Safeguarding against Errors in Pension Benefits: A Big Job at CalPERS
Macht, Patricia K., Government Finance Review
According to a recent federal government audit, 8 percent of private-sector retirees nationwide who are in fully funded plans that terminate receive a smaller pension check than they are entitled to when they accept lump-sum payments. The audit, summarized in June 1997 by the Pension Benefit Guaranty Corporation, sampled 374 fully funded terminated plans covering 2,800 participants and found 13.7 percent were underpaid. These raw, unadjusted data were then extrapolated to determine the number of lump sums that were underpaid to participants in all fully funded terminated plans during the audit cycle.
The audit estimates that 8 percent of about 290,000 plan participants in 6,000 fully funded plans that were ended between January 1994 and December 1995 did not receive their full benefit when they accepted lump-sum payments. The audit concentrated on small terminated pension plans, which is where most errors in calculating lump-sum benefits occur. It found that the miscalculations were due primarily to the use of the wrong interest rate in determining the lump-sum amounts.
Members of the California Public Employees Retirement System (CalPERS), however, do not have to worry about getting shortchanged in their pension benefits. CalPERS employs numerous safeguards and provides customer services that create opportunities to verify that appropriate pension payments are made. The accuracy of benefit payments from CalPERS is validated by periodic staff audits and independent outside auditors, as are benefit calculation processes. CalPERS also conducts regular workshops to fully explain an employer's annual actuarial valuation and …
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Publication information: Article title: Safeguarding against Errors in Pension Benefits: A Big Job at CalPERS. Contributors: Macht, Patricia K. - Author. Magazine title: Government Finance Review. Volume: 13. Issue: 6 Publication date: December 1997. Page number: 48+. © 1999 Government Finance Officers Association. COPYRIGHT 1997 Gale Group.
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