When I'm attempting to place a client in a specific job they almost always have questions about pension plans. Since the recent Coronavirus hysteria I'd noticed that a lot of my Kaiser Permanente clients in particular have had questions about their pensions. So to try and help them out I did a deep dive and here's what I found.
Whether you're changing jobs or retiring from KP, knowing what to do with your hard-earned retirement savings can be difficult. An employer-sponsored plan, such as a Pension & 401(k), may make up the majority of your KP retirement savings, but how much do you really know about that plan and how it works? There are seemingly endless rules that vary from one retirement plan to the next, early out offers, interest rate impacts, age penalties, & complex tax impacts.
"Workers are far more likely to rely on their workplace defined contribution (DC) retirement plans as a source of income. 8 in 10 believe this will be a major or minor source of income in retirement. 3 in 4 expect income to come from their personal retirement savings or investments."
- Employee Benefit Research Institute
As of March 2018, 77% of full-time private-sector American workers had access to an employer retirement plan, but only 61% chose to participate. Regardless of what you choose to do with the funds from your employer retirement plan, you’re already ahead of 39% of all workers.(1)
Kaiser Permanente Pension Benefits Overview
Disclaimer: KP contains many different groups of employees that are provided with differing pension plan formulas and payout options. The following information pertains to KPEPP & TPMG.
KPEPP Eligibility
- Retirement Age: 55+
- Term of Employment: 15+ years
Age Penalty for Early Retirement: Withdrawing before age 65
Union Calculation - KPEPP
1.45% of Final Average Monthly Compensation (Last 10 years) X Years and partial years of Credited Service = Monthly Pension - Age Penalty
TPMG Pension Eligibility
- Retirement Age: 55+
- Term of Employment: 15+ years
- OR Age and Years of Service total 75+
Calculation for Physicians and Salaried Employees – TPMG Pension
Highest Average Compensation (Highest 5 year compensation of last 10 years) X 1.5% X Years and Months of Credited Service = Monthly Pension – Age Penalty
Pension Max
Strategy to maximize pension payout to self & survivor using life insurance:
- Employee must have good health
- An intended beneficiary
Benefits:
- Tax free payment benefit
- Flexible legacy strategies
- Maximum cash flow
Single Life Pension - Joint Life Pension = Spread
Use the "Spread" to buy low cost life insurance. In the event of an early death, your potential beneficiary will receive your life insurance payout instead of receiving continued benefits from Joint Life Pension.
Thinking about what to do with your pension is an important part of planning for your retirement at KP. What is best for you and your family?
If you are looking for more details about your benefits, reach us at TechStaffer.
If you are wanting to get a better understanding of your KP benefits, visit: https://techstaffer.blog/2020/02/28/a-deep-dive-in-kaiser-permanente-employee-benefits/
If you want to better understand the various stages of retirement, visit: https://techstaffer.blog/2020/01/16/the-various-stages-of-retirement/
Sources:
- The Retirement Group or www.theretirementgroup.com
- “Retirement Plans-Benefits & Savings.” U.S. Department of Labor, 2019, www.dol.gov/general/topic/retirement.
- “Generating Income That Will Last throughout Retirement.” Fidelity, 22 Jan. 2019, www.fidelity.com/viewpoints/retirement/income-that-can-last-lifetime.
- Kaiser Permanente Summary Plan Description, 2017
