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Oct 19 2009 12:00AM


How do I take control of my pension from my last job?


FPA member Christopher L. Fry, CFP®, ChFC, CRPC, of Ameriprise Financial, said the following: "The first step is to request a copy of the Summary Plan Document (SPD). This will give you the details about your pension plan and what your options are."

For his part, FPA member Keith M. Pelkey, CFP®, of Charles Schwab said, "The answer depends in part on what kind of pension you had in your last job."

If it's a defined benefit pension plan you have at least two questions to answer: How long did you work for the employer and are you vested in the plan? "If you are vested in the plan, then you should ask the plan administrator for a copy of your benefits statement," Pelkey said. "Further, you should ask about the eligibility of the plan assets to be "rolled over" to either an Individual Retirement Account (IRA) or to another qualified plan."

"If it's a defined contribution plan, such as a 401(k) or 403(b), you would, again, check with your plan administrator in regards to paperwork required to move the assets in your account to either another qualified plan or Rollover IRA," Pelkey said.

"If you decide to roll the assets in your plan to an IRA, you would first establish a Rollover IRA account," Pelkey said. "With this account information you would contact you prior employer's plan administrator or human resources department for the required paperwork/procedure to rollover/transfer the assets to the new account. Your prior employer's plan would then distribute the assets. Often the plan will send you the check but made payable to the new Custodian or sometimes they will send the check directly to the new custodian."

"If, by chance, you want to 'take control' of your pension plan assets by taking an outright distribution rather than moving them to either a qualified plan or an IRA Rollover, you may be facing some steep tax consequences," Pelkey said. "Though there are some mitigating situations, taking receipt of plan assets before normal retirement can lead to taxes and penalties that may eat up much of the balance if you are under age 59 ½."

In addition, Fry noted the importance of reviewing your options with a financial planner. "I would take the time to review the document with a professional and/or a tax adviser to make sure you are making the right decision," he said.

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