The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing


Subject:  Re: Pensions Date:  3/16/2011  7:16 PM
Author:  NarnCeredir Number:  68652 of 104361

Are you sure about this? I have NEVER heard of govt employee mandated pension (defined benefit plan) contributions to be after tax. This can happen electively in a defined contribution plan....but I can't imagine why the employer would require non-elective employee contributions to be after tax...and I can't imagine ERISA (dept of Labor) would allow it.

Absolutely sure. But the benefits are not taxed when they're paid upon retirement (so I suppose the closest comparison for tax purposes is a traditional IRA vs. a Roth IRA). And, of course, the employer contribution is made on a pre-tax basis. How about that! But the only reason I don't like this system is that my student loan repayment is based on my adjusted gross income, and post-tax pension contributions won't help reduce that at all. See question 8 below:

Nope...can't be done. ERISA has very strict vesting laws on employer contributions. What you've described was the pre 1974 ERISA cutesie game unscrupulous employers would play on unsuspecting employees, where all plan contributions would not vest until retirement age...and then the employer would fire them the year before this...which as you've described it is what could happen with this pension plan.

What you may mean is that if you leave the employer within a certain time period (up to 5 years under current rules), you would lose all employer contributions. This is a 5 year cliff vest...but your employer could also use a 3 to 7 year graded vesting schedule.

Yes, it absolutely can be (and is) done. Vesting in the WRS is automatic as of your first day of employment, but the only portion that an employee can take with them is their 5.8% contribution. If you do not leave the funds in your WRS account until age 55, the lowest age for retirement benefits, you forfeit the employer contribution. See:

-Narn Ceredir
Copyright 1996-2021 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us