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My father died 13 months ago.  He had a 403(b) on which I was the sole beneficiary.  I sent in paperwork to have the entire lump sum rolled out to an inherited IRA in October.  The check to the IRA custodian wasn't cut until the end of January, more than 5 months after my father's death.  I had been led to believe the full amount in the account would continue earning 7% interest for at least 6 months after his death, but that's not what the New York City Teachers' Retirement System has written to me in a letter.  The letter states the following:

In accordance with the 1991 TRS Board Resolution regarding interest payments on death benefits, interest is credited using the lesser of on (sic) declining rate schedule or the rate of return on the TRS Non-Variable Annuity Funds. Previously, TRS erroneously applied only the declining rate. However, for payments issued on or after the March 2012 payroll, we started correctly doing both calculations and applying the applicable one. Please note that the rate of return earned by TRS on its Non-Variable Annuity Funds for the current quarter is based on the annual rate of return for the last previous quarter as reported by the Office of the Comptroller.

Furthermore, by resolution of the Teachers' Retirement Board on September 20, 2012, "where interest on a qualified pension plan or tax-deferred annuity death benefit is due, the rate of interest shall be the lesser of (a) 5% simple interest for the first year following the member's death and reduced by 1% simple interest per year for each of the following four years; or (b) a simple interest rate equal to the actual net rate of return on TRS' qualified pension plan fun assets calculated from the date of death of the member as determined quarterly (based on the previous quarter) by the Chief Accountant pursuant to data provided by the responsible agencies (but in no case shall principal be reduced)."

As further stated in the above-noted resolution, "the interest rate to be paid on a death benefit shall commence on the thirty-first day after the date of death and will continue until the earlier of the following date: a. the date the death benefit payment is issued, b. five years after the date of death, or c. six months following the date on which TRS sends death benefit claim forms to the beneficiaries."

For your information, we have enclosed a detailed breakdown of the interest computation used to calculate the interest on your TDA death benefit.


Earlier in the letter, it states, "your father's TDA account became inactive as of his date of death."

I've given up hope of getting 7%, which would have been around $31K for the 5 months in question, despite at least two TRS phone reps telling me the money was still earning that return, once last September and once last December.

Interestingly, although he died before the 9/20/2012 resolution, it was within less than 30 days of that date.  I'm not sure if that makes a difference.

According to the interest calculations worksheet they enclosed with the letter, quarterly interest (5% declining rate) would have been over $18K. Quarterly performance was only $1065, which is what I got.  I'd like to collect the difference of about $17,600 if possible.  I've contacted a FINRA lawyer who said the case was way to small for him even if it were a slam dunk, but he recommended that I try the securities arbitration clinics at local law schools.  They don't want to deal with this and referred me to the bar, where I got a reference to another lawyer this morning who I called.  I left him a message and he hasn't called me back yet.

Questions:

(1)  How relevant is the September 20, 2012 board resolution?  Can they apply any new rules or procedures they enacted on that date to my father's account?  They stated earlier in that very same letter that his account became inactive when he died.  Therefore, wouldn't it have to be administered according to the rules and procedures in place at that time?

(2)   The way this letter is written is confusing to me.  In the fhird paragraph that begins with, "As further stated in the above-noted resolution," it's unclear whether they're referring to the 1991 resolution or the 9/20/2012 resolution.  I'm not sure if it matters.  Additionally, it seems the correction was made in March of 2012, and the 9/20/2012 resolution was included only for the purpose of detailing the method by which the Chief Accountant is to calculate the simple interest rate in part (b), which in my case was $1065.

(3)  Basically, I think I'm screwed and I probably have no case to recover the $17,600 difference.  Should I bother putting more time and effort into this?

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I hope someone can help you out. My only advise would be to sue them in small claims, if possible. You would not be able to get the full amount but the lawyer would get almost half it anyway so it would not be a total waste.

