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Author: janicedowden One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19412  
Subject: Pension Plan Date: 7/3/2001 5:23 AM
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Getting ready to roll over my pension plan into an IRA. Checked the figures, though, and I think my lump-sum estimate is way off. They shorted me a month on my credited service, and I think they shorted me on my average monthly pay (based on last 3 yrs) several $100's.

Also, my ex-company is using the 1983 Group Annuity Mortality Table to determine how long I'll live. This is based on 1970's insurance companies' experience. Surely, there are more recent tables out there they should be using. This table shows that I (55 yr old female) should live another 30.28 yrs. But if it's based on 1970's mortalities, shouldn't that figure be even higher now? Or am I just wishful thinking - ha?

I have asked for complete detail about how they're doing the calculations, but just wonder how many folks don't even question the numbers. I'm an accountant - nuff said - and may be slightly anal retentive, but it does worry me.

ANyone else have a like experience or hints?
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Author: rjm1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7010 of 19412
Subject: Re: Pension Plan Date: 7/3/2001 9:13 AM
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Also, my ex-company is using the 1983 Group Annuity Mortality Table to determine how long I'll live. This is based on 1970's insurance companies' experience. Surely, there are more recent tables out there they should be using. This table shows that I (55 yr old female) should live another 30.28 yrs. But if it's based on 1970's mortalities, shouldn't that figure be even higher now? Or am I just wishful thinking - ha?



Their should be newer ones. If someone does not post a link try some insurance co sites. I think Northwestern Mutual may have a calqulator.

The bad thing about the table is that 50% die after the 30.28 years. You have to add a safty factor. If your family lives a long live maybe 10 years to the 30 for a total of 40.

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Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7011 of 19412
Subject: Re: Pension Plan Date: 7/3/2001 9:24 AM
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Also, my ex-company is using the 1983 Group Annuity Mortality Table to determine how long I'll live. This is based on 1970's insurance companies' experience. Surely, there are more recent tables out there they should be using. This table shows that I (55 yr old female) should live another 30.28 yrs. But if it's based on 1970's mortalities, shouldn't that figure be even higher now? Or am I just wishful thinking - ha?

We really can't help on being shorted on months of service or average pay. However, as it relates to mortality talbes you are in goood shape. The enrolled actuary for a pension plan must make a mortality table choice and then: 1) stick with that choice for a material amount of time; 2) apply that mortality table consistently for all lump sum distributions as well as other computations.

Further, unless you are member of a fairly large & unusual group with established & different mortality, the actuary will usually pick one of the 9 tables approved by the IRS; of which the 1983 GAM Table is one. Interestingly, of the 9 approved tables, the 1983 GAM yields the highest life expectancy for a 55 year old female. There could easily be more recent mortality tables but I am unaware of them.

Further, the interest rate assumption in a lump sum distribution is much more important than the mortality table used. You should ask what interest rate(s) are being used; they should be coming from the PBGC.

TheBadger






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Author: MDGrabhorn Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7021 of 19412
Subject: Re: Pension Plan Date: 7/4/2001 1:38 AM
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>>Their should be newer ones. If someone does not post a link try some insurance co sites. I think Northwestern Mutual may have a calqulator.

The bad thing about the table is that 50% die after the 30.28 years. You have to add a safty factor. If your family lives a long live maybe 10 years to the 30 for a total of 40. <<

Unfortunately, a plan is required to use the IRS approved tables under GATT. The 1983 table is correct. If nothing else, it beats the older tables plans used to use.

MDGrabhorn, CFP
www.pensionrecovery.com

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Author: MDGrabhorn Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7022 of 19412
Subject: Re: Pension Plan Date: 7/4/2001 1:42 AM
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>>We really can't help on being shorted on months of service or average pay. However, as it relates to mortality talbes you are in goood shape. The enrolled actuary for a pension plan must make a mortality table choice and then: 1) stick with that choice for a material amount of time; 2) apply that mortality table consistently for all lump sum distributions as well as other computations.

