With all the changes taking place can anyone tell me if our pension can be affected. No one can tell me for sure if our leaders get creative can they mess with our pension. Can we lose our pension or is it legally protected. I plan to bail out in 6 months and I'm concern that my projected benefit won't be there. You ask if I'm paranoid? You bet I am!
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Hmmmm
The change in the severance plan may also impact RIGP. Under the old plan, which was a monthly payout for X months based on years of service, plan participants could not take out their RIGP balance (or 401K) until after the severance payouts ended. With the new, lump sum plan, that is no longer the case.
Look at the 2017 Annual Report https://www.xerox.com/annual-report-2017/pdfs/Xerox-2017-Annual-Report.pdf. Although Xerox made $500M contribution in 2017 the RGIP is still underfunded.
"Our financial condition and results of operations could be adversely affected by employee benefit - related funding requirements.
We sponsor several defined benefit pension and retiree-health benefit plans throughout the world. We are required to make contributions to these plans to comply with minimum funding requirements imposed by laws governing these employee benefit plans. Although most of our major defined benefit plans have been amended to freeze current benefits and eliminate benefit accruals for future service, the projected benefit obligations under these benefit plans is measured annually and at December 31, 2017 exceeded the value of the assets of those plans by approximately $1.4 billion. The current underfunded status of these plans is a significant factor in determining the ongoing future contributions we will be required to make to these plans. Accordingly, we expect to have additional funding requirements in future years and we may make additional, voluntary contributions to the plans. Depending on our cash position at the time, any such funding or contributions to our defined benefit plans could impact our operating flexibility and financial position, including adversely affecting our cash flow for the quarter in which such
funding or contributions are made. Weak economic conditions and related under-performance of asset markets could also lead to increases in our funding requirements."
The four key words in the entire FAQ are (For Benefit Restriction Purposes). We all know that benefits are restricted if the funding falls below 80%. I take those four words to mean that the RIGP is funded at 100% of the 80% benefit restriction threshold. A little wordsmithing there, which I would expect from the current leadership. It would take very little to fall under the 80% limit, they just tried to give you a false sense of security.
There's a FAQ on the HUB about the RIGP
Can Xerox eliminate my lump sum payment option?
No. Under ERISA and the Internal Revenue Code, Xerox cannot amend RIGP to eliminate your lump sum payment option.
If plan funding falls below a certain level, however, RIGP may be required to restrict lump sum payments.
What happens to the availability of lump sum payments if RIGP funding falls below certain levels?
Under the Pension Protection Act, if plan funding falls below certain levels (for benefit restriction purposes), RIGP must restrict lump sum payments until funding is restored.
If a participant takes a distribution when RIGP is funded:
• Between 60 – 80%, the participant can only take up to 50% of the benefit as a lump sum payment and must take the remaining benefit as an annuity payout under one of RIGP’s annuity payout options.
• Below 60%, none of the benefit is available as a lump sum payment and the participant must take the benefit as an annuity payout under one of RIGP’s annuity payout options.
What is RIGP’s current funding level?
As a result of the $613 million contribution made by Xerox in September 2017, RIGP’s funding level (for benefit restriction purposes) was in excess of 100% for RIGP’s plan year ending November 30, 2018. This funding level was certified by the plan’s actuary on August 30, 2018.
My understanding is that they cannot take away the lump sum option under federal law.
The rumor was the lump sum payout option was going to be taken away after October 1st. You will still get your pension but in the form of a monthly annuity. Once you kick the bucket, the annuity stops and there is no benefit to your "next of kin". With the lump sum, you could take the payout...die the next day...and the funds could be passed on. So, many 25+ year tenured employees have been electing to "retire" (earlier than they wanted to) so as to get the lump sum payment before that option is taken away. Again, just the rumor.
If you leave this year and take a lump sum, you will get about 5% more cash than if you wait til 2019, due to rising interest rates.