Your claim for pension benefits has been approved! A check came in the mail from your pension plan. You open it, look at the amount of your monthly benefit, and wonder how the dollar amount was calculated. You shrug and deposit the check, assuming the pension plan has correctly calculated what you are entitled to receive. But is it correct?
Although you may think calculating the amount of your monthly pension benefit is a simple matter of plugging some numbers into an equation based on the language in the pension plan, there are multiple ways a plan administrator can make an error when calculating the amount. According to the Department of Labor, the top ten most common errors made when calculating pension benefits are:
- The plan did not include all your relevant income when calculating the benefit amount. One of the variables used to calculate pension benefits is pre-retirement earnings. The higher your earnings were when you were working, the higher the amount of your pension benefit. However, if the pension plan mistakenly excludes some of your compensation – such as bonuses, commissions, or overtime – your benefit may be smaller than it should be.
- The plan incorrectly counted your years of service to the employer. Another variable used in calculating the amount of the pension benefit is the number of years you have worked for your employer. The more years you have worked, the higher the benefit amount. If your employer has miscalculated the number of years you have worked your benefit may be smaller than what you are entitled to receive.
- The plan used the wrong benefit formula. There may be multiple formulas in your pension plan used to calculate benefit amounts. The formula may vary depending on your start date with the employer or what your position was with the company. If the pension plan used the wrong formula, your benefit amount may be incorrect.
- The plan used the wrong social security data in calculating your benefits. If personal data from social security is used in your benefit calculation and that data is wrong, your benefit amount will also be wrong.
- The plan used incorrect personal information when determining your benefit amount. Your age at the time of retirement is often another factor in the equation used to calculate your benefit amount. If the plan administrator uses the wrong birthday, your age will also be incorrect, causing errors in the amount of benefits you will receive.
- Your company merged with another company or went out of business, and there is confusion about what pension benefits you qualify for. Any structural changes to your employer may cause confusion about how the pension plan works.
- Assets in your account were improperly valued. This commonly happens in defined contribution plans rather than defined benefit plans because in defined contribution plans you have an individual account and generally you can choose how your money is invested. Everyone’s accounts will look different depending on how they choose to invest their money. If there is an error in valuing the investments in your personal account, your account balance may be higher or lower than you expected based on your account statements.
- Your employer failed to make the required contributions on your behalf. In defined contribution plans, money is taken from your paycheck by the employer and placed in your retirement account. If the employer takes the money from your account but does not put it in your retirement account, logically your account balance will be lower than it should be.
This can also happen if your employer is required to make a “matching” contribution to your account from its own assets but does not do so. Your employer has a duty to you to make sure your contributions are properly placed in the correct account. In either scenario described above, the employer has breached that duty to you. You should consult with a lawyer who has experience with breach of fiduciary duty claims to see if the situation can be remedied.
- Basic mistakes were made in the mathematical calculations. Honest mistakes happen and calculations are only as good as the human being operating the calculator. Mathematical errors can occur and can cause your pension benefit to be incorrect.
- You failed to update your personnel office with changes. If you got married, divorced, or had other major life changes happen since you filled out your initial pension paperwork, the employer may not have the most current information to use in determining your benefit amount. Make sure when you have life changes you update any forms necessary, so your employer and pension plan have the most current personal information for you.
If you think your pension benefit has been calculated incorrectly or your employer has not made the required contributions to your retirement account, the attorneys at Kantor & Kantor can assist you. Please call for a free consultation or complete our online contact form.