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Key Questions for CUNA Mutual Group Employees to Explore When Evaluating an Early Retirement Package

With the economic downturn and recession looming, companies across various industries are facing an uncertain future. We have been planning with CUNA Mutual Group client's retirement for decades, and when an offer comes along, you typically don’t much time to act on it. Many give only 2 weeks to 30 days to make a decision. Many organizations are being forced to cut expenses to stay afloat, and unfortunately, that means workforce cuts in the form of furloughs, payroll reductions and forced layoffs.

You have spent decades planning for retirement. Just when you think you have everything figured out and a concrete retirement plan in place, you’re thrown a curveball. CUNA Mutual Group has offered you an early retirement or voluntary separation package.

You were planning on retiring in a few years. Now what?

If you’ve received an early retirement offer, accepting it doesn’t mean you must retire from the workforce altogether. It just means that you can no longer work for CUNA Mutual Group. If you think you may be getting an early retirement package, here are questions to consider as you review your offer.

What is an early retirement offer?

Does it include health benefits?

How does it affect my retirement assets?

How does it impact social security benefits?

What if I don’t want to retire, or can’t afford to?

Can I negotiate my offer?

What if I don’t accept my early retirement offer?

What is An Early Retirement Offer?

Early retirement packages, also known as retirement buyouts, are generally offered to employees who may be approaching retirement age, usually in a company’s efforts to reduce its overall costs.

These packages may include perks in addition to standard severance benefits. For example, an employer may offer an extended salary continuation, a lump sum, payment of healthcare benefits or additional years of service to help employees reach the required time needed to collect a pension.

Some employers may even pay for career counseling or placement services to help you find your next job (if you want or need to keep working), but that benefit may be limited in the current environment.

Does my retirement offer include health benefits?

Health care has become one of the largest expenses for a retiree, even with good insurance. For many, a company’s contribution to your family’s health insurance premium is critical to keeping medical insurance and care affordable.

If you are lucky, your voluntary severance package will extend your health benefits. Companies may include health insurance benefits for a period of time in an early retirement package, but this varies by employer. If your offer from CUNA Mutual Group includes medical coverage, make sure you understand how long you’re covered for and to what extent. If health benefits aren’t part of your initial offer, consider negotiating for any crucial coverage and premium benefits. Health insurance will be needed until you are age 65 and become eligible for Medicare. However, not all those offered an early retirement package are so lucky.

If you will be on your own paying for health insurance after accepting an early retirement offer from CUNA Mutual Group, COBRA insurance is always available. COBRA may extend your family’s coverage for up to 18 months. But this coverage is expensive. You might be able to get added to your spouse's health plan if they are still working.

If you still want to work, look into a company that offers health benefits to get you to age 65 You also have the option of entering the open market for an insurance policy. If you don’t have healthcare benefits or don’t yet qualify for Medicare, you may want to consider purchasing a health insurance policy from the Health Insurance Marketplace.

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For example, a 60-year-old on a Silver-level plan may pay an average monthly premium of $1,216 in 2022, but this also does not include out-of-pocket expenses, such as deductibles, copays, or coinsurance.

Before making a decision about an early retirement offer from CUNA Mutual Group, determine if your severance package includes any health care benefits. If not, price out other health care options, such as those available on Heathcare.gov . Can the added expenses be supported with your retirement savings?

How does an early retirement package affect my retirement assets?

Retirement accounts

If you have a CUNA Mutual Group-sponsored 401(k) plan and are 100% vested, then that money is yours to keep. After leaving CUNA Mutual Group, you can consider rolling your 401(k) over to a new or existing IRA.

Workers who are 55 or older that take an early retirement package may be eligible to withdraw money from their CUNA Mutual Group-sponsored retirement plan, such as a 401(k) , without paying the 10% IRS penalty. This only applies if withdrawing from a current employer’s retirement plan, not any past employer. Just keep in mind that while you won’t have to pay the 10% penalty, you will have to pay income taxes on withdrawals from your 401(k).

Note: Rule of 55 works only if you leave money in your 401(K)

Another method to avoid the 10% penalty is to utilize 72t if you rolled you money into an IRA. You will need to take Substantially equal payments for 5 year or at age 59 1/2, whichever is later.

Accepting an early retirement offer or voluntary severance package from CUNA Mutual Group may require you to begin withdrawals from your 401(k), IRA, or other retirement accounts sooner than you originally expected.

Extra years of retirement can take a toll on your retirement nest egg. In fact, retiring earlier than planned can result in hundreds of thousands of dollars in extra expenses that your retirement portfolio must now support. It may also limit the growth of your assets already invested since you have to spend instead of saving.

Can your retirement portfolio withstand fewer years of contributions and more years of withdrawals? This is the first question you need to answer when making your decision.