Further, unless you are member of a fairly large & unusual group with established & different mortality, the actuary will usually pick one of the 9 tables approved by the IRS; of which the 1983 GAM Table is one. Interestingly, of the 9 approved tables, the 1983 GAM yields the highest life expectancy for a 55 year old female. There could easily be more recent mortality tables but I am unaware of them.

Further, the interest rate assumption in a lump sum distribution is much more important than the mortality table used. You should ask what interest rate(s) are being used; they should be coming from the PBGC.<<

While the table being used may be correct, the interest rate now required for lump sum distributions is the 30 year Treasury Rate as published monthly. The PBGC monthly rate is no longer used after adoption of the GATT amendments.

MDGrabhorn, CFP
www.pensionrecovery.com

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Author: MDGrabhorn Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7023 of 19412
Subject: Re: Pension Plan Date: 7/4/2001 1:47 AM
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>>Getting ready to roll over my pension plan into an IRA. Checked the figures, though, and I think my lump-sum estimate is way off. They shorted me a month on my credited service, and I think they shorted me on my average monthly pay (based on last 3 yrs) several $100's.

Also, my ex-company is using the 1983 Group Annuity Mortality Table to determine how long I'll live. This is based on 1970's insurance companies' experience. Surely, there are more recent tables out there they should be using. This table shows that I (55 yr old female) should live another 30.28 yrs. But if it's based on 1970's mortalities, shouldn't that figure be even higher now? Or am I just wishful thinking - ha?

I have asked for complete detail about how they're doing the calculations, but just wonder how many folks don't even question the numbers. I'm an accountant - nuff said - and may be slightly anal retentive, but it does worry me.

ANyone else have a like experience or hints?<<

You are not alone in this feeling of being shortchanged. A 1993 audit by the PBGC found that almost 1 in 7 people are underpaid by their pension plan, and over half of those are underpaid over $1,000.

The mortality table should be right, but whether it has errors is another matter. Also, there are other issues which you have mentioned which can significantly affect your retirement benefit.

I have started a new board on Fool.com called Pension Benefit Mistakes. Please visit me there and I will try to answer more of your questions.

If you want your benefits reviewed for accuracy, you can also visit my website at www.pensionrecovery.com

Good luck to you.

MDGrabhorn, CFP
www.pensionrecovery.com

I would be happy to review your benefit calcs for accuracy.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7026 of 19412
Subject: Re: Pension Plan Date: 7/4/2001 7:45 AM
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MDGrabhorn writes,

If you want your benefits reviewed for accuracy, you can also visit my website at www.pensionrecovery.com

Good luck to you.

MDGrabhorn, CFP
www.pensionrecovery.com

I would be happy to review your benefit calcs for accuracy.


A quick visit to the pensionrecovery.com web site revealed that the fee for this service is 35% of any additional pension benefits you collect. It would likely be far cheaper to pay someone by the hour to make the calculation for you.

intercst

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Author: janicedowden One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7038 of 19412
Subject: Re: Pension Plan Date: 7/4/2001 7:40 PM
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MD Grabhorn, CFP, replied to my message re Pension benefits, providing a link to www.pensionrecovery.com, a service for professionally reviewing pension benefits. Thanks, MD - if I don't get comfortable with the numbers soon, I will contact them.

So far, I have found that my company shorted me one month of service - doesn't sound like much, does it? But it means at least another $700+ in lump-sum benefit. They have agreed to change that.

I also questioned the base pay they used (last 3 yrs), but they explained where some types of "bonuses" paid to me did not count in my earnings calculation. I'm not happy about it, but found it in the company "rules", so okay.

I'm now trying to find out why the lump-sum amount will only yield the expected monthly benefit for 25+ years instead of the 30+ years that 1983 GAM table shows for 55 yr old female. (FYI - I make great use of the calculators on www.ctbatlanta.com/calculators.html) Difference is in $9,000 range!

It's sad when you think about how many people probably never even question the figures. Will advise of my results. Thanks for all the replies.

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