In recent years, pension benefits have come under increased scrutiny amidst allegations that benefits are often miscalculated and thus underpaid.
If you’re targeted, and it turns out you under-calculated retirees’ benefits, you could end up owing a lot more than you set aside.
400+ pages of state-specific, easy-read reference materials at your fingertips—fully updated! Check out the Guide to Employment Law for California Employers and get up to speed on everything you need to know.
To help you avoid problems, here’s a checklist that focuses on the 10 most common pension calculation errors, as identified by the Department of Labor’s Employee Benefits Security Administration (EBSA):
- Check your plan documents to determine the types of covered compensation. Be sure all relevant pay such as commissions, overtime, and bonuses are included when calculating benefits.
- All appropriate years of service should be part of the computation, including (if the plan requires it) years of service the employee may have worked in different divisions.
- Use the correct benefit formula, including an accurate interest rate.
- Confirm whether you’re using correct Social Security data.
- Verify employees’ birth dates.
- If your company has been through a merger or similar transition, check that there’s no confusion regarding which pension benefits an employee qualifies for.
- Ensure that assets in each employee account are properly valued.
- Make all required contributions to pension funds on time.
- Double-check your calculations because basic arithmetic mistakes are common.
- Remind employees to promptly provide you with information on any changes in their status-such as marriage, divorce, or death of a spouse-because inaccurate data can affect benefit calculations.