No matter what type of retirement savings you have, you likely want to know more about how they work and how much your benefit might be. That includes a defined benefit plan, also called a pension. Here are some answers to some of the most common defined benefit questions.
What is a defined benefit plan?
Most defined benefit plans are “employer sponsored,” meaning your workplace fully funds your enrollment in this retirement savings plan. When do you qualify for your defined benefit plan and how much might that benefit be?
When do I become eligible for my defined benefit plan?
That depends; every workplace has a different required time of service for you to become fully vested in the plan. Check with your HR department for details.
My workplace offers a defined benefit plan. Do I have to contribute to it?
Typically, no. Some may require an employee contribution, but most do not.
How do I know what my benefits are going to be?
On your defined benefit “anniversary,” your employer will update your tenure (i.e., number of years on the job) and salary. That’s when you’ll receive a defined benefit statement with estimated retirement-age benefits. Typically, the more years you work at an employer and the more you earn, the more your benefit may be.
If you have a pension that is serviced by 51ԹϺ®, you can find details about your plan on your individual dashboard. To access information:
- from any page on 51ԹϺ.com; look for the blue button on the upper right-hand corner.
- On the left-hand side of your dashboard, look for the “defined benefit” card; click on it.
- To find your summary plan description, click on “Overview” in the top menu, then scroll to “Plan information and forms.”
- To run an estimate of your benefits, click on “Estimate benefits” in the top menu, then scroll to “New estimate.”
I got a statement with expected benefits. Is that amount exact?
No; that’s just an estimate. You won’t receive an exact benefit amount until you have an exact retirement date.
One of my coworkers has a bigger projected benefit on his statement than I do. Why?
Every projected benefit is different; yours depends on your years of service and your salary. Your coworker’s does, too. Unless you both started on the exact same day with the same position and salary through the years, your statements and benefits won’t be the same.
Will I have to pay taxes once I start getting a payout from my defined benefit plan?
Yes; you haven’t paid any income tax on the savings in a defined benefit plan. Once you begin receiving payouts, you’ll have to report that benefit on your taxes and pay income tax.
My previous employer had a pension plan. Will I get a payout from them once I retire?
As long as you vested in their plan, yes. Just because you left a job doesn’t mean you left behind that benefit. (Ensure you keep your contact information up to date with that pension provider.) And, you can have multiple pensions—meaning, as long as you vest with a new company, you can receive another, different pension.
Can I roll over the vested amount I have in a pension plan into savings like an IRA or a 401(k)?
That depends on if it’s allowed by your plan. Make sure to consult a tax advisor so you understand the tax implications.
What are the payout options for a defined benefit plan?
Those vary based on the plan, and what you choose depends on your financial goals and your planned retirement. You have different options for your pension payout, too.
How do I find out what payout options I might have, like a survivor payout?
Every defined benefit plan is different, and available payout options depend on the plan. To confirm, contact your HR department or defined benefit plan provider.
I need to choose a beneficiary for my defined benefit payout. Can I name a child?
Generally no, but check what’s allowed by your plan. Survivor benefits are typically limited to someone who is closer to your age, such as a spouse, brother, or sister. If a plan does allow younger beneficiaries, it may limit the survivorship benefit to a certain period.
If I’ve decided on my retirement date, how long until I get my first payout?
It depends on when you formally request your payout and on the processing lead time of your program. Check with your HR department or plan provider for specifics.
I’m going to retire early. Can I get defined benefit payouts early, too?
Many plans begin payouts around age 65; some may allow early withdrawals, but the payout amount will be impacted. Learn more about how defined benefit plans work with other retirement savings.
Can I complete defined benefit payout paperwork online?
If allowed by your plan; double check if certain forms such as a spousal consent or notary are needed in writing so you have everything in place before requesting a payout.
Can I cash out my defined benefit plan?
If the plan allows it. However, a total dollar figure provided on a statement won’t match any cash-out value. For exact figures, contact your HR department or plan representative.
I’ve started receiving defined benefit payouts. Will those ever change?
No; the federal government requires that your employer set aside the pool of money that’s owed to you. Once you begin receiving payouts, those payouts remain the same until the end of your payout option, up to an amount guaranteed by the government, no matter what happens to the company.
Next steps
Can catch-up contributions along with your DB plan help you reach your retirement goals? to see where your savings stack up. First time logging in? Get started by creating an account. Want to supplement your employer retirement savings? We can help you set up your own retirement account.