When we help CUNA Mutual Group clients answer this question, we commonly use a cash flow analysis. This allows us to simulate different scenarios side-by-side, and quickly see the impact accepting – or declining – an early severance offer will have on your financial plan.

Pensions

CUNA Mutual Group employees who have earned a pension may worry that taking early retirement will affect their monthly benefits. Many pension plans partly determine monthly benefits based on how long an employee has worked for the company, so leaving early could reduce that monthly figure.

To offset these concerns, CUNA Mutual Group may increase the total number of years of service as part of the early retirement package. This can help bridge the gap for those who would receive a reduced pension as a result of retiring early.

Social Security benefits

An early retirement package from CUNA Mutual Group can affect your Social Security benefits if you leave the workforce before working for a total of 35 years. The Social Security Administration averages your highest-earning 35 years of employment to decide your monthly benefits. For example, if you only worked for 32 years, then the government would add a $0 salary for three years to come up with your 35-year average. That means those three years of unemployment would technically count “against” you.

One potential consequence of accepting an early retirement offer is a reduction in Social Security benefits. Your future pension payments may also be reduced, depending on the language in your separation package.

If you accept an early retirement package, the benefits listed on your statement is not what you will receive. These estimated Social Security benefits assume that you continue to work for CUNA Mutual Group and make your current salary. As a retiree who accepts an early voluntary severance package, your future income will likely be reduced. This means potentially lower future Social Security payments.

Likewise, your pension statement likely makes assumptions on years of service. If you accept an early retirement offer, your years of service may be less than what your pension statement assumes.

The first step is to determine what your Social Security or pension benefits will be if you accept the early retirement package. We use several different cash flow analyses to determine your future pension benefits and your optimal Social Security selection. Calculating your optimal Social Security and pension depends on the options you have available, your savings, and your spending needs.

Pensions, and particularly pension benefits for those who retire early, often have options for increased payments until the retiree reaches Social Security age. This is usually referred to as a ‘Social Security Offset’ option. This option adds more to your early benefits, but your lifetime benefits may be reduced.

You also will have to consider what portion of your pension would be left to your spouse if you were to pass away in retirement. For most, the peace of mind by ensuring their spouse will receive a sizeable pension, is best. However, this will leave you with lower monthly benefits.

You may know that your monthly Social Security benefit is increased the longer you delay beginning your benefit. But that requires you to likely draw down on your retirement savings more early on in retirement. Social Security increases its payouts by 6.7% to 8.3%, plus an additional increment for inflation, for every year a beneficiary between ages 62 and 70 refrains from collecting a check. Sometimes delaying collecting benefits for just one year could have a huge impact on a successful retirement for married couples. It may make sense for the lower-earning spouse to claim benefits early, while the higher-earning spouse delays.

Therefore, not only is it important to known which Social Security strategy gets you the most money in total, but also which options fits best with your retirement plan. If you are evaluating the early retirement offer on your own, you can start by using the Social Security Administration’s Benefits Estimator .

From there, you can enter estimated future income to arrive at an estimated correct Social Security benefit. Once you have this updated, compare your new estimate to your monthly expenses. What impact will this reduced benefit reduction will have on your retirement plan and anticipated retirement account withdrawals?

Accepting an early retirement offer may force you to tap into your retirement savings, such as your 401(k) or IRA earlier, or it may mean changing when you will need to begin receiving Social Security benefits.

Unemployment benefits

If you decide to take an early retirement package, you may still be eligible for unemployment in certain circumstances. Your state may have its own qualifications, such as a specific period of service with a company before you can claim unemployment after leaving CUNA Mutual Group.

What if I don’t want to retire early, or I can’t afford to?

If you're unsure about your financial future, you might consider working with a financial advisor to go over your finances and how an early exit package may impact your retirement plans.

If you can’t retire just yet, try to determine if a part-time job will be enough to fill the gaps. If not, can you at least afford to take a pay cut with your next job? If so, how much? Try to map out these answers while also thinking about ways you can cut back on expenses and adjust your budget to accommodate your new income.

If you end up landing another job, your early retirement package won’t be impacted. However, you may want to check for a non-compete disclosure that could prevent you from working with one of CUNA Mutual Group's competitor for a specified time.

Can I negotiate my early retirement offer?

Just as you would negotiate a salary for a job offer, consider negotiating an early retirement package, too. Some employers may be willing to offer more money in the form of extended salary coverage or a lump-sum, better healthcare benefits or an addition to your years of service. Of course, they may decline, but you won’t know if you don’t ask.

If You Accept a Voluntary Separation Package – Consider Roth Conversions

Roth conversions can be an incredibly valuable tool for those who accept an early retirement offer. They can increase asset longevity and reduce total taxes paid during their retirement.

