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31 March 2005 @ 10:30 am
Decisions, decisions - retirement plan choices  
They are giving us choices regarding our retirement plan at work – stay with the traditional plan or chose one of 2 alternatives.

Current

· Earn a benefit from the Employer Retirement Plan. This plan is a pension plan in which the monthly benefit is determined by your eligible compensation, years of service, and age at retirement.
· Be eligible to receive a Retiree Medical Subsidy that offers you, your spouse, and other covered dependents a subsidy based on your age, years of service, and the average cost of your medical coverage level when you retire.

Alternative 1

· Keep any benefit you earned under the Employer Retirement Plan as of April 30, 2005. This benefit will be “frozen” and Employer will pay it to you according to the rules of the plan. (If you were hired after April 30, 2004, you are not yet an active participant in the Employer Retirement Plan as of April 30, 2005. If you select this alternative, you will have no frozen benefit from this plan.)
· As of May 1, 2005, begin earning a benefit under the new Personal Pension Account. This is an account-based pension plan in which you earn 5% of your eligible compensation during each year of service, plus annual interest based on the current 10-year U.S. Treasury bond rate.
· As of May 1, 2005, also become eligible for the Retiree Medical Account for your use after you retire. This is an account-based retiree medical benefit paid by Employer in which you earn a $1,500 credit for each year of past and future service plus interest based on the current 10-year U.S. Treasury bond rate.

Alternative 2

· Keep the benefit you earned under the Employer Retirement Plan as of April 30, 2005. This benefit will be “frozen” and Employer will pay it to you according to the rules of the plan. (If you were hired after April 30, 2004, you are not yet an active participant in the Employer Retirement Plan as of April 30, 2005. If you select this alternative, you will have no frozen benefit from this plan.)
· As of May 1, 2005, begin earning a benefit under the new Personal Investment Account. This is an investment account within your Supplemental Retirement Plan (SRP) to which Employer contributes 5% of your eligible compensation each year and you choose how to invest it. Of the 5%, 4% is for retirement income and 1% is intended for retiree medical.
· As of May 1, 2005, also become eligible for Retiree Medical Coverage Access when you retire. It gives you access to retiree medical coverage at group rates. In addition to the 1% of your eligible compensation in your Personal Investment Account, you receive a credit of $1,500 per year of past service through April 30, 2005, plus interest based on the current 10-year U.S. Treasury bond rate.






































Comparison
  Current Alternative 1 Alternative 2
Retirement
Income
Employer Retirement Plan

Current pension plan in which the monthly benefit is determined by your eligible compensation, years of service, and age at retirement.
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Personal Pension Account

Account-based pension plan in which you earn 5% of your eligible compensation during each year of service, plus annual interest based on the current 10-year U.S. Treasury bond rate.
Personal Investment Account

Investment account within your Supplemental Retirement Plan (SRP) to which Employer contributes 5% of your eligible compensation each year and you choose how to invest it. Of the 5%, 4% is for retirement income and 1% is intended for retiree medical, but it may be used for any purpose upon distribution.

plus plus plus
Retiree
Medical
Retiree Medical Subsidy

Current subsidy that provides you, your spouse, and other covered dependents a subsidy based on your age, years of service, and average cost of your medical coverage level when you retire.
Retiree Medical Account

Account-based retiree medical paid by Employer.You receive a $1,500 credit for each year of past and future credited service. The credited amount earns interest based on the current 10-year U.S. Treasury bond rate.


Retiree Medical Coverage Access
Access to retiree medical coverage at group rates. In addition to the 1% of eligible compensation in your Personal Investment Account, you receive a credit of $1,500 per year of past credited service through April 30, 2005 only, plus interest based on the current 10-year U.S. Treasury bond rate.

Who Makes
Investment
Decisions
Employer

Employer directs investment of all the assets in the plan
Employer

Employer directs investment of all the assets in the plan.
Employee

As with the SRP plan, employee is responsible for investing the Personal Investment Account balance. Can select from the same fund choices as currently available through SRP plan.

