You Shouldn’t Have to Hire a Pension ‘Private Eye’

“Planning for retirement” is becoming the financial mantra of baby boomers. Over the next couple of decades, millions will be counting on regular pension checks, as their parents’ generation does today. So it’s disturbing that errors depriving pensioners of their hard-won dollars are rising fast. Some retirees who suspect underpayment are hiring private pension “detectives” to investigate their problem at fees equal to 30% of additional benefits recovered.

Employees paying into a pension plan need and should demand consistent, error-free reporting about their pensions, and they need it in plain, understandable English.

Preliminary results of a government study of pensions, as reported Sunday in The Times by Robert A. Rosenblatt, show a disturbingly high error rate, with 13.7% of participants being underpaid. In 1988, the underpayment rate was a mere 2.8%. Government experts were aware that the rate had risen since, but they were shocked by the double digits in the latest audit; they had predicted an 8.2% underpayment rate.

Major causes of the problem include error-ridden software used to compute pensions, loss of employment and salary records and incorrect calculations of the life expectancies of workers.

The propensity for error grows also from the complexity of pension law. Pensions are a benefit that employers provide voluntarily and one that the government encourages. Federal law attempts to protect workers while allowing companies some flexibility and discretion in investing the money.

The Senate Special Committee on Aging got an earful on the pension error problem at a hearing in Washington Monday. Chairman Charles E. Grassley (R-Iowa) is considering legislation to require employers to send each worker a detailed statement of pension benefits. Such legislation indeed is needed.

Under current law, reports must be provided only at worker request, though some companies provide them voluntarily. The reports should be mandated, every year or two. Workers who leave a job and take a lump sum with them, forgoing later benefits, need similarly detailed reports about how the amount was calculated.

Workers and retirees have a responsibility to monitor what they’re due. With clear and regularly provided information, they would be able to do it themselves.