As a person who knows someone who brought a similar 'slam dunk' case against the trustees of a pension fund let me also point out to you that judges are typically too stupid to get this stuff which allows the defendants to get away with taking advantage of said stupidity. That is what happened to someone I know with a slam dunk case as his pension plan f&cked him out of about $100k in value(and since he was a pension expert he was in the unique position to know they had done it). He now has to file an appeal.


Start with the safer methods first before going crazy:
1) Call and try to get yourself up the latter of their directory. You want to get to someone with a ton of operational authority and point out that they didn't even make good on what their own letter says, let alone what it was before 9/12 which your father should have arguably been grandfathered into.
2) If that doesn't work than pay an attorney a small fee to use their letterhead and fire off a letter threatening suit over the entire pre-9/2012 amount if they don't at least make good on the amount they said they would pay in the letter they sent you(post-9/2012).

3) Reassess after you've exhausted those options. Calling up regulatory bodies is another option I would try before trying to tie up either my time pro-se or my money with an attorney.

They paid everything they said they'd pay in the letter. The only dispute is in regard to how much accumulated interest I'm entitled to for a period of approximately 160 days following the date of death. They told me twice over the phone that I'd get the full 7% amount (31K), then backtracked in writing, apologizing for any confusion caused by incorrect information being given to me.

When you say I should threaten to sue over the entire pre-9/2012 amount, are you referring to the 31K or to the entire principal balance of the account? There's no way I can sue for the latter because they paid that already.

Sorry for your loss.

What they told you on the phone (the 7%) is not binding.  Says in this guide (link    - page 3) that interest and/or investment returns cease on the date of death.  As for their calculations, it seems clear to me that they are paying the lessor of 5% or the actual return on the fund assets.  The actual return resulted in a payment of $1065.

It isn't clear to me why you think the payment would be either the 7% or the 5% when both paragraphs in your post (the 1991 resoluction and the 2012 resolution) refer to a lesser of the defined rate schedule or the actual return on fund assets.

Edit:  fixed link.

DTASFAB said:   They paid everything they said they'd pay in the letter. The only dispute is in regard to how much accumulated interest I'm entitled to for a period of approximately 160 days following the date of death. They told me twice over the phone that I'd get the full 7% amount (31K), then backtracked in writing, apologizing for any confusion caused by incorrect information being given to me.

When you say I should threaten to sue over the entire pre-9/2012 amount, are you referring to the 31K or to the entire principal balance of the account? There's no way I can sue for the latter because they paid that already.

  
Okay I read your explanation wrong. The way I read your explanation is that 7% would have given you $31k(what there was before), 5% simple would have given you $18k(what they said they would give you per 9/2012 decision), and they paid you $1065(what you actually received).

After re-reading your explanation the 7% was never possible following death, the 5% simple was the go to percentage before 9/2012, and the $1065 was the quarterly performance that they agreed they could do after 9/2012.  Okay I get it.

You want the truth. You're basicaly SOL. Feel free to create all of the stink you want, but I'm hard pressed to see how there is any economical way to bring a suit centered on grandfathering against a pension plan over $17k. So unless you can convince them(which you probably wont be able to because they have a legitimate argument that the decision might only apply to the timing of distributions and not date of death) then you'd be wasting your time doing anything else. Just consider yourself lucky they only f*cked you out of $17k if that happens.

"When you say I should threaten to sue over the entire pre-9/2012 amount, are you referring to the 31K or to the entire principal balance of the account?"

I did mean the $31k, but I read your explanation wrong so that is meaningless. There was no way possible for you to ever get the $31k. Your argument on the $18k is on a rocky ground to begin with.

dcwilbur said:   Sorry for your loss.

What they told you on the phone (the 7%) is not binding.  Says in this guide (link       - page 3) that interest and/or investment returns cease on the date of death.  As for their calculations, it seems clear to me that they are paying the lessor of 5% or the actual return on the fund assets.  The actual return resulted in a payment of $1065.

