Tips for Keeping Track of Your Pension: Additional Detail
This page is a supplement to the Keeping Track of Your Pensions fact sheet.
Pension plans have a duty under the law to maintain records about the pension plan and the individuals entitled to benefits from the plan. Workers should keep back-up records of their own in case there are mistakes in the plan’s records or records are lost. Staying informed about your pension can help prevent a lot of problems as you move toward retirement.
To protect yourself, keep all relevant documents about your pension together in one place, sorted chronologically. The documents you should keep include your benefit statements, notices from the plan, and official plan documents (such as the Summary Plan Description) provided by each pension plan in which you participated.
You should also keep documentation of your work history including W-2 forms and pay stubs. If a company loses your work records, those W-2s and pay stubs will help verify your employment. If you don’t have your past W-2’s, you can request an earnings history from the Social Security Administration for a small fee. You should also keep old tax returns which can show whether or not you reported receiving a distribution from your pension plan.
When you become a participant in a pension plan, you should receive a copy of the pension plan’s Summary Plan Description (SPD). The SPD is a summary of the plan’s rules. It will tell you the requirements for earning benefits, how your pension will be calculated, and when you can receive payments. It also includes information about contacting the plan, obtaining the underlying plan document, and applying for benefits. This is an important document to save for your records.
You should keep periodic individual benefit statements, which provide individualized information about your benefits. Plan documents can be difficult to understand, so if you have questions about something you read in the SPD or your individual benefit statement, be sure to ask the person running your pension plan (the plan administrator).
If you have difficulties getting plan documents from your plan administrator, you should contact the U.S. Department of Labor’s Employee Benefits Security Administration (Toll Free: (866) 444-3272).
Read the Department of Labor’s (DOL) publication What You Should Know About Your Retirement Plan to find out more about plan rules. The DOL also provides answers to Frequently Asked Questions about Pension Plans and ERISA.
Pension plans are permitted to adopt features that may affect the amount of benefits. Make sure to read the plan carefully for rules that allow the plan to reduce your benefits by a portion of your Social Security, disability, or workers compensation payments. Also look for rules that allow certain plans to reduce or suspend benefits under other circumstances, such as:
- When the employer gets into financial trouble.
- If you go back to work for the same employer (or in a related field) after you start collecting benefits.
Employer-sponsored pensions are required to report their funding status to the government as well as to individuals entitled to benefits under the plan. The Form 5500 is the annual report that plans must file every year with the Department of Labor, IRS and Pension Benefit Guaranty Corporation. The form provides useful information about the plan, including the plan’s funding information.
You can determine your plan’s funding status from the Form 5500. Plans are also required to send periodic plan funding notices to individuals covered by the plan. In addition to the funding notice, you are entitled to ask your plan for its annual reports. You may obtain also obtain annual reports from the Department of Labor and www.freeERISA.com.
Most private retirement plans do not provide cost of living adjustments (COLAs), which are increases in benefits reflecting increased living expenses, but it is important to know whether your plan provides a COLA. If you will be relying on your pension for 20 years or more, the presence or absence of a COLA can affect your financial planning for retirement. The existence of this benefit may depend on whether your plan can afford to pay a COLA and how well funded your plan is.
Most plans will require you to work for a certain number of years before you vest in the benefit you have earned. A vested benefit is a benefit that cannot be forfeited even if you stop working for your employer. Before leaving an employer, make sure that you and the employer agree on your vesting status. If one has not already been provided to you in the previous 12-months, you can request your individual benefit statement, which will provide information on your earned benefits and vesting status.
If you leave employment before you retire, you should have a copy of the Summary Plan Description (SPD) in effect on your last day of work because your benefits will be determined according to the plan that was in effect on your last day. You can obtain the SPD by making a request in writing to your plan administrator.
Periodically, you should check for any significant corporate changes at companies where you earned a pension. Visiting a company’s web site can often reveal any recent changes. In particular, watch for company mergers, buyouts or bankruptcy. The easiest way to track an employer is through the employer identification number (EIN), which is a unique identifier that is registered with the Department of Labor and can be found on the plan’s Form 5500, and your old W-2 forms. If at retirement you are unable to locate your pension plan, the Pension Benefit Guaranty Corporation publication, Finding a Lost Pension, provides helpful information. Also see What Happens When a Plan Terminates.
