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Tracking Down an Errant Pension

Q. I worked for a company for 19 years and was vested in its pension plan before I quit to take another job. Now I have learned that the company has been taken over by another corporation. How do I find out what happened to my pension guarantee? Is it in jeopardy? --M.J.H.

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A. The common presumption, and indeed the most common practice, is that the pension assets and obligations of your former employer were assumed by the acquiring corporation. However, you would be foolish to base your retirement planning on a presumption. You must do some independent checking to verify your status.

You should have received some sort of written notice from the company that acquired your former employer. If you didn’t receive anything or have misplaced it, your first step should be to contact the human resources department of the acquiring corporation to find out where you stand. It is possible that the pension plan in which you were vested has been terminated and its assets distributed among the participants, but presumably you would remember if you received your payout. (However, by law, a terminating pension plan is required to make only one try at contacting the affected workers; if you missed that communication, you may never hear again of your payout.)

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It is also possible that the pension plan has been spun off from the acquiring company’s existing pension obligations into a separate entity, but you should have been notified of this at the time.

General questions about pension rights can be sent to the Pension and Welfare Benefits Administration, 790 E. Colorado Blvd., Suite 514, Pasadena, CA 91101.

If you aren’t sure which company is responsible for paying your pension because of a corporate takeover, you can contact the federal government’s Pension Benefit Guaranty Corp., which has a special office to help workers, their spouses and other beneficiaries trace the pension plans that have been closed, taken over by the federal agency or otherwise transferred. Write to the Pension Benefit Guaranty Corp., Missing Participant Program, 1200 K St. N.W. Washington, DC 20005.

Shouldering the Taxes for U.S. Savings Bonds

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Q. I was the executor of my mother’s estate when she died last year. She left behind U.S. Savings Bonds on which I was listed as the beneficiary. However, I knew my mother’s wish was for the funds to be divided equally with my two brothers, so that is what I did. When I cashed out the bonds, the bank took my Social Security number and is reporting that all the funds went to me. Am I responsible for the taxes owed on the entire amount of the bond proceeds, or should that obligation be shared equally with my brothers? --H.O.

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A. Unfortunately, unless your brothers are as kindhearted as you, you may be stuck with the entire tax bill.

Technically, the bond proceeds are all yours because you were listed on them as your mother’s beneficiary. In fact, as far as the Internal Revenue Service is concerned, the fact that you split the proceeds with your brothers qualifies as a gift from you to them and presents no tax obligation to them. In the IRS’ eyes, you alone are responsible for the income taxes on the proceeds.

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That said, what can you do? Your best choice is to discuss the matter with your brothers and try to persuade them to make you a gift of their shares of the tax bill you face on the bond proceeds. Let’s hope that your generosity is genetic.

In the future, such situations should be handled before the proceeds are divided among heirs, with the beneficiary deducting the expected tax bite before distributing the funds as gifts among the relatives.

All Taxpayers Subject to Social Security Tax

Q. I am a Social Security recipient and work part time. Social Security taxes are deducted from my earnings. Should I have to pay Social Security when I am already collecting it? --A.C.

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A. Yes. All taxpayers, regardless of their age or whether they are drawing Social Security benefits, are subject to taxation on that portion of their earnings covered by the Social Security assessment. In 1996, Social Security taxes are levied on the first $62,700 of earnings.

Please do not confuse this tax with other features of federal law affecting Social Security recipients, namely the limit on earnings for Social Security recipients before benefits are reduced, which affects only recipients who continue to receive earned income. There’s also the portion of Social Security benefits subject to income tax, which depends on a recipient’s total family income, including both earnings and unearned income, such as investment dividends and interest.

Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Please do not telephone. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. Or send e-mail to carla.lazzareschi@latimes.com

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More on Stocks

* Standard & Poor’s annual stock guide and its 1996 outlook are available through Times on Demand. The guide includes performance histories and facts on about 7,000 securities, all common and preferred stocks listed on the New York, American and Nasdaqex changes. The forecast takes a look at emerging trends for 1996 and offers investment recommendations from S&P; analysts. To order either or both of these publications, call (800) 440-3441. For the stock guide, order Item 2847. The price is $6.95 plus $1.50 delivery. For the 1996 outlook, order Item 2848. The price is $3.95 plus $1.50 delivery. To order by mail, send a check to Times on Demand, P.O. Box 60395, Los Angeles, CA 90060. Because S&P; must gather year-end data for these publications, they will not be available for shipment until Monday.


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