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Step 3—Apply for Your Retirement Benefits: Pension Benefits
Your pension is a key part of your retirement planning. If eligible, you've already applied for the government-provided leg of your retirement stool (Social Security). Your pension benefit is the Company-provided leg of your retirement stool. And although it's not designed to carry the full load of your retirement, a pension can take some pressure off of your personal savings, the third leg.
Cash Balance Pension Plan
You will receive benefits under the Cash Balance Pension Plan. The following is what you need to know about applying for and receiving your pension.
Selecting a Payment Option
You have several pension payment options to choose from, including:
Lump-Sum Distribution
- Your total accrued benefits is paid out at one time
- If you do not roll the lump-sum amount over into an IRA or other similarly qualified plan, there will be tax consequences
50% Lump-Sum Distribution/50% Annuity
- Half of your accrued benefit is paid out as a lump-sum distribution
- If you do not roll the lump-sum amount over into an IRA or other similarly qualified plan, there will be tax consequences
- Half of your accrued benefit is paid as an annuity—you select a Single Life Annuity or 50% or 100% Joint and Survivor Annuity
Single Life Annuity
- A monthly benefit to you for life
- No survivor benefits
- The highest monthly benefit of the three options
100% Joint and Survivor Annuity
- Reduced monthly benefits for life**
- The same monthly benefit to your beneficiary if you die first
- The lowest monthly benefit of the three options
50% Joint and Survivor Annuity (Normal form of payment if you are married)
- A reduced monthly benefit for life*
- A monthly benefit to your surviving beneficiary—which is one-half of the amount you were eligible to receive
Note: If your total benefit at retirement is less than $5,000, you will receive a one-time, lump-sum cash distribution of your pension benefit.
* If you elect a Joint and Survivor Annuity payment option and your beneficiary dies within five years of your retirement date, your monthly pension benefit will be adjusted and paid as a Single Life Annuity based on the pension benefit you earned. This change will occur on the first of the month following the death of your beneficiary and the increased amount will be paid to you for life. You must call 1-800-571-0400 and follow the voice recognition prompts to speak with a Benefits Express representative to report the death of your beneficiary. You will be required to provide a death certificate.
** You may not elect the 100% Joint and Survivor Annuity if you retire under the disability provision of the Pension Plan and are not eligible for Early Retirement (age plus years of service equal 80). In addition, you may not designate a non-spouse beneficiary for the 100% Joint and Survivor Annuity who is more than 10 years younger than you. There is no age limitation for a spouse beneficiary designation.
After you receive your documention from Benefits Express about your pension options, call 1-800-571-0400 and follow the voice recognition prompts to speak with a Benefits Express representative to select your payment option. You will then receive an authorization form that you must sign and return to register your selection.
If your regular pay is provided through direct deposit, your monthly pension payments continue the same way. If your regular pay is not provided through direct deposit, you can arrange for direct deposit of your pension when you retire. Use the information provided in your Retirement Kit to apply for direct deposit. Simply fill out the form and mail it directly to the address shown on the form. If you elect a lump sum, your lump-sum payment will be mailed directly to you.
Receiving Your Pension
Just before you receive your first monthly pension check, you'll also receive a Final Pension Notice confirming the payment option you selected and how much you'll receive each month, if you elect an annuity. Keep this important letter in a safe place. You may need to show it as proof of income to the Social Security Administration, the Internal Revenue Service, or a mortgage lender. You will not receive this letter if you elect to receive a lump sum. Keep the Pension Confirmation Statement for your records.
You should receive your first pension check at the beginning of the fourth full month following your retirement, if you elect to begin receiving benefits immediately. If your regular pay was provided through direct deposit, you will receive your monthly pension payments the same way. Otherwise, your pension check will be mailed to your home. You will not receive this letter if you elect to receive a lump sum. Keep the Pension Election Statement for your records.
For example, if you retire on May 20, you could receive your first check the first week of September, as shown in the timeline below. Your annuity checks will continue to arrive at the beginning of every month, unless you elected a lump-sum distribution.
Taxes on Your Pension
Increase the amount withheld from each pension check—Complete a W-4P tax form to notify the Company of the amount of federal taxes you would like withheld from each check. If you don't complete the form, your annuity check will have withholdings (for federal purposes only) of married with three exemptions.
File quarterly—File a quarterly estimated tax return rather than withholding more money from each pension check. To claim exemption from regular withholdings, you must indicate on the W-4P form that you don't want income tax withheld from your annuity payments.
Choose whether to have state taxes deducted—Complete a NJ State W-4P form if you want to have taxes for the state of New Jersey deducted from your pension check. If no tax withholding is made, no tax monies will be withheld. Note: PSEG can only take state taxes out for NJ.
If you have any questions about taxes and your retirement income, it's a good idea to speak with a professional tax advisor.
If Your Beneficiary Dies
Call 1-800-571-0400 and follow the voice recognition prompts to speak with a Benefits Express representative. The representative will take your information and notify the proper parties. If you elected a Joint and Survivor Annuity option and your beneficiary dies within five years of your retirement date, your monthly pension benefit will be adjusted and paid as a Single Life Annuity based on the pension you earned. This change will occur on the first of the month following the death of your beneficiary and the increased amount will be paid to you for life. You will be required to provide a copy of a death certificate.
Retirement Timeline
Here is an example of a timeline you would follow if you were to retire.
- Retirement Date: May 20.
- Call Benefits Express to find out what happens to your benefits after you retire.
- Apply for Social Security (if eligible).
- Receive a letter from Benefits Express, which will contain information about your Cash Balance Pension Plan (around June 30).
- Call Benefits Express when you’re ready to begin receiving payments from your Cash Balance Pension Plan.
- Receive Retirement Kit and apply for benefits.
- Receive lump-sum distribution or first pension check (around August 30).
- Continue receiving a pension check at the end of each month (unless you elected a lump-sum distribution).
If you are in the Cash Balance Pension Plan and elect a lump-sum distribution, your distribution should be made by the end of the fourth full month following retirement, if you elect to begin receiving your beneit immediately following your retirement date. This single payment ends your participation in the plan; you will not receive another check.
If you don’t receive a check within the prescribed time, call 1-800-571-0400 and follow the voice recognition prompts to speak with:
- A Benefits Express representative, if you requested a lump-sum distribution; or
- The Business Center—Employee Services, if you elected an annuity.
You may choose to wait and commence your pension benefit at a later date. This will be effective the last day of the month you call to start your benefits. Your pension checks will be sent one to two months following.
You must pay federal and (in most locations) state taxes on your pension check.