For those with retirement account assets in tax deferred retirement savings accounts (like 401(k)s and IRAs), an early retirement offer opens up the potential to save significantly on future taxes . Those who accept an early retirement buyout offer from CUNA Mutual Group will likely be facing a year or two of reduced income before Social Security benefits kick in. These years of reduced income can be the perfect time to convert some assets within your 401(k) or traditional IRA into a Roth IRA.

What if I don’t accept my early retirement offer?

Rejecting an Early Severance Offer

Of course, you have the option to say no to any voluntary severance package offered by CUNA Mutual Group.

If you want to continue working, or are unable to retire early, this may be your best option. Working additional years can lead to pay raises, promotions, increased Social Security and pension payments, and increased financial stability. However, rejecting an early retirement offer has potential drawbacks, too.

First, there is no guarantee that CUNA Mutual Group will repeat the early retirement offer in the future. Assuming that another offer will come later is not always a wise move. Second, and more importantly, realize that companies offers an early severance package to its employees to cut costs. If the company’s finances do not improve, there may be much worse outcomes in the future. CUNA Mutual Group may make layoffs, reduce employee pay, or eliminate other benefits.

What are the key differences between defined benefit plans and defined contribution plans offered by CUNA Mutual Group, and how might these differences affect my retirement benefits? As an employee of CUNA Mutual Group, understanding the nuances of defined benefit plans versus defined contribution plans is critical for effective retirement planning. Defined benefit plans typically promise a specific payout at retirement based on factors such as salary history and duration of employment. In contrast, defined contribution plans, like 401(k) plans, depend more on employee contributions and investment performance. Given the volatility in investment returns and changing employment patterns, employees might find themselves at a crossroad between predictable retirement income versus self-directed savings and investment risks. It's vital to explore how these plans could impact long-term financial security at retirement.

A defined benefit plan at CUNA Mutual Group offers predictable retirement payouts, typically based on salary history and years of service, ensuring employees a guaranteed income in retirement. In contrast, defined contribution plans, such as a 401(k), rely heavily on individual contributions and investment performance. Employees may face risks with defined contribution plans due to market volatility but benefit from greater control over their retirement savings. Depending on your financial situation and retirement goals, these differences can impact how secure your future income will be, either through guaranteed payouts or potential growth in investments.

How are pension costs determined in a defined benefit plan at CUNA Mutual Group, and what factors can influence these costs over time? The cost structure of a defined benefit plan at CUNA Mutual Group is predicated on various components, including service costs, interest costs, expected returns on assets, and amortization of gains and losses. Understanding these factors helps in managing potential burden changes on the organization's budget and employees' retirement expectations. For instance, factors such as fluctuating interest rates can significantly alter the present value of future liabilities, affecting the costs that CUNA Mutual Group bears. Employees should be versed in these aspects to contextualize their retirement benefits.

Pension costs at CUNA Mutual Group are influenced by factors such as service cost (new benefit accruals), interest cost (growth on past benefits), expected return on plan assets, and the amortization of gains or losses. Changes in these factors, like fluctuations in interest rates or salary adjustments, can affect the overall cost of the plan. Employees should be aware of how these variables impact their future pension benefits and how changes to the company's funding strategy could alter expectations.

What strategies can CUNA Mutual Group adopt to manage the costs and benefits of its defined benefit plan without drastically impacting employees' retirement security? CUNA Mutual Group faces the challenge of balancing cost management for its defined benefit plan while also ensuring that employees have adequate retirement benefits. Options like freezing benefit accruals, amending contribution formulas, or shifting to defined contribution plans can be explored. However, such strategies must be handled delicately to avoid significant disruptions to employees' retirement planning. Understanding employee concerns and the potential ramifications of these strategies is crucial to formulating a balanced approach.

CUNA Mutual Group can adopt strategies such as freezing benefit accruals, transitioning to cash balance designs, or reducing benefit formulas to manage costs. These strategies may lower expenses but must be carefully balanced to avoid significantly affecting employees' long-term retirement benefits. Clear communication about potential changes and their impact on retirement income is crucial for employees to adjust their retirement planning.

In what ways could regulatory changes influence the CUNA Mutual Group's pension plan design and its offerings to employees after retirement? Regulatory bodies frequently revise guidelines that govern employee benefit plans, potentially impacting how CUNA Mutual Group structures its pension offerings. For instance, changes to tax policies or pension funding requirements could affect administrative decisions regarding contribution levels or payout structures for defined benefit plans. It is imperative for employees to stay apprised of these regulations so they can understand any changes that might occur in their future benefits and what steps CUNA Mutual Group might take to adapt to new compliance needs.

