Ask Terry Questions Company ending pension plan

Company ending pension plan

By Terry Savage on October 14, 2019 | Financial Planning / Retirement

Hi Terry,
My husband recently found out his company is ending the pension benefits at the end of the year. He has with his company 19 years. They gave the options of rolling it over into the 401K is company provides tax fee. The other options are getting a separate IRA or taking a lump some which will not be tax free. He is only 41. He will not know the exact figure until November although his supervisor said it will be very generous. We are just unsure of the best option. Originally we were automatically going to roll it into the 401K, however, we are a bit nervous about this as well. Any input on this would be appreciated. Thank you!

Terry Says

The company may be “generous” — but they are doing this to get out from under the obligation of making future contributions to the pension plan.  The best choice is to “roll it” into the 401(k) plan — but only if it is a “good” plan.  The question you should be asking before making this choice is a simple one:  What are the “all-in” costs of investing in either the large-company growth fund or the S&P 500 stock index fund that is offered inside the plan?

For sure, those two choices will indeed be offered inside the plan. And the company HR department MUST legally answer those questions BEFORE you make the choice.

If the answer is that the costs are 1 percentage point of more annually, then contact Fidelity at 1-800-FIDELITY and tell them you need help with a DIRECT ROLLOVER from a pension plan that is ending.  They will handle it so there are no taxes due.

Please write back if you have trouble getting the answer to that question and I’ll call the company HR department for you/with you.  One of my pet peeves is people have to make important, live-long decisions without the proper input!

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