Frequently Asked Questions about Your Cash Balance Plan Polaroid PBGC Case Number:196607
Q1: What happens to my Cash Balance benefit now that PBGC is trustee of my pension plan?
A1: PBGC uses plan assets and PBGC assets as necessary to make sure current and future retirees receive their pension benefit up to legal limits. PBGC pays benefits according to your plan's provisions, ERISA, and PBGC regulations and policies.
Your pension plan included a cash balance benefit.A cash balance pension formula looks like an "account balance" in your name; however, it is really just a way for your employer, and now PBGC, to describe your pension.
Before your plan ended, your account received two types of increases:
- a pay-related credit, and
- an interest credit.
The pay-relatedcredit was a percentage of your pay.
The interest credit is added to your account each quarter. Your plan specifies 1% + Â¼ of the 12 month average yield on the 1-year Treasury Securities as of August 31st from the previous year. This interest rate is subject to change each year.
Since the plan is no longer sponsored by your employer, there are no pay-related credits after 07/31/2002, the date your plan ended, but we will continue to add interest credits to your account until you begin receiving benefits.
Q2: What is an "Annuity Conversion Factor"?
A2: An Annuity Conversion Factor is a number that is used to convert your Account Balance to a monthly benefit. This number, based on interest and mortality rates, your age and form of benefit, is divided into your Account Balance. The result is your Cash Balance Monthly Benefit
Q3: Can PBGC determine the exact monthly benefit amount now?
A3: Whether PBGC can exactly determine your cash balance monthly benefit depends, in part, on when the cash balance rates that your plan requires are available.
Your monthly pension amount depends on how large your Account Balance is when you begin receiving monthly retirement benefits (see Q&A1). That Account Balance will have grown with interest from when the plan ended to when you begin receiving your benefits. Your plan specifies 1% + Â¼ of the 12 month average yield on the 1-year Treasury Securities as of August 31st from the previous year. Because we don't know future interest rates, we can only estimate what your Account Balance will be when you are ready to begin receiving benefits.
Your monthly pension amount is a result of dividing your Account Balance by an "Annuity Conversion Factor" (see Q&A2). Your plan specified that the Annuity Conversion Factor is to be based on an interest rate and mortality table prescribed by the IRS. Because we won't know the interest rate to use until you are ready to begin receiving benefits, we can only estimate what your Account Balance will be when you are ready to begin receiving your benefit. As a result, we can only calculate an estimate of your monthly pension benefit.
In addition, there are certain limits on the benefits that PBGC can legally pay. PBGC determines whether and the extent to which those limits affect your benefit when calculating your exact benefit.
Q4: What happens to my monthly benefit when interest rates change?
A4: If you are currently receiving a cash balance monthly benefit that was calculated with the rates your plan requires, fluctuating interest rates will have no affect on your benefit amount. Changes in cash balance rates only affect your monthly benefit before the cash balance rates your plan requires have been applied to your monthly benefit.
Your "estimated monthly cash balance benefit" may change if interest rates change. Lower interest rates generally produce a smaller Cash Balance Monthly Benefit and higher interest rates generally produce a larger Cash Balance Monthly Benefit.
Changes in the applicable cash balance rates that occur after your plan has ended only affect the amount of a cash balance benefit when paid as a monthly annuity.
Q5: When will you be able to determine my exact monthly benefit?
A5: We can calculate your exact monthly benefit, i.e., your monthly benefit with the cash balance rates your plan requires, as soon as these rates become available, usually shortly before you begin receiving a monthly benefit. If you begin receiving a monthly cash balance benefit before the applicable rates are available, PBGC may need adjust your benefit after the rates become available if our "estimated" rates differ from those your plan required.Q6: Can I get a lump sum payment from my cash balance pension plan?
A6: PBGC will pay a lump sum only if - as of the date the plan ended - either the value of the monthly benefit we will pay you OR your account balance is $5,000 or less.
The lump-sum amount will be the larger of
a) your account balance when your plan ended, and
b) the value of the monthly benefit you would receive from the plan.
The lump sum amount may be reduced, however, by the legal limitations on what PBGC may pay. If we pay you a lump sum and if your lump sum amount is greater than $5000, you must receive spousal consent to receive the lump-sum payment.
Q7: Can PBGC determine the exact amount of my lump sum now?
A7: Yes. Because lump sums depend only on the cash balance rates as of when your plan ended, changes in cash balance rates that occur after your plan ended will not change the amount of your lump sum. In other words, cash balance rates affecting the lump sum amount of your benefit are "fixed" as of the date your plan ended.
Shortly after you notify PBGC that you wish to start receiving your retirement benefit, we will send you another Benefit Update showing the calculation of your pension with the cash balance rates your plan requires. Upon request we will send you an Update at any time before you start receiving your PBGC benefits.