Regulatory changes, such as adjustments in pension funding requirements or tax policies, can have a substantial impact on CUNA Mutual Group’s pension plan design. Changes in laws may require adjustments to benefit levels, contribution structures, or funding strategies. Employees should monitor such regulatory shifts to understand how they could influence future pension payouts and retirement strategies.

Could you explain the process employees at CUNA Mutual Group would need to undertake to access their retirement benefits upon leaving the company? For employees transitioning from CUNA Mutual Group to other ventures, itâ€™s essential to understand the process involved in accessing retirement benefits. This process may involve determining eligibility for pension payouts, selecting between lump-sum distributions or annuitized payments, and understanding how past contribution levels affect final benefits. Employees are encouraged to seek guidance from the HR department or pension plan administrators to navigate this process thoroughly.

When leaving CUNA Mutual Group, employees need to assess their eligibility for pension benefits, choose between lump-sum payouts or annuities, and understand how their years of service and contributions affect the final payout. It's advisable to consult with HR or a plan administrator to navigate the options and ensure that the benefits are accessed appropriately.

What tools and resources does CUNA Mutual Group provide to assist employees in planning for retirement effectively? CUNA Mutual Group offers various resources designed to support employees in their retirement planning journey. These might include access to financial planning tools, informational webinars about defined benefit and contribution options, or one-on-one consultations with benefits specialists. Employees should actively participate in these offerings as a means of optimizing their retirement readiness and ensuring they are leveraging all available benefits to the fullest extent.

CUNA Mutual Group offers several resources for retirement planning, such as access to financial planning tools, retirement webinars, and consultations with benefits specialists. These resources are designed to help employees make informed decisions about their defined benefit and defined contribution options, ensuring they optimize their retirement strategies.

How does the CUNA Mutual Group approach the issue of pension funding, and what implications does this have for current and future employees? The funding strategy for the pension plan at CUNA Mutual Group has significant implications for the benefits that employees can expect. A well-funded pension plan can provide assurance for employees about the stability and security of their retirement income. Conversely, fluctuations in the funding status could lead the organization to consider changes in benefit formulas or contribution strategies. Employees should be aware of how funding levels could affect their future benefits and the overall health of the pension plan.

CUNA Mutual Group’s pension funding strategy is critical to maintaining the stability of retirement benefits. A well-funded plan assures employees of predictable payouts, while underfunded plans may lead to changes in benefit formulas or contributions. Employees should stay informed about the funding status, as it could affect the future security of their pension income.

What should employees at CUNA Mutual Group know about the potential risks and benefits associated with their defined benefit plan? Employees should have a clear understanding of the inherent risks and benefits linked to CUNA Mutual Group's defined benefit plan. While these plans offer predictable retirement income, they are subject to various risks such as underfunding issues, market volatility, and regulatory changes. This understanding equips employees with knowledge about their eventual retirement income and helps them plan strategically alongside their professional developments or transitions within their careers.

Employees need to understand that defined benefit plans at CUNA Mutual Group provide predictable retirement income but come with risks such as underfunding, economic fluctuations, and regulatory changes. By staying informed about these risks, employees can better plan for their financial security in retirement, potentially supplementing their pension with other savings strategies.

What happens to my retirement benefits if CUNA Mutual Group decides to freeze its defined benefit plan? The implications of freezing a defined benefit plan at CUNA Mutual Group would be substantial for employees. Understanding the details surrounding such a freeze, including whether it would impact future accruals or merely limit new benefits for incoming participants, is crucial. Employees should consider consulting HR for comprehensive information regarding their specific situations and how a freeze could influence their expected retirement payouts.

If CUNA Mutual Group freezes its defined benefit plan, employees may no longer accrue new benefits, though they retain previously earned benefits. A freeze could impact future retirement income, particularly for employees nearing retirement, as they could miss out on years of service accruals or salary increases factored into their final benefit calculation.

How can employees contact CUNA Mutual Group to inquire further about their retirement benefits and related services? To learn more about retirement benefits, employees should reach out directly to CUNA Mutual Groupâ€™s HR department or designated pension plan administrators. The organization provides channels such as in-person meetings, phone consultations, and online resources which are specifically structured to assist employees with inquiries related to their retirement benefits and participant obligations. Employees can also explore dedicated web portals for additional information and updates on their pension plans.

Employees can contact CUNA Mutual Group directly through their retirement solutions division at 1-800-356-2644 or visit the website at CUNA Mutual Retirement Solutions for more information about retirement planning services and personalized assistance with their retirement benefits.

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For more information you can reach the plan administrator for CUNA Mutual Group at 5910 Mineral Point Rd Madison, WI 53705; or by calling them at (608) 238-5851.