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No. of Recommendations: 1

Several possibilities based on the info you've provided.
A bit of background.

There are three kinds of employer retirement plans:

1. Defined Contribution plan, where the employer and/or employee contribute to the plan over working years, and when the employee leaves, will usually transfer the plan's balance to their IRA. Her 401(k) is an example of this, and the 'pension plan' you mention MAY be a DCP.

2. Defined Benefit Plan, where the employee gets a life annuity (monthly payment) benefit based usually on the number of years worked, the average of the highest 3 years salary (this can vary) and some participation %, usually 1% to 2%. These three variables are usually multiplies together to figure the annual benefit, paid monthly. Sometimes employers will offer a 'cash-out' benefit that essentially converts the life annuity into a lump sum amount that may be transferred to the employee's IRA. Otherwise, the cash required to pay the life annuity remains with the employer.

3. A Deferred Compensation plan. This is made up of salary deferral over the years, but it is actually owned by the employer and so is subject to the employer's creditors if BK occurs. But these plans are usually restricted to executives at mid-level and higher in the corporation.

1 & 2 are ERISA plans, meaning they are fully protected in the event of employer BK. But there is a catch, and I'm fearful this is what may be going on with her. I have no idea what a 'Cash Advance Pension Plan' is as I've never heard that term before, and I used to work around these plans for several years. It sounds like an employer title. It could be a slight variant of a Cash Balance Plan which another poster already spoke to, but if so, it would behave just like a defined benefit plan at the plan's normal retirement age by providing a life annuity...or...may offer a cash out. But it may also be a Money Purchase Plan, particularly if this is an older company. If so, this is technically a 'pension' plan due to the mandatory annual contributions to it, but it functions as a DCP at separation and so is fully transferrable to an IRA. But here's the catch.....the plan may be or have been invested largely in company stock over the years under a special provision of ERISA allowing 'qualifying employer securities' to be largely or even entirely the investments held by the plan, as an exception to the diversification rules of ERISA. This happened with ENRON.

My approach would be to get firm with the TPA (Third Party Administrator), and threaten to go to the PBGC and file a complaint if your (her) questions are not answered. Here is what I'd ask...

1. Is a balance transferrable to her traditional IRA? If not, why not.
2. What is the plans normal retirement age (almost always 65). Does the plan pay a life benefit (annuity) at this age. If so, what is it (the unit benefit formula is what you'd want to know)

Worst case: the is a MPP or, worse, an ESOP, holding largely/completely company stock and its value has tanked. The TPA doesn't want to talk about it as they don't know what the plans value is. Let's hope that's not what it is.

Hopefully this is a Cash Balance Plan and the TPA is just footdraging on answering questions on benefit amount and start date. Some of my most frustrating experiences were working with TPAs who were paid as a % of the value of the plan's they oversaw, s they were incentivized to leave the account balances where they are for as long as possible to maximize their cut.

Post back with what you find

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