The Unexpected Risk of Pension Reductions in Retirement and Why A Financial Contingency Plan Is Key
Pension Reduction, Recalculation, and Recoupment in Retirement Is Real
Many retirees nationwide are learning they were overpaid by their pension plans and are being held liable for repayment. With the recent announcements this month of global pharma companies like AstraZeneca ending its U.S. workers' pension plan this year, and AbbVie closing its U.S. pension plan to new hires, I was compelled to share an AbbVie Retiree's pension experience:
"I've worked a lifetime to achieve retirement and earn a pension. Six years into retirement, I received a letter from AbbVie advising an error in my pension was discovered during a recent audit. I was informed that my pension is being recalculated, reduced, and a recoupment of the overpayment is needed. I now owe tens of thousands of dollars. I was given the option to repay in one lump sum, or in monthly deductions from my pension, or have my pension withheld until the overpayment is fully recouped. After months of calls with the pension plan service center and initiating a written appeal, my appeal was denied."
Retirees are impacted financially when their pensions are suddenly reduced, recalculated, and recouped by the companies they retired from.
If this has happened to you, you know what this feels like. Shock, frustration, anger.
It makes you think "How is this possible?" "How many other retirees are experiencing this?" and "What can I do about this?"
Expect the Unexpected In Retirement
Pension recoupments, recalculations, and reductions are happening with much more frequency than many of us are aware of. This can create financial hardship for retirees, and a long-lasting impact for what retirement looks like in the years ahead.
When we decide to retire, we take into consideration our financial ability to support ourselves and our families. We anticipate that our pensions will provide a guaranteed income for the duration of our lives.
But what, if the pension many retirees depend on as a primary source of income is suddenly and unexpectedly taken away?
I'm writing this blog not just to create awareness of this issue, but with the intention that you give thought to what could occur as you plan your retirement.
The Guarantee of A Pension Is At Risk
Given the complexity of the rules governing retirement plans, errors are common.
Most retirees are unaware that there are any calculation issues in their retirement pensions. Pension funds think they did things right, and retirees think they're getting the correct pension.
An audit is often the trigger that results in the discovery of an error in a pension calculation.
Retirees are blindsided by the shocking suddenness of this notification, and the realization that the safety net of a guaranteed income is gone. "Unfortunately, fewer people are retiring with a guaranteed pension, and even those who have one are at greater risk for losing their benefit" as shared by David Certner, legislative policy director at AARP. "The guarantees are becoming less and less secure."
A few words of guidance if you're preparing for retirement, or have already achieved retirement:
Have a financial contingency plan in place that can provide an alternative means of supplemental income besides your pension in case of unexpected life events.
And, if you experience the unplanned impact of a pension recoupment, recalculation, or reduction:
Ask to see the calculations showing how your new benefit amount was determined. Plan administrators miscalculated your payments before and they may be wrong again.
Refer to these articles and resources for additional insight and guidance if you're unclear about your situation:
AARP article "Can They Grab Your Pension?" The topic of "Is Your Pension At Risk of An Overpayment" shares how clawbacks become more common as plans discover they overpaid recipients.
The Pension Rights Center offers resources that provide information and legal assistance to understand and enforce pension rights, address questions and problems with retirement plans.
And, if you'd like confidential coaching guidance on a career or life challenge you're experiencing, reach out to talk with me about your needs.
About the Author:
Deborah Petropoulos, Executive Life Coach and Founder of One True You, LLC works with high-performing leaders in Global Pharmaceuticals and other industries who are experiencing mid-life challenges, workplace stress and burnout, considering a career change, or want to create a plan for retirement and what's next in life.
Professionals that choose One True You, LLC for their leadership and life coaching needs learn new ways to navigate their challenges, and find renewed satisfaction and fulfillment in their careers and lives.
Reserve a Complimentary Clarity Call if you’d like to talk with Deborah Petropoulos about a leadership or life challenge you’re currently faced with.