Pension Tag

https://www.kielichlawfirm.com > Posts tagged "Pension"

Why is there a 10% early withdrawal penalty to cash out a 401k?

Before becoming an employment attorney I worked for one of the largest (maybe the largest) provider of 401k services. We provided various investment, customer service and recordkeeping services for 401k plans. Most people who call for information about their 401k plans will end up talking to my former employer or one of their competitors. Most 401k plan administration responsibilities outsourced to financial institutions that provide the infrastructure and staffing with expertise in plan issues. A common issue for 401k participants is: why is there a 10% early withdrawal penalty to cash out my 401k? A large number of calls about 401k...

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Employers struggling to win pension overpayment cases against retirees

The late 2000s and early 2010s saw a growth in litigation over 401k fees by employee-side ERISA attorneys. These often attacked large employers and major plan recordkeepers who profit from the kickback scheme known as revenue sharing. We're still not done with that wave of litigation but we're seeing a similar rise in litigation for pension overpayments. In these lawsuits employers pursue retirees for allegedly overpaid pension benefits based. The overpayments often arise due to shoddy recordkeeping, payment systems and benefit calculations. (Once again richly paid recordkeepers like Fidelity Investments and AONHewitt find themselves caught up in the plan administrator's problems.) Plan...

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Dissecting fact and fiction from a recent report on retirement savings

As somebody who spent a decade working in employee benefits and now practices employee benefits law, I have an understanding of the employee benefits industry. When I saw WFAA in Dallas covering a report about retirement savings I couldn't pass up the opportunity to fact-check. Predictably, the piece mixes a little truth with a lot of scare tactics and misdirection. (You can read the WFAA story here.) Let's get right into the thick of it. The first thing we should note is who conducted the study involved in this news story. The study comes from the Employee Benefits Research Institute (EBRI). Although...

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It’s your pension. Who is your financial adviser helping?

This week I fielded a question from a soon-to-be-retiree regarding her pension that I thought was worth sharing. Her employer offers a defined benefit pension plan, which she is fortunate enough to receive. Her employer's pension plan offers the opportunity to receive benefits in the form of a single lump sum payment or various annuity payments that would pay out a fixed payment each month for the rest of her life and, if she chooses, for her husband's life. This lady wisely decided to seek out professional guidance and which payment option would best meet her financial plans. Several years ago...

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Can my employer change the 401k plan or make an exception for me?

Generally, no. The federal regulations that govern 401k plans require that 401k plans do not discriminate against employees. Plans must have uniform rules and the rules must apply in a uniform manner. For example, if your plan permits hardship withdrawals it must establish specific rules for those distributions. Plans can establish some variances in rules across different business units, but once the rules become effective they cannot change without amending the entire plan. In order to make an exception or change the rules, the plan has change for everybody. Even when a 401k plan desires to make a change, changes often require amending...

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Should I be concerned about 401k fees?

401k fees have come into focus as one of many ways the financial services industry leeches money from the investors. That focus turned into litigation by participants against their plans (and plan service providers). Eventually the Department of Labor instituted fee disclosure rules that require plan service providers to break down fees charged to the plan and participants. Although most of the litigation has been unsuccessful in recovering awards for participants, the fee disclosure rules did force the financial service industry to better expose the relationships between the plan, participants, investments and fees. That way the plan can assess the fees paid...

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Retirement Plan Participant Disclosures

By now you received fee disclosure statements on your 401k, ESOP, 403(b) and profit sharing plans. These fee disclosure statements, known as 404a5 Participant Disclosures, ensure these retirement plans provide plan participants with a minimum amount of information about the fees charged by plan investments and fees paid by the plan (often from those investment fees) to companies that provide services to the plan, such as auditing, accounting and investment management. These disclosures provide participants with information necessary to adequately assess the investment options within your plan. Why these retirement plan disclosures began In the 1990s mutual fund and insurance companies realized the...

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What is the difference between a 401k plan and a deferred compensation plan?

Generally, both plan formats defer compensation because the employee has elected to defer taking cash in hand to obtain some additional benefit, such as deferring taxes on the money or investing on a tax deferred basis. Under more specific legal definitions, there is a distinction between how these different plans work. Today's post will discuss some of the key differences between these types of employer-sponsored retirement plans through the eyes of an employment law attorney. 401k plans and ERISA 401k plans are governed by the Employee Retirement Income Security Act (ERISA) along with other defined contributions plans like ESOPs. They must be available to...

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ERISA Retirement Plan Participant Disclosures

By now you received fee disclosure statements on your 401k, ESOP, 403(b) and profit sharing plans. These fee disclosure statements, known as 404a5 Participant Disclosures, ensure retirement plans provide participants with a minimum amount of information about the fees charged by plan investments and fees paid by the plan (often from those investment fees) to companies that provide services to the plan, such as auditing, accounting and investment management. These disclosures provide participants with information necessary to adequately assess the investment options within your plan. Confused about the disclosures? Talk to an employment lawyer near you. Why these 401k fee disclosures began In the...