It isn't clear to me why you think the payment would be either the 7% or the 5% when both paragraphs in your post (the 1991 resoluction and the 2012 resolution) refer to a lesser of the defined rate schedule or the actual return on fund assets.

Edit:  fixed link.

  Thanks.  The left column of page 3 of brochure 6.2 does not make it clear if they're referring to the QPP (his monthly pension checks) or the TDA (403b) or both.  I know the QPP checks stop accumulating immediately upon death.  The TDA interest stopping wasn't as clear to me, and that's what I'm asking about.  Would money invested in a fixed return annuity in a 401k or in a privately held IRA automatically stop earning interest upon death?  I find it absolutely astounding that they're able to drag their feet and hold seven figures of cash hostage for over 5 months while providing the worst service and communication I've ever experienced in my entire life.  They didn't send me my father's 2012 RMD until December 18, and that was only after I'd called approximately half a dozen times and written two letters reminding them that I'm not about to make a five-figure donation to the IRS in the form of a 50% penalty for not taking the distribution by the end of the calendar year.  These people are the most incompetent, understaffed, overworked schmucks who don't give a crap about anything.  The main reason I rolled all the money out to a private custodian was simply because I didn't want to deal with TRS ever again.  I'm sure the feeling is mutual on their end.

I don't even understand why they cited the 9/20/2012 resolution if the 1991 resolution contains all the justification they needed to tell me to go screw myself.  All that did was complicate the situation unnecessarily.  And if the policy has been in place for over 20 years, why are their phone reps telling clients that the principal will continue to earn interest when it doesn't?  It's a travesty.

I'm sorry you feel so mistreated.  I too am handling estate matters for a parent that passed recently, and I can tell you that without exception, I have found that the people that handle these matters in my experience have been very compassionate, if not always the most efficient.  Close to a year later, I am still dealing with a couple of parties to finalize payouts and other matters, so a bit of patience is necessary.  I will tell you that if you called the general customer service line for these types of questions, you were dealing with the wrong people.  Insurance companies and HR departments and pension administrators have specific departments that specifically deal with member/client/employee deaths, and you should have been dealing exclusively with those individuals.  Only my opinion, but your repeated references to these people trying to screw you out of something is a bit extreme.  Sounds to me like they got the calculation right, even if you felt that the communication wasn't the best.

DTASFAB said:   In accordance with the 1991 TRS Board Resolution regarding interest payments on death benefits, interest is credited using the lesser of on (sic) declining rate schedule or the rate of return on the TRS Non-Variable Annuity Funds. Previously, TRS erroneously applied only the declining rate. However, for payments issued on or after the March 2012 payroll, we started correctly doing both calculations and applying the applicable one. Please note that the rate of return earned by TRS on its Non-Variable Annuity Funds for the current quarter is based on the annual rate of return for the last previous quarter as reported by the Office of the Comptroller.

Furthermore, by resolution of the Teachers' Retirement Board on September 20, 2012, "where interest on a qualified pension plan or tax-deferred annuity death benefit is due, the rate of interest shall be the lesser of (a) 5% simple interest for the first year following the member's death and reduced by 1% simple interest per year for each of the following four years; or (b) a simple interest rate equal to the actual net rate of return on TRS' qualified pension plan fun assets calculated from the date of death of the member as determined quarterly (based on the previous quarter) by the Chief Accountant pursuant to data provided by the responsible agencies (but in no case shall principal be reduced)."


