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Author: BruceCM Big red star, 1000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76082  
Subject: Re: Remaining Pension to beneficiary ? Date: 11/8/2010 1:01 AM
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I am 55 years old and just received an estimate of my pension when I am 65.
Typically, with a private company defined benefit plan (DBP), your benefit is the result of a unit benefit formula which takes into account the number of years you have worked for the employer, some average of your salary and a participation %. A common unit benefit formula might be the average of your highest 3 years of compensation X the number of years you were employed at least half time X .01. Now, this may vary depending on how your plan is written, but if like most, this is something you should be able to figure out fairly easily.

I see that depending on the options i pick - if I live shorter then defined in the plan, my beneficiary will get the remaining payments OR from another company plan that I have - my beneficiary will get benefits for the remaining time he/she is alive after I die.

Well, maybe.

ERISA DBPs must default to a 50% Joint Survivorship Annuity to the surviving spouse, unless the SPOUSE chooses another option (usually 75% or 100% or 0%). But the recent Defense of Marriage Act has defined a 'spouse' as an opposite sex formally married to the employee. ERISA does not recognize domestic partners or any other strangers. However, state law may allow the plan to name a, usually, registered domestic partner as the beneficiary to a DBP or a Defined Contribution Plan.

As to selling your pension annuity...or part of it....as a structured settlement, my experience with these is the settlor will want the annuity payments transferred as soon as the court approves the sale, not at your death. The risk to the settlor is that you will die before your life expectancy and they will lose any remaining balance. And I believe the full amount of the structured settlement is ordinary income for that year. Like a reverse mortgage and payday loans, this is one way to generate cash...but its also a very expensive way.

BruceM
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