantees are off. PBGC has to fight for all monies including pension fund assets with other creditors. A 100 percent return will not be possible.

So you should check with the company holding your pension to see if it has some protection by the PBGC. It counsels:

The easiest way is to ask your employer or plan administrator for a copy of the “Summary Plan Description,” or SPD. The SPD will state whether your plan is covered by the PBGC program.

Although PBGC insures most defined benefit plans, some are not covered. For example, plans offered by “professional service employers” (such as doctors and lawyers) with fewer than 26 employees, by church groups or by federal, state or local governments usually are not insured.

How can I find out if my pension plan is underfunded?

You have a legal right to obtain information about your plan’s funding by requesting the information in writing from your plan administrator.

Protecting your money is not getting easier. It takes a lot of work. But you'll feel a lot better after securing it in your hands and out of companies with other priorities besides your retirement and well-being.

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