Benefit upon
Termination
or Retirement
Not Portable

Full vested benefit payable when you turn age 65. Actuarially reduced vested benefit payable after age 55 with 10 years of service, or age 62.
Portable

Vested benefit is portable, so you can take it with you whenever you leave Employer.
Portable

Vested benefit is portable, so you can take it with you whenever you leave Employer.


How to
Recieve
Benefit
Retire

When you retire, you can choose to receive your benefit through one of a number of monthly payment options. If the present value of your benefit is $15,000 or less, your benefit may be paid in a lump sum.
Retire or Leave

When you leave the company, you can roll over your benefit or receive it in a lump sum. After you retire, you also can receive it in one of a number of monthly payment options. You will receive any frozen Employer Retirement Plan benefit amount separately per the current plan’s rules..
Retire or Leave

When you leave the company, you can roll over your benefit or receive it in a lump sum. You also can receive it in one of a number of installment options after age 55. You will receive any frozen Employer Retirement Plan benefit amount separately per the current plan’s rules..

Death
Benefit
Spouse Only

If you die before retirement, your spouse or documented domestic partner will receive a survivor benefit, which is 50% of your vested benefit amount. If you are single, the plan will pay no benefit.
Beneficiary

If you die before retirement, your spouse or documented domestic partner will receive a vested benefit from this account. If you are single, you may name anyone you wish as your beneficiary.
Beneficiary

Regardless of your marital status, the beneficiary you designate will receive your vested benefit from this account. However, your surviving spouse or documented domestic partner is your designated beneficiary unless he or she consents to another option..

Protection of
Retirement
or Income
Pension Benefit
Guaranty Corporation (PBGC).

Your retirement income benefit is insured by the Pension Benefit Guaranty Corporation (PBGC). If the plan ends without the resources to pay your benefit, the PBGC would pay you a guaranteed benefit amount within certain limits..
Pension Benefit
Guaranty Corporation (PBGC).

Your retirement income benefit is insured by the Pension Benefit Guaranty Corporation (PBGC). If the plan ends without the resources to pay your benefit, the PBGC would pay you a guaranteed benefit amount within certain limits..
Separate Funds

Your retirement income benefit is in a separate account in your SRP. The assets in the SRP are held in a trust that is separate from company resources. If Employer does not have the assets to continue funding the plan, you still have full right to your account balance.




Alternative two seems the best, as it holds the most value (based on conservative estimates) until age 55, where the value crosses over to the Employer Retirement Plan. But I cannot guarantee that I will retire from my current employer, so much better to have a portable retirement program. I also really like being able to control the investment of assets instead of relying on the company to do it.

Alternative 2 it is.

-the redhead-
 
 
 
Bill the bold bosthoonwcg on March 31st, 2005 07:01 pm (UTC)
What's the SRP Plan and what are the investment options available in it? I'm with you in thinking that there are probably better growth opportunities to be found than T-bonds, but I'm wondering what the other options actually are there.

I think that their estimate of 20% of your retirement fund being your medical coverage is unrealistic. But unless they're going to limit the amount of it that you can actually spend on medical expenses, I think it's just so much hot air on their part.
-the redhead-theredhead on April 1st, 2005 02:06 am (UTC)
The SRP plan is our current 401K (and match) program, so we are already familiar with the funds available there. We have the choice of 20+ different funds (stock, bond, balanced, short term, international, etc.) At this moment things aren't doing so well due to recent market activities, but last year I pulled a little over 10%.

-the redhead-
...being all practical and responsible and grown up and stuffs...
Bill the bold bosthoonwcg on April 1st, 2005 03:09 am (UTC)
OK, so you've got a good assortment to choose from, and not just three different S&P 500 funds, the company stock, and a bond fund. Excellent.
-the redhead-theredhead on April 1st, 2005 05:04 am (UTC)
Yes, we do have a range of choices.

I've been a bit frustrated over the last few weeks as the market has been down and my funds are not performing, but I think once the latest market corrections settle out it will bounce back and I will still get my performance. Actually I wouldn't be terribly distressed if the funds stayed depressed for a few more weeks, until after I get my 401K matching funds in the first couple weeks of May.

-the redhead-
-the redhead-theredhead on April 1st, 2005 02:07 am (UTC)
I'm still trying to figure out why LJ put in the giant space before my table - it's not there in my code.

-the redhead-