Pensions lost and (hopefully) found

Pensions lost and (hopefully) found

Imagine earning a pension after many years of hard work with a company. Then you leave your employer before retiring and without claiming your pension. When you reach retirement age, you expect to be able to start receiving that pension but you are unable to find the employer or the plan. Your pension plan is “lost”. This is an all-too-familiar scenario faced by clients of both the Pension Rights Center and the Pension Counseling and Information Program.

We are often contacted by people who need help finding a “lost” pension plan. While it may sound odd for a person to lose a pension plan, it is actually quite common. It can be difficult to find a plan from an old job, particularly if it has been many years since you worked for that employer. The employer might have merged with another company, changed its name or location, gone out of business, or simply chosen to terminate its plan – the focus of this blog entry.

A retiree can lose a pension plan when an employer with a fully-funded pension plan terminates the plan and purchases annuities from an insurance company to pay participants their pensions.  In a “standard termination” employers are required to give the Pension Benefit Guaranty Corporation (PBGC), the federal agency that insures most private pensions, the names of the annuity providers they propose to contract with. The employer then transfers the money in the pension plans to the insurance companies, along with lists of the participants who are entitled to receive pensions, and the amounts of their benefits. 

Problems arise in a number of different situations: when employers choose different insurance companies from those shown in their PBGC filings; when retirees are left off of the lists of participants entitled to receive pensions; and when the amounts paid to the retirees are different from the benefits they had been told they would receive. 

By contacting the PBGC, retirees are often able to track down the insurance company selected by their former employers to pay their benefits. But it is harder for them to establish that they were incorrectly omitted from the list of participants given to the annuity provider. The biggest problems retirees and their advocates face come in proving that the retiree is entitled to a pension, calculating the amounts of that pension, and proving that the retiree hasn’t already received a payout from the pension plans.  If a retiree cannot come up with the right documents, they are often out of luck – and without a pension.

Because these are such common problems for our clients, we were happy to learn that the PBGC is looking into ways to improve the standard termination process. By asking employers to provide certain information when terminating their plans, the PBGC could help reduce the number of people who are unable to find their pension plans and receive the benefits they have earned. 

In a letter to the PBGC, PRC’s Jane Smith and Henry Rose called on the agency to require plans to provide information that will help prevent people from losing their pensions.  The Center recommends that the PBGC require that single-employer plans undergoing standard terminations to provide final lists of:

1. All annuity providers with which the plan has contracted;
2. All participants entitled to an annuity from each of the annuity providers;
3. Any plans that have been merged into the terminating plan and copies of plan documents, including Summary Plan Descriptions, from those merged plans.

We hope PBGC adopts these recommendations to help ensure that people who have earned pensions can receive them.

Read the letter here.
Also see a fact sheet, Tips for Keeping Track of your Pension.
Read a PBGC booklet, Finding a Lost Pension