Edison Interest Rate Update
Attention all Edison Employees:
The IRS has announced the new Segment Interest Rates which are used to calculate the Grandfathered Lump-Sum (GFLS) and Cash Balance Pensions. If you are a Grandfathered Pension Participant and are considering a retirement date between now and the first quarter of 2019, we can help you maximize your benefits. You must request a Benefit Commencement Date (BCD) no later than December 1, 2018. Edison must receive this request by October 31, 2018.
Please call us immediately so we can help you through the process.
Cash Balance Participants have more flexibility in determining the optimal time to retire as their accounts always increase in value. Please call us to schedule a time to review your retirement options.
Below is a copy of our most recent Edison Interest Rate Announcement.
2019 Edison Interest Rate Announcement
IRS Segment rates are used to calculate Edison’s Grandfathered Lump Sums (GFLS). The Final 2019 Edison Rates have been announced by the IRS and they are higher than last year’s. The GFLS is inversely related to the interest rate, so this higher rate decreases the GFLS. Chart 1 below shows how the rates have been increasing over the past 12 months. We anticipate this upward trend to continue into 2020 as the Federal Reserve Board “Fed” has embarked on a long cycle of interest rate increases which will continue to pressure interest rates higher and the GFLS lower.
Grandfathered Lump-Sum $52K (5.2%) Lower in 2019
Chart 2 below shows how the value of a $1 million Grandfathered Lump-Sum has changed since last year. By our estimate, these rate increases will result in Grandfathered Lump- Sum values dropping nearly $52,000 or 5.2% from the 2018 value. Therefore, Edison employees who are grandfathered may want to consider retiring in 2018 instead of 2019 to secure the higher GFLS.
The decrease in the GFLS should not be the sole factor in determining your retirement date, as there are numerous other factors in play. The best way to determine a retirement date is to reach out to Manchester Financial to run a complementary retirement projection for you. We will integrate the monthly pension versus lump-sum options into your personalized projection.
- September to October – Request your retirement projection from Manchester Financial to determine the optimal retirement date based on your specific needs
- October 30th – If you decide to retire to take advantage of the better 2018 rates, request the retirement package from Edison and we will help navigate you through the paperwork!
Cash Balance Participants
Unlike GFLS, Cash Balance Plans benefit from rising interest rates and always increase in value. Your plan increases by the 3rd Segment Rate. Therefore, Cash Balance Plan participants will be credited 4.46% on the current balance for 2018. In other words, for every $100,000 in your plan the participant will be credited $4,460 during the year. In addition to the interest rate credits, Edison provides you pay credits ranging from 3% to 9% of your base pay, depending on your age plus service “points” you have earned (see below). These pay credits are applied each month that you have at least one hour of service.
Your 401(k) Investments
Rising interest rates are impacting all your retirement plans. Grandfathered Lump-Sums will likely be lower, Cash Balances will likely grow faster; however, your 401(k) also needs to be invested differently. The current investment options available in your Edison 401(k) are very limited and may have a difficult time with rising interest rates and new stock market opportunities. However, Edison offers you the Tier III Personal Choice Retirement Account (PCRA). PCRA’s allow professional money managers like Manchester Financial to strategically invest your 401(k) to protect and grow your portfolio. We have helped hundreds of Edison employees and retirees for over 25 years! Call us to schedule a portfolio review or retirement projection with our Edison team.
Manchester Financial is focused on protecting and improving the lives of our clients by providing you with savvy financial planning and astute portfolio management.
Manchester Financial is neither affiliated with Edison International nor is this information sponsored by Edison International. Proudly independent to serve you better for over 25 years!