The rates that Edison uses in their pension calculation for 2019 have been posted by the IRS. Below is where the 3 segments stand for 2019, and how they compare to the rates in place for 2018.
Segment 1: 3.10% (1.93% for 2018)
Segment 2: 4.15% (3.57% for 2018)
Segment 3: 4.46% (4.36% for 2018)
Impact for Grandfathered employees: The overall impact for grandfathered employees looking to take the lump sum option is a slight to modest negative. As a general rule, if rates move by 1%, the lump sum will move by about 10% in the opposite direction. The 1st segment increased by 1.17% but this segment carries the least impact. The 2nd and 3rd segments we up by .58% and .10% respectively. It will take EIX Benefits a little while to update the new rates on the website so you won't be able to determine the exact impact till then.
Impact for Non-Grandfathered employees: If you are in the Cash Balance pension plan this is a slight positive. The only rate that impacts the Cash Balance plan is the 3rd segment. This is the rate at which the money in your pension plan grows during the year not counting Edison’s contributions. For 2018, your money is growing at 4.36%. For 2019 the money currently in the pension plan will grow at 4.46% This increase will also positively impact anyone in the cash balance plan that is looking to convert their lump sum into an annuity in 2019.
Timing your retirement: If you are grandfathered and are planning on taking the lump sum, you will need to retire by 11/30/18 and set your benefit commencement date to 12/1/18. You need to notify Edison of your retirement and request your pension paperwork at least 30 days prior but ideally as soon as possible. If you are in the cash balance plan and are planning on taking the annuity, you will want to delay your benefit commencement date till 1/1/19 to get the better rates.
As always, if you are interested in talking further about the information provided above or have other questions as it pertains to retirement planning, don’t hesitate to call.
