Friday, August 26, 2016

Help out an ex-DuPonter with their retirement funds

From the comments, Anon641p has an excellent question (lightly edited for grammar): 
....I came home to mail from DuPont ( I worked for them for 1981 to 1995) that said I can (but don't have to) cash out my defined benefit pension as a lump sum... And I have to decide between Sept 12 and Oct 16 of this year... Obviously this has to do with the merger. 
I would rather take it under the original plan as a little secure longevity insurance, but I wonder, given everything, if that is wise...  
Obviously they are trying to disburse the money in the plan as quickly as possible, which makes me wonder if it will be around in the long run (I have at least 5 years before I retire) 
I know there are other ex-DuPonters that read this blog, I wonder if they have gotten the notice yet and what they are thinking of doing about it...
I suspect that there really isn't much of a difference between the two choices, but I suspect that there are both tax implications and questions as to where the lump sum would be transferred to.

Readers, any help here?

UPDATE: A reader sends in a scan of the attached information sheet. 


  1. Some things to complicate your decision: How long do you expect to live? How much inflation will there be over the next XX years? If invested in the stock market, what will the returns be? All unknowables.

    I've heard funding retirement described as a three-legged stool: Social Security, retirement savings and pensions, each with different risk/reward characteristics. If you take a lump sum and roll in into an IRA, you will be giving something up. There is something to be said to just getting a couple checks each month when you're 90 years old, rather than managing an investment/bond portfolio when your mental facilities may be declining.

    If you create an anonymous account on the forum and post some details, some smart people there will probably help you run some numbers.

  2. I'd find a financial advisor, who is a fiduciary, and explore an annuity.

  3. CJ: Can't begin to thank you enough for this post. I am impacted by this and this discussion should help me a lot.

    My spouse is impacted by this, she left Dupont via one of the spin-offs, and we received the mailing last week. Right now this program is only being offered to employees who left the company before 12/31/2015. I was laid off in early 2016 so it does not apply to me, at least not yet.

    We will be calling to get the actual dollar amounts involved so that we can do some calculations to help with the decision. My instinct tells me, though, that it is best to take the payment. As indicated by the mailing, the payment can be rolled over into your existing retirement accounts - Merrill Lynch if you still have your old Dupont account, or any other 401(k) account including one with your current employer. Therefore, I assume that this transaction is tax free. If that assumption is correct, then the question comes down to whether you can equal or better the return on that money in your own account than Dupont will do in theirs. I think this is a no-brainer. The pensions are (supposed) to be invested in low risk, low return funds. That should be easy to equal and appeal to low risk investors. If you want growth and don't mind the risk, now you have more money to take that route with.

    One other point that will be important for people impacted by this and who have gone through a divorce. If you have a QDRO on your pension then you know that when you start receiving your pension payments, those payments will be shared with your ex. However, there is a chance that the QDRO will not apply to this lump sum payment. The reason is that the QDRO is written such that it applies to a specific plan. If the company comes up with a new plan then the QDRO is not written to address the new plan, it simply becomes obsolete. Therefore, by taking the lump sum you may get to keep all of your "pension" because it is not a pension any more. This is what happened several years ago when Dupont dropped the employee pension plan and started putting more into employee's SIP plans instead - if you had a QDRO it did not apply to the new money going into SIP. If any of this applies to you I recommend calling and finding out how QDROs will be handled. Could be worth a lot of money to you.

  4. Something to consider: why is DuPont making this offer? It's because their high priced actuaries have determined paying out a load of cash today is cheaper than paying for a future guaranteed pension stream.

  5. Anon at 10:35 AM,

    I am the person who original asked the question. My preference would be to take the monthly pension checks until (once I retire) for the rest of my life. I like the guaranteed income, and while I don't know for sure, I suspect the old Dupont Plan was relatively generous, as you imply, as it came from a time of higher interest rates...

    But I worry that there may also be another motive. This move makes me wonder if I can depend on the plan surviving the merger for the long term. They obvious want to lower it assets, which might also have an effect on the Plan's long term viability.

    If there is a significant chance the Plan won't survive the rest (or at least most) of my life, then the smart move would be to take the lump sum, even if staying in was better on paper. In my case the money would need to go into an IRA as my current employer does not have a 401K at all.

    I just have no idea how to evaluate the probability that the plan may be dissolved in the future.

    While my pension is not large (I was there for just under 14 years early in my career) I need every guaranteed cent I can get.

  6. OP, head on over to the PBGC website (government agency that insures pensions) and read up what happens when a company terminates their pension. The short form (and I'm no expert): Depending on the reason for termination, either the tax-payer is on the hook for paying you or the former employer buys an annuity for you and your checks come from an insurance company instead.

  7. OP (I am Anonymous 9:12) - To make the best decision it is best to go to the website on the mailer to access your account and to see what exactly what you get with each of the three options they provide. The mailer says that more information, including a "personalized statement" will be sent to you in early September, but there is no point waiting if this is causing you angst.

  8. You should be able to mitigate tax implications by having the funds transferred directly to an IRA. (Obviously confirm with a real tax expert).

    After that it's really just an NPV issue. If you can generate a higher return that their fund you'll be ahead. Depending on what survivor benefits are included in the pension (having started work in 2000 I have no idea how pensions work....) taking a lump sum may be better for your beneficiaries once you go to your reward.

