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Getting What a Pension Plan Owes You

When you leave a job and have been covered by a pension plan, your employer owes you money.

Sometimes it's paid right away, in cash. Sometimes it stays in the pension fund, to be paid when you reach age 65.

Either way, you depend entirely on the company's calculations. It tells you how much money you have, which you take on faith. But that faith may be misplaced. Pension plans are complicated, and the company might have made a mistake.

For example, take Alain Tasse, 35, a chief building engineer in Lake Forest, Calif. During most of the 1980s, he worked for telecommunications giant GTE Corp. But when he cashed out of its pension plan, he got just $1,827.

Then he heard about the National Center for Retirement Benefits (NCRB) in Northbrook, Ill., which double-checks payouts from pension plans, and got in touch. An actuary for the NCRB discovered that GTE had indeed figured his payout wrong. The extra money he was owed amounted to almost $5,000.

At first, GTE's benefits department rejected Tasse's claim. Now, however, GTE says a different department already had spotted the mistake and was working on a repayment plan. Letters went out late last month to all the affected employees: about 7,000 of them, mostly people who left their jobs since 1987 with cash payouts of $3,500 or less. They're owed around $18 million, including interest on the unpaid funds, says J. Randall MacDonald, a GTE senior vice president.

The error, by the way, was an outdated, incorrect interest rate table, used to calculate the amount of money owed. That standard table changed in 1987, but a number of companies -- GTE among them -- overlooked it. J. Patrick Byrnes, president of Actuarial Consultants in Torrance, Calif., says he has seen the same mistake in several smaller pension plans. It mainly affects younger employees earning modest amounts of money -- in other words, those who can least afford to have their pension plans shortchanged.

That's only one of dozens of mistakes that today's complex pension laws can cause. Actuaries believe that a majority of pension payouts are correct -- especially in traditional pension plans, where, by law, there must be an outside auditor. An unlucky few are shortchanged deliberately, through fraud. But most underpayments (and overpayments, too) amount to honest errors, resulting from ever-changing pension rules.

The highest error rate is probably in company-run 401(k) and profit-sharing plans, Byrnes said.

There, your payout might be figured by a payroll clerk who isn't up to speed on the plan's finer points.

Other employee benefits also might be wrong, sometimes through misinterpretations of law. Take Denise Wassenaar of Reston, whose husband, Richard, was the top law enforcement officer for the Internal Revenue Service. He died nine years ago, and Wassenaar received the usual federal survivor's benefit.

Through research, however, she learned that the law called for higher payments to the survivors of certain federal law enforcement officers and firefighters. The government rejected her claim, so she went to attorney Edith Fierst of Fierst & Moss in Washington. Fierst won the case last year.

Wassenaar, now 49, picked up $40,000 in back benefits and an extra $600 a month.

Unlike GTE, the government hasn't notified other widows and widowers it shortchanged. "We have no remote idea who they are," says a spokesperson for the federal Office of Personnel Management. Fierst is suing to get everyone paid.

Three yellow flags should warn you that something might be wrong with the way your company figured your pension account: (1) your retirement plan payout is inexplicably less than your colleagues got; (2) the money seems low for the number of years you worked; or (3) your company merged or got a new pension plan administrator -- often the start of a royal muck-up.

The NCRB (1-800-666-1000) charges nothing to check your pension payout but takes 50 percent of any money it recovers (25 percent or less if you had no pension and NCRB secures you one). This firm doesn't handle any union or government plans. If you want to sue, the Pension Rights Center (202-296-3776) will send you the names of pension lawyers. They typically charge one-third of the money you recover, plus expenses.

Don't delay if you suspect you've been underpaid. You don't want a statute of limitations to cut off your claim.