Keep all pension plans -- past and current -- informed of any changes to your contact information, including changes in address, phone numbers, e-mail address, your name, and your marital status. You should send this information to the plan administrator or to the human resources department of your former employer.
As part of the pension application process, you may be asked to fill out additional forms that will ask you to choose how your pension should be paid. All traditional pension plans must offer annuities, which are lifetime monthly payments. If a worker is married, the plan must also offer a joint and survivor annuity, which allows pension benefits to be paid out over the lives of both the worker and the worker’s spouse.
If you are married, make sure that both you and your spouse understand the choices you are being asked to make. A common mistake occurs when spouses unknowingly sign away their legal right to choose to receive a lifetime survivor’s benefit if the worker dies.
There are other choices that you may be asked to make when you apply for your pension. Some can result in reduced payments. Common benefit options include early retirement, lump sums, and annuities that pay out over different periods of time. Choosing the form of benefit that is best for you depends upon what you (and your spouse) think you will need in retirement.
A traditional pension plan uses a formula to calculate your pension benefit. The Summary Plan Description should provide an explanation of the formula. You are entitled to receive an individual benefit statement from your plan, which will show your benefit as calculated by the plan.
If the benefit calculation provided by your plan is different from the amount you expected, you should contact the administrator and request an explanation of your benefit calculation. You can provide records of your work history to verify your earnings and length of service. See Record Keeping
If the company has calculated a benefit that is higher than the amount you are expecting, you should alert your plan and ask for a recalculation. If the plan determines at a future date that you received an overpayment on your pension benefit, the plan could reduce your benefit to collect past overpayments. Recoupment of overpaid pension benefits can pose a serious financial burden for retirees on a fixed income.
You may request a clear explanation from the plan in writing of how your benefit amount was determined (how many years of service are they crediting, how much in compensation do their records indicate) and check for inaccuracies. If you find proof of an error, you can appeal the calculation and provide copies of your evidence, such as W-2s showing past service credit.
Read about a recoupment case.
If your pension plan is terminating, it must provide you with a notice of intent to terminate at least 60 days before the termination date.
When a company terminates a traditional pension plan, the termination is reviewed by the Pension Benefit Guaranty Corporation (PBGC), the government agency that insures most pension plans.
If a terminating plan is fully funded, it will be required to purchase annuities for plan participants from an insurance company. If benefits are less than a certain amount, a one-time lump sum benefit (also known as a forced distribution) may be paid out to participants.
When a plan does not have sufficient funds to meet its benefit obligations, administration of the plan will be taken over by the PBGC. Knowing the fate of your terminated plan is important, because the PBGC insures benefits only up to a certain amount, and will not fully pay benefits that were increased within five years of the plan’s termination, went into effect. The PBGC also reduces pension payouts for employees younger than age 65, and will not pay lump sums and certain other benefits.
It is also important to know whether an insurance company or the PBGC is administering your terminated plan so that when the time comes, you will know where to apply for your retirement benefits. You can also visit the PBGC web site to search for terminated plans.
Looking for help with your retirement plan?
If you have a problem with your retirement plan, free help may be available from the U.S. Administration on Aging's network of Pension Counseling and Information Projects. Find help now.
PensionHelp America connects people who need help with their pension, 401(k), and other retirement plans with the pension counseling projects, legal services providers, and government agencies that can help answer their questions. Visit www.pensionhelp.org.
Retirement USA is a national initiative that is working for a new retirement system that, along with Social Security, will provide universal, secure, and adequate income for future retirees. Visit the website.
Did You Know?
In 2011, workers can contribute up to $16,500 to their 401(k) plans. Workers age 50 and older can contribute $22,000. Employers can match those contributions up to a total employer-employee limit of $49,000. Check out our helpful fact sheet to learn the contribution limits for other retirement plans. Read the fact sheet.