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Benefits of staying in your 401k after you leave an employer

When employees leave employment, the common response is to want to sever ties and move on, especially if the employee left involuntarily or on bad terms. However, withdrawing or rolling over your 401k may not be the best decision in every case. There are important financial and legal considerations. Before making decisions about your 401k benefits you should consider talking to a financial adviser and lawyer near you to discuss financial and legal concerns. Financial Considerations for employees and retirees Many financial considerations can come into play in this decision. If you leave one employer to go to a next, you may...

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What is a KSOP?

KSOP is jargon used within the financial and employee benefit industries as shorthand to explain the arrangement where a 401k plan houses an ESOP of the employer’s stock as an investment option. An ESOP is an Employee Stock Ownership Plan that allows employees to purchase company stock through a retirement plan. It is an ERISA plan all on its own but also an investment option within a 401k plan along with the other common 401k investment options. A KSOP is an ESOP housed within a 401k plan. What is a KSOP retirement savings plan? KSOP structures became popular among employers as a...

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Why are retirement accounts so important in a divorce in Texas?

Retirement accounts are assets, just like bank accounts, cars, houses, boats, furniture and so forth. They tend to be community property (at least partially) so like all other marital property they require division among the parties. These property laws and the procedures to divide them can be complex. Working with a divorce attorney in Fort Worth or Dallas can be beneficial. Retirement plans in a Fort Worth divorce Often retirement accounts are the largest assets within a marriage, especially for older couples nearing retirement. Certainly if retirement accounts are not the largest assets, they are second to the homestead in all cases, since most...

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How are pensions calculated?

Defined benefit pension benefits are calculated in a variety of ways, depending on what formula your plan has adopted. ERISA requires defined benefit pension benefits expressed in the normal form of payment at the plan’s normal retirement age. (Often referred to as the accrued benefit.) This is normally a monthly annuity benefit paid out over the lifespan of the employee-participant. That does not necessarily mean the benefit must pay out either in that payment method or at that time. The benefit pays in the payment options at ages defined in the plan document and summary plan description. Even cash balance plans, typically expressed as...

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What is an Summary Plan Description?

SPD is a Summary Plan Description. It is the employee benefit plan documentation that must be provided to all participants and beneficiaries that explains the basic rules of the plan in layperson’s terms. It contains descriptions of the rules for eligibility, participation, vesting, benefit calculation, benefit availability and how to file a claim for benefits. An SPD can be an important tool to understand your 401k or other retirement plan. According to the Department of Labor: The summary plan description is an important document that tells participants what the plan provides and how it operates. It provides information on when an employee...

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What can I do to dispute my benefit plan?

You may have many reasons to dispute your benefit plan, such as 401k or pension. You may disagree with the facts used to calculate your benefits, the formula used to calculate your benefits, an investment option or distribution opportunity denied. ERISA lays out a specific set of rules that plans must follow. You must comply as required by ERISA before the next step occurs. You cannot simply hire a Texas employment attorney and sue the plan. Also, you have to give the plan administrator an opportunity to review the decision and confirm its accuracy. Assuming you inquired about the focus of your...

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How secure are my pension payments?

A common concern posed by pension participants is how secure those payments will be in the future. Given the economic turmoil in the past few years, it is certainly a worthwhile question. The good news is that the vast majority of retirement benefits are more secure than you might think. As a Dallas employment attorney experienced with pension issues I can tell you this is a legitimate concern for employees and retirees. Pension benefits are not an easily understood issue. Plan rules are complex. The benefit formula for a pension plan is just as complex. The legal issues around pensions and...

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Should You Take the Lump Sum or the Annuity Payments from Your Pension?

This highly important question tends to receive significantly less attention in today’s economy than it should. Many people see a lump sum as a way to either pay down debts or seed stock gains. This attitude is further fueled by financial advisors who need to bring in assets, like your pension lump sum and 401k, to generate revenue. (You are most likely paying fees through asset-based management or advisory fees or as the sales charges on your purchases.) As an employment attorney who once worked employer-side with pension plans, I have discussed this question with a large number of retirees. Pension payment elections...

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City of Fort Worth, Texas Continues to Struggle with Underfunded Pensions

Fort Worth hammered out a new contract for its police officers the city government continues to suffer under the ongoing problem of its underfunded pension plan for city employees. Fort Worth is not the only city with an underfunded pension on its books. This problem is widespread and even the Texas state pension plan for state employees is underfunded. The underfunded pension issue is not just a government employee problem. Studies of private defined benefit pension plans indicate private pensions typically only retain 81% funding and only 10% fully funded. The Fort Worth Retirement Fund maintains only 71% funding, 10%...

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