 

  As I read this, the rules are:
From 1991 to March 2012: rule was lesser of declining rate or TRS Non-Variable Annuity Funds Return, but they were just using the declining rate
March 2012 on: lesser of declining rate or TRS Non-Variable Annuity Funds Return (unclear what the formula for the declining rate was)
9/20/12 on: lesser of declining rate defined as 5%, dropping at 1%/year or TRS Non-Variable Annuity Funds Return

So, it looks to me like the the TRS Non-Variable Annuity Fund rate is the max you could have gotten, regardless of whether the 9/20/12 resolution happened or not. 

dcwilbur said:   I will tell you that if you called the general customer service line for these types of questions, you were dealing with the wrong people.  Insurance companies and HR departments and pension administrators have specific departments that specifically deal with member/client/employee deaths, and you should have been dealing exclusively with those individuals. 
It would have been oh so nice if the front-line CSRs would have been willing to connect me to the proper individuals or at least give me their names so I could send them written letters directly.  Instead, they made up whatever information they thought I wanted to hear to get me off the phone as quickly as possible.  Asking the same question 10 times to 10 different CSRs will yield 9 different answers.  My speculation is that the proper people who sort of almost know what they're doing are so busy and overworked and overwhelmed with paperwork that it's impossible for them to answer clients' questions directly, so the public is never afforded access to these people.  I even went down to 55 Water Street in person about two weeks before the hurricane to get some answers, hoping it would be easier to sit down and discuss the situation with someone knowledgable, but I got nowhere fast.  I took half a day off from work for that and it turned out to be a complete waste of time.

Sorry I was venting a bit, but I can tell you that for years I was told not to worry about interest continuing to post, only to find out after the fact that I was "cheated" out of $30K.   Maybe I wasn't cheated according to the written resolutions, but I was cheated according to what I'd been led to believe for years, including bad information I was given directly by TRS after my father died.  Just as an indication of how inept their whole operation is, they admitted that for over 20 years they weren't properly administering payouts on death benefits.  Who the hell gets away with that?  How much did it cost them?  Was taxpayer money involved?  It's an outrage.  They've been overpaying other people for years, but now that I'm asking for my handout, they're saying too bad, sorry, there's nothing left for you.  At least I got whatever I was entitled to out of that hell hole.  There are negative tax consequences to putting the money in a private inherited IRA rather than keeping it where it was, but I'm much happier with the money where it is now and it's worth the cost.

Charlie Munger: Psychology of Human Misjudgment: 14. Deprival Superreaction Tendency:

"If a man almost gets something he greatly wants and has it jerked away from him at the last moment, he will react much as if he had long owned the reward and had it jerked away."

This is also where entitlement comes from(although maybe not perfectly applicable to your situation).

The best thing you can do is to just accept that this extra $17 or $31k was never yours to begin with and that you wouldn't have gotten close to even 5% simple guaranteed if you had pulled it out and invested elsewhere anyway. Then if you succeed in convincing some guy on the phone to give you another few thousand you'll actually be happy instead of still being pissed.

It's hard to be pissed over money that was never yours, but as Charlie Munger pointed out often times people do when they're lead to believe that it will be there's.

DTASFAB said:    
There are negative tax consequences to putting the money in a private inherited IRA rather than keeping it where it was...

Care to elaborate?  The rollover shouldn't be a taxable event, and RMD's are required in either scenario.  What are these negative tax consequences?

dcwilbur said:   
DTASFAB said:    
There are negative tax consequences to putting the money in a private inherited IRA rather than keeping it where it was...

Care to elaborate?  The rollover shouldn't be a taxable event, and RMD's are required in either scenario.  What are these negative tax consequences?

  
The entire 403(b) RMD would be state tax exempt because it's from the NYC TRS, regardless of amount (see link   ). Since my future RMDs starting in 2014 and beyond will be coming from an inherited IRA at a private custodian rather than from the TRS, only the first $20K each year will be state tax exempt. It won't affect me significantly for the first few years, and hopefully by the time the RMDs get big enough, I won't be living in this crap state any longer.

EDIT:  Actually, after finding another article from the same author, I just realized it's not as bad as I thought. This link    says that the original rollover is still state tax exempt, and it's only the earnings that are taxable after the first $20K. Now I'm even more thrilled to have my money out of TRS! Thanks fatwallet!   

