“Can I use my severance to get a ‘bridge to retirement?'”

Question: I have been with my company for 28 years. I am 58 years old. I need 2 more years to be 60 and have 30 years to my full, 100%-vested pension. 

My company is paying me a year’s severance and six months of retirement severance. Due to the fact that they are paying me, can I use this time to get my full retirement? 

Los Angeles, California

Answer: Dear Richard: Your situation is rather common – so close to full pension or full retirement benefits, only to lose your job just before full vesting. Here are my thoughts:     

1. Why are you leaving? Your note to me did not provide an answer to that question. If you are resigning to begin an early retirement, you might reconsider. Loss of even part of your potential pension is nothing less than a lifetime loss. If you are being laid off, which would seem more likely the case, a really important question might be raised: Why were you chosen? 

If you believe in your heart that you may have been chosen to deny you your opportunity to vest in your full pension, that would be a violation of federal law. Therefore, raising that issue might give you added leverage to get the bridging to retirement you seek. Read on.    

2. As a general rule, only “active” or “full time” employees are entitled to have their time on payroll credited toward pension calculations; those on severance usually are not entitled. In my many years of doing this work, I have never seen a pension plan say that the time an employee is on severance can be credited toward pension time. That said, a few companies have policies to permit “bridging to pension” under limited circumstances, like yours, when a person is pretty darn close to full vesting. You should find out from HR – by asking in an email, with a copy to the Pension Plan Administrator, what your pension plan says, and what your company policies on this are. 

3. Read over your pension plan; does it mention either “bridging” or “vesting accommodations,” or words to that effect. Considering the very considerable value that might be lost by your being denied your full, 100% vesting, I strongly suggest you take the time and devote the effort necessary to read through your company’s pension plan. I do acknowledge that it will likely put you to sleep, given how boring these documents can be. Even if you have to pay a few bucks to an attorney to do so for you, I would see that as a wise investment.    

4. Even if your pension plan and your company policies do not permit bridging to retirement, it can always be negotiated. As my blog readers know, I believe that it is foolish not to, at the very least, request things that you want, so long as they are reasonable. In your case, a bridge to full pension vesting is entirely reasonable. I am also a big proponent of negotiating to get what you want and deserve, and I suggest that to you, as well, if need be.  

I have written a blog post entitled “12 Steps to Negotiating a Bridge to Retirement.” You can view it by simply [clicking here.]  

5. Don’t be afraid to write to the Pension Committee, the Compensation Committee or Plan Administrator asking them to exercise their discretion to give you a Bridge to Retirement. In over 30 years of doing this kind of work, every single pension plan I have read has a paragraph, usually found in the last two or three pages, that says something like this: “The Compensation Committee may use its discretion in making decisions, exceptions and administering this Plan as it sees fit, proper and reasonable in its complete discretion.” Considering your long-term service, loyalty – and, perhaps, your concern that you were chosen for layoff due to your approaching 100% vesting – such a request, if written with respect and specifics, has a good chance of receiving a positive response.    

To assist you in writing this letter, we offer a Model Letter Requesting a Bridge to Retirement.To obtain a copy, simply [click here.]

Richard, you have given nearly all of your working life to your company. A very large part of the reason you remained in its employ has been the expectation of one day achieving full, 100% pension vesting. I hope you will go for it, with all effort necessary, with determination and conviction in your heart. You deserve all you have earned. Not one penny less.   

Best to you,
Al Sklover


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