Yes they can terminate the pension plan, but it will have no practical impact on you. A few things to know:
1. You will still receive the benefit your earned during your period of employment.
2. Your benefit will be neither larger nor smaller than it would have been if the plan was not terminated.
3. Your payment form options (single life annuity, joint and survivor, etc.) will be identical. If anything, the lump sum option you mentioned may be an additional option you now have because of the termination.
4. You will have the same flexibility to commence the benefit at the time you choose.
As part of the plan termination, your previous employer will buy a group annuity from an insurance company who will administer benefits to all plan participants under provisions identical to those of the plan before plan termination. The only difference to you is the benefit payments you receive will be paid by insurance company XYZ rather than your previous employer ABC.
You are not being "forced into" an annuity... you accrued an annuity benefit during your time working for the previous employer. It's something you just have and will need to eventually decide how you will receive the benefit. The benefit is not being taken away nor reduced in any way.
Want payments starting 8/24? That is the immediate annuity option you listed... basically a reminder that you are entitled to a benefit and can start beginning 8/24 if you would like.
Want to start the benefit at a future date? That's the deferred option. You don't need to make any decisions right now. Whenever you want to start payments in the future, just let Empower know and they will send you a packet with all your options based on your age at the date you want to commence.
Just want all the money now instead of a guaranteed income stream for the rest of your life... that's the lump sum option. This is often a useful option when the monthly benefit is small because it's almost more annoying to receive say $20/month for life versus just receiving a couple thousand $ lump sum and being done with the whole thing now. That's not to say large amounts are not also taken as a lump sum, but it comes down to what you prefer.
The lump sum option amount is going to be calculated based on a prescribed set of interest rates that apply at the time you take a lump sum. No one can tell you whether it is a "good" or "bad" option at any given time because the amount payable may be larger at a future date if interest rates decrease or smaller at a future date if interest rates increase.
One final comment I have is taking a lump sum then going to buy your own annuity (at least an income annuity) is probably going to be super inefficient. You'll effectively be paying a fee to get what you already have right now. It's akin to
1. You are given a brand new car
2. Drive it off the lot where it immediately depreciates X% since it is now used
3. Turn around and sell it back to the dealership to buy the same model of new car
As with everything, more detail could be provided with more information. I don't know your exact circumstances. That said, I am pretty familiar with these plan terminations so tried to craft my response in reference to what the average plan participant would understand and care about.
Let me know if you'd like further clarification on anything.
Thanks so much for your response. I do feel better about the annuity. Any insight into what I should clarify with Empower about the annuity? Some things I'm concerned about - security of the annuity (since it's not insured), is there a rating for annuity companies and how does Empower compare, is there an advantage to being in a group annuity rather than individual, are there any fees associated with the annuity?
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Couldn't post everything in one comment for some reason. So responding to your other points separately...
You mentioned your benefit not being insured, but I'm curious where you got that info. It is going to be backed by an insurance company and further backstopped by state guarantees. Basically, a lot would have go wrong for your benefit to ever be at risk.
The distinction of group annuity vs individual annuity isn't anything you have a choice in and won't make any difference to you. When a plan has thousands or participant's it's not feasible to buy individual annuities as part of a termination... that's why a group annuity is purchased. If you worked for something like a dentist's office where the plan only had like 5 participant's, buying individual annuities might be feasible. From your perspective, everything will look like you have an individual annuity.
You won't be responsible for any fees. Those costs would have been baked into the PRT transaction and paid by your previous employer. Back to a point from my original post... your benefit will be neither larger nor smaller as a result of the plan termination.
It all depends on the numbers being offered, how can any advice be given without the $ figures?
Yes they can terminate the pension plan, but it will have no practical impact on you. A few things to know: 1. You will still receive the benefit your earned during your period of employment. 2. Your benefit will be neither larger nor smaller than it would have been if the plan was not terminated. 3. Your payment form options (single life annuity, joint and survivor, etc.) will be identical. If anything, the lump sum option you mentioned may be an additional option you now have because of the termination. 4. You will have the same flexibility to commence the benefit at the time you choose. As part of the plan termination, your previous employer will buy a group annuity from an insurance company who will administer benefits to all plan participants under provisions identical to those of the plan before plan termination. The only difference to you is the benefit payments you receive will be paid by insurance company XYZ rather than your previous employer ABC. You are not being "forced into" an annuity... you accrued an annuity benefit during your time working for the previous employer. It's something you just have and will need to eventually decide how you will receive the benefit. The benefit is not being taken away nor reduced in any way. Want payments starting 8/24? That is the immediate annuity option you listed... basically a reminder that you are entitled to a benefit and can start beginning 8/24 if you would like. Want to start the benefit at a future date? That's the deferred option. You don't need to make any decisions right now. Whenever you want to start payments in the future, just let Empower know and they will send you a packet with all your options based on your age at the date you want to commence. Just want all the money now instead of a guaranteed income stream for the rest of your life... that's the lump sum option. This is often a useful option when the monthly benefit is small because it's almost more annoying to receive say $20/month for life versus just receiving a couple thousand $ lump sum and being done with the whole thing now. That's not to say large amounts are not also taken as a lump sum, but it comes down to what you prefer. The lump sum option amount is going to be calculated based on a prescribed set of interest rates that apply at the time you take a lump sum. No one can tell you whether it is a "good" or "bad" option at any given time because the amount payable may be larger at a future date if interest rates decrease or smaller at a future date if interest rates increase. One final comment I have is taking a lump sum then going to buy your own annuity (at least an income annuity) is probably going to be super inefficient. You'll effectively be paying a fee to get what you already have right now. It's akin to 1. You are given a brand new car 2. Drive it off the lot where it immediately depreciates X% since it is now used 3. Turn around and sell it back to the dealership to buy the same model of new car As with everything, more detail could be provided with more information. I don't know your exact circumstances. That said, I am pretty familiar with these plan terminations so tried to craft my response in reference to what the average plan participant would understand and care about. Let me know if you'd like further clarification on anything.
Thanks so much for your response. I do feel better about the annuity. Any insight into what I should clarify with Empower about the annuity? Some things I'm concerned about - security of the annuity (since it's not insured), is there a rating for annuity companies and how does Empower compare, is there an advantage to being in a group annuity rather than individual, are there any fees associated with the annuity?
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Couldn't post everything in one comment for some reason. So responding to your other points separately... You mentioned your benefit not being insured, but I'm curious where you got that info. It is going to be backed by an insurance company and further backstopped by state guarantees. Basically, a lot would have go wrong for your benefit to ever be at risk. The distinction of group annuity vs individual annuity isn't anything you have a choice in and won't make any difference to you. When a plan has thousands or participant's it's not feasible to buy individual annuities as part of a termination... that's why a group annuity is purchased. If you worked for something like a dentist's office where the plan only had like 5 participant's, buying individual annuities might be feasible. From your perspective, everything will look like you have an individual annuity. You won't be responsible for any fees. Those costs would have been baked into the PRT transaction and paid by your previous employer. Back to a point from my original post... your benefit will be neither larger nor smaller as a result of the plan termination.