The Tale of the Lost Pension
October 02, 2012What should I call my husband’s ex-wife’s mother? My mother-ex-law? Or perhaps mother-in-law once removed?
Well, I’m not sure of what to call Eleanor, but she did call me this past weekend looking for financial guidance. This may seem like a strange relationship, but it’s developed over the years as I’ve been the hopefully not-to-wicked stepmom to her two grandsons. Most recently, I escorted Eleanor down the aisle of her oldest grandson’s wedding so she wouldn’t stumble after her recent stroke, following right behind my husband with his ex-wife on his arm.
Over the years, I have watched as Eleanor has struggled financially, and I learned that over the past few years she has had Social Security as her only income source. I questioned this recently when my stepson and I were talking about her recent medical bills. I knew from listening to stories about her past that she has spent several years working at the steel mill so why wasn’t she getting a pension from her old employer?
Although the mill had closed long ago, I had my stepson go to www.pbgc.gov and use their online tool for finding an unclaimed pension. Lo and behold, there it was – waiting all these years for her to claim a pension now worth $550 a month! Fast forward to this past weekend, and Eleanor needed my help to interpret all the paperwork needed to get her pension started. The sad thing is she could have started collecting this pension over 9 years ago at age 65, but she can now only request back payment to when she turned 70 1/2. But this is a lifesaver for her to be able to get both a lump sum for the past 3 years that is worth about $14,000 and the monthly check for the rest of her life.
So what had happened? Eleanor incorrectly assumed that since the mill had gone bankrupt, she had lost her retirement plan. Since she had moved several times over the years, she was not receiving any notification of her pension.
And Eleanor is not the only one: the Pension Benefit Guaranty Corporation (PBGC) reports that it is holding almost $197 million in unclaimed pension benefits for over 36,000 people owed money from terminated defined benefit pension plans formerly sponsored by private sector employers. Since 1996 about 37,000 people have found nearly $252 million in missing pension benefits through PBGC’s Pension Search program. For the more than 36,000 people still missing, individual benefits range from $1 up to $676,436 and average about $6,550. The states with the most missing pension participants and money to be claimed are: New York (7,215/$40.65 million), California (3,078/$7.82 million), Texas (2,496/$11.52 million), New Jersey (2,487/$14.22 million), Ohio (2,311/$15.56 million), Illinois (2,175/$16.78 million), and Pennsylvania (2,109/$11.32 million).
For your employees, this could mean additional retirement income if they are one of these missing participants. So how can you help? Make sure to include a discussion about previous employer-provided retirement plans as part of your typical retirement readiness workplace education. Whether it is helping an employee uncover an old pension or perhaps highlighting the benefits of consolidating previous 401(k) accounts into your existing plan, pre-retirees need all the help they can get in managing their retirement nest egg so they don’t overlook any of their hard-earned benefits.