Get the Right Pension
Half of pension calculations have errors, so make sure you get the amount you've earned.
June 2003
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You probably glance through your credit card and brokerage statements each month for mistakes. But few people give their pension that same degree of scrutiny, even though experts estimate that up to 50% of pension calculations contain errors.
Where the slip-ups creep in
Despite the best intentions of pension-plan administrators and the help of computers, mistakes happen. According to Steve Leventhal, a lawyer in Bend, Ore., who specializes in employee benefits and retirement planning, the errors range from data-entry keying blunders to misinterpretation of complex pension laws.
The Department of Labor gathers data on pension-calculation gaffes. The most common flubs are:
Errors of omission. Not all relevant compensation, such as commissions and overtime (if these are required to be included), was used to determine your benefit.
Using an incorrect formula. For example, your benefit was calculated using the wrong interest rate.
Sloppy record-keeping. If your company merged with another or went out of business, your pension plan might overlook contributions you made.
Mistakes also occur when companies switch employees from traditional pension plans to cash-balance accounts, says Allen Engerman, who runs the National Center for Retirement Benefits (NCRB), a private pension-recovery firm in Northbrook, Ill.
Keep a file, and know your plan
Don't postpone paying attention to your pension benefit until retirement is only a few months away: It can take months to fix problems and address questions.
Engerman suggests setting up a file for all the relevant paperwork concerning your pension, including annual benefit statements and the plan's summary plan description (SPD), which sets out the terms and definitions and spells out how your pension will be computed. Keep all correspondence and notes from conversations with your plan administrator.
Begin giving your annual benefit statement more study at least five years before you retire. Most statements give estimates of what your benefit would be if you retired at the company's normal retirement age. If you believe you've found a mistake, go talk to the plan administrator.
Once you've set a retirement date and receive a pension amount from the plan, consider having the benefit reviewed by a lawyer or actuary who specializes in pensions, particularly if you had compensation from more than one source, your firm was merged or sold, or your plan was significantly changed at some point. If a professional you hire finds an error in your favor, you must file an appeal to the plan. An appeal can take anywhere from three months to a year and a half.
Where to find expert help
Pension law is so complex and convoluted that it's impossible for laypersons to keep up with changes in the law and interpret company policy, much less accurately compute their own pension. But help is available from these professionals and organizations:
- The Employee Benefits Security Administration (formerly the Pension and Welfare Benefits Administration) can advise you on your pension rights. Visit the Web site, or call 866-444-3272.
- Pension actuaries charge either a flat fee or rates that can run $175 to $500 an hour, depending on the area. For actuaries near you, contact the American Society of Pension Actuaries (703-516-9300).
- Engerman's NCRB (800-666-1000; www.ncrb.com) will investigate and recalculate your pension. If it discovers an error and wins on appeal, you pay the firm 20% of the additional payment it recovers. For example, if you are entitled to receive an additional $50,000 in pension payments, the firm collects $10,000.
- For a lawyer with pension expertise, contact the National Pension Lawyers Network (617-287-7332).
- Free pension advice is available to residents who live in New England. Contact the New England Pension Assistance Project (888-425-6067).