    Be interesting to know what n they used in NPV = x/(1+r)^n....

  9. This question should really go to reddit's r/personalfinance sub. They can help you out with the best path.

  10. OP - a question if you don't mind - what is your age?

  11. Oh you poor boomers! Such a difficult decision! How could you possibly choose? Between your (well-deserved, I'm sure, you've paid your dues after all!) Social Security checks, your pension, and your house(s) how will you ever retire gracefully?

    1. Anon8:48 - I hope that helped you feel a little better, but really uncalled for.

  12. Obviously it would be very helpful to know the discount rate and number of years assumed in dupont's NPV calculation, but I would be staggered if taking the lump sum payment was the best option. Most people would kill for a defined benefit pension and as others have suggested, it is their attractiveness that makes lump sum offers attractive to the employer in the first place

  13. Had the same issue with Pfizer.

    There are two reasons they do this, as explained to me by a Fidelity financial adviser. First, they simply want this liability off their books, clear and simple. Its not some weird conspiration theory or because of a merger or whatever. Second, the timing has to do with a recent change in the law allowing company to buyback pension on the cheap. This is your democracy at work and the work of lobbyist.

    Now, the first time, they offered me the equivalent of 3-4 years of payments at term, which was absolutely ridiculous. I refused, and despite the fact that they told me that this was a once only opportunity, they came up with a second offer the following year that was 25% more. I also turned it down.

    Unless they file for bankruptcy, they are legally obligated to pay this money.

    Finally, the inflation worries are exaggerated, out of place and ignorant of the monetary policies of the past decade or so. All the printed money went into real estate and the stock market, and average salaries actually went down. Unless you plan to purchase a McMansion when retiring and rebalancing your portfolio to 100% high risk stock, you're good. Besides, I prefer to deal with a slight loss of purchasing power than the complete loss of my investment in the next stock market crash.

    A fixed monthly payment pension fund place the burden of return of investment on the company, whereas this burden is transferred to you when you cash out.

    Keep it. You will thank me later.

  14. I just saw the article about this on, and then found this blog. I think I should be affected by this too, but I haven't received anything about it. I worked for DuPont for 10+ years (83 to 93 - enough to qualify for a small pension) and have continued to get pension-related notifications, but haven't gotten anything about this. Is there a phone number to call or some other contact details to pursue? Thanks in advance!

    1. Check out the attachment here, it has a phone number:

  15. > After that it's really just an NPV issue.

    Not quite, you're also changing the risk profile. For example, if you withdraw the money and invest in the stock market, you exchanging "DuPont risk" (the odds that DuPont will default) with market risk.

    I'm always suspicious of these offers. After all, if it was structured to be net benefit for you, and a net negative for DuPont, you wouldn't be offered it. That leaves two possibilities: net no benefit for either side; or net negative for you (and net positive for DuPont). In either case I don't see a benefit for you to make a change.

  16. "Not quite, you're also changing the risk profile."

    Nope, still an NPV issue: if the person's r is > DD's s/he wins (i think pensions typically, and overly optimisitically, assume ~7% return: bear in mind, most MFs don't beat the S&P....), and if their n < DD assumes they also win.

  17. There are plenty of fairly detailed articles on this subject. Here's one that seems pretty good:

    I think the bottom line is that you have to look at the numbers for the three options offered and then do the calculations to determine the best option for you, factoring in your own personal preferences and life expectancy. The benefits Dupont gets out of it are irrelevant.

  18. Hi all,
    I am the OP. Thanks for the feedback... I found a website that gives a reasonable way to look at the decision with a rue of thumb:

    (the WSJ article is behind a pay wall)

    I am 61 now

    So once I know the payout I'll have a better idea of what to do. BTW payout info is NOT available from my account on the Dupont retirement website,, but I CAN calculate there what my monthly benefit would be if I took it now, to which I can apply that rule of thumb.

    As to how long I will live? Who knows... parents died in their 70's but for identifiable reasons not old age ... but I have 2 grandparents that lived to 100 (on on each side of the family) so I have no real way to judge that.

    BTW to the young poster who has an issue with boomers... Not all of us are rich and have multiple homes... I known I don't fall into that category... being at the bench your whole career is NOT a way to get rich... And i am sure social security WILL be there when your times comes as long as you and your cohort votes intelligently.

    1. OP, in the future, when you see a WSJ article, Google the title of the article, and you can move around the paywall. For example, search the title of the above suggested article, which is "Should You Take a Lump-Sum Pension Offer?"

    2. OP. FYI the Dupont Alumni group on Linkedin has some information, hopefully you can access these and maybe get some help/insight.

  19. Let me offer an alternate reason for this offer.

    Executive pensions are supersized and Ellen and her team recently retired. It puts a lot of stress on pension funds. This may be a way for THEM (exec team) to take pension lumpsum while it is solvent. Still have doubts? We had pension reduction only WHEN and EVERY time CEO's retired. Remember last big change? 2007 Chad.

    So what if you don't take lumpsum, and fund fails? PGBC formula. About 75% of total I think.

    For those of you who cheered "free market" without "regulatory checks" - you got it!