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Tracking benefits your responsibility.

The Pension Protection Act turned five years old in September. As companies rush to shore up pension--or cancel underfunded--plans, individuals need to protect themselves from common mistakes, cautions Rick Rodgers, author of The New Three-Legged Stool.. A Tax Efficient Approach to Retirement Planning. PPA was designed to close loopholes in the pension system; it addresses problems for the roughly 34,000,000 Americans covered by traditional pensions known as defined-benefit plans.

PPA requires pensions to be funded fully by 2015. It also prevents companies with big pension deficits from skipping annual contributions and still pronounce their plans healthy. Another major goal of the bill is to shore up the health of the Pension Benefit Guarantee Corporation. PBGC is an agency of the Federal government that insures private pension plans. Some 147 pension plans failed in 2010, which increased the PBGC deficit to $23,000,000,000. The agency assumes terminated plans and pays benefits to retirees up to a maximum of $54,000 if they retire at age 65 or later, Rodgers points out.

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One problem not addressed by PPA is pension miscalculations. Anytime you change jobs or take a lump-sum pension cash-out, you are at risk. Women especially are vulnerable to pension mistakes because they tend to move in and out of the workforce more often than men. For the most part, pension mix-ups are not intentional.

How would you know if there was an error that had been compounding for many years? How can you ensure that you will get what rightfully is yours when retirement arrives? It is up to you to keep track of your own pension. Know your rights and monitor your retirement plan before the "golden years" creep up on you, Rodgers emphasizes.

Educate yourself about how your plan works. Contact your company benefits officer and ask for a copy of the plan, not the summary plan description. In May, the Supreme Court ruled that you cannot depend on a summary, which is an abbreviated form of the plan. The Court held that, if there are discrepancies, the plan is the controlling document. You need a copy of the plan to determine how your pension is calculated.

More and more companies are freezing or terminating their pension plans, Rodgers confirms. Only 38% of Fortune 1000 companies offered a pension plan in 2010.That number is down from 59% in 2004. Of the companies with a plan, 35% of those were frozen and two percent were in the process of terminating it. You should request a personal statement of benefits immediately if this happens to your pension. The statement will tell you what your benefits are worth and how many years you have been in the plan. It even may include a projection of your monthly check.

Most of the time, companies do not intentionally fudge; sometimes the blame can be on simple errors. Here are some common pension mistakes to watch for: company forgot to include commission, overtime pay, or bonuses in determining your benefit level; your employer relied on incorrect Social Security information to calculate your benefits; somebody used the wrong benefit formula (i.e., an incorrect interest rate was plugged into the equation); calculations are wrong because you worked past age 65; you did not update your workplace personnel officer about important changes that would affect your benefits, such as marriage, divorce, or death of a spouse; the company neglected to include your total years of service; and your pension provider made a mathematical error.

How do you protect yourself? Rodgers suggests creating a pension file to store all of your documents from your employer. Also keep records of dates when you worked and your salary, since this type of data is used by your employer to calculate the value of your pension. Ask for professional help if you still think something might be wrong. The American Academy of Actuaries Pension Assistance List program offers up to four hours of free help from a volunteer. The Federal Administration on Aging's Pension Counseling and Information Program also may be of aid.
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Title Annotation:Pension Plans
Publication:USA Today (Magazine)
Geographic Code:1USA
Date:Dec 1, 2011
Words:680
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