Ah, state taxes.  I was only thinking in terms of federal.

dshibb said:   Charlie Munger: Psychology of Human Misjudgment: 14. Deprival Superreaction Tendency:

"If a man almost gets something he greatly wants and has it jerked away from him at the last moment, he will react much as if he had long owned the reward and had it jerked away."

This is also where entitlement comes from(although maybe not perfectly applicable to your situation).

The best thing you can do is to just accept that this extra $17 or $31k was never yours to begin with and that you wouldn't have gotten close to even 5% simple guaranteed if you had pulled it out and invested elsewhere anyway. Then if you succeed in convincing some guy on the phone to give you another few thousand you'll actually be happy instead of still being pissed.

It's hard to be pissed over money that was never yours, but as Charlie Munger pointed out often times people do when they're lead to believe that it will be there's.

  Yeah this is all true, and I understand exactly what your point is.  But if they'd sent out the beneficiary kit more quickly and then didn't take over 3 months to cut a rollover check, the money could have theoretically been rolled over within one month instead of five.  Even just getting 3-4% APY for those extra four months would have been significant.

DTASFAB said:   
dshibb said:   Charlie Munger: Psychology of Human Misjudgment: 14. Deprival Superreaction Tendency:

"If a man almost gets something he greatly wants and has it jerked away from him at the last moment, he will react much as if he had long owned the reward and had it jerked away."

This is also where entitlement comes from(although maybe not perfectly applicable to your situation).

The best thing you can do is to just accept that this extra $17 or $31k was never yours to begin with and that you wouldn't have gotten close to even 5% simple guaranteed if you had pulled it out and invested elsewhere anyway. Then if you succeed in convincing some guy on the phone to give you another few thousand you'll actually be happy instead of still being pissed.

It's hard to be pissed over money that was never yours, but as Charlie Munger pointed out often times people do when they're lead to believe that it will be there's.

  Yeah this is all true, and I understand exactly what your point is.  But if they'd sent out the beneficiary kit more quickly and then didn't take over 3 months to cut a rollover check, the money could have theoretically been rolled over within one month instead of five.  Even just getting 3-4% APY for those extra four months would have been significant.

  
Fyi, you wouldn't have been able to get 3-4% extra APY guaranteed. You might have been able to get an extra 1% APY. Let's face it your choices outside weren't great. In hindsight throwing it in the stock market would have been great, but you wouldn't have known that. If you had thrown it in the bond market it's quite likey you would have underperformed.

So let's be honest here about a promise of even 5% simple guaranteed was excessive relative to the market anyway. The equivalent is a deposit account or a stable value fund and they yield about 1/3 of that in 1 year. At the end of the day your pissed about an inflated promise not being kept and not really about getting the money out earlier.

Actually the main point is that they took a long time to send the money, because if you remember, there was a nice rally that occurred in January that I missed. The FA I'm working with now is keeping all his clients out of the bond market, and I've actually been sitting on quite a bit of cash in the inherited IRA all year that would have been invested in stocks and index funds in January if I'd had the opportunity. I'm more pissed about that actually than the $17K I think they should pay me for the 160 days they held my money.

Considering the only reason it wasn't getting 7% (and the only reason it's still not getting 7% currently) is because my father died at a relatively young age.  Yes, I felt entitled, I admit it, and I don't see a problem with that. He was legally entitled to that income by negotiated collective bargaining, and I hate that it got cut off the moment he stopped breathing.  That money was guaranteed to be getting 7% for as long as he was alive, and there was always an understanding I'd be getting all of it. It just would have been nice if he'd died at 91 instead of 71 and had approximately 4X as much for me to inherit at age 53 rather than collecting the windfall at age 33. He was always healthy and fit and obsessed with exercise.  His mother died when she was 90.  Her older brother died when he was 89.  We always thought longevity would be easy for him, but we were wrong.

Trying to manage this money and make it grow for the next 50 years is a lot more stressful than it would have been for me to get 4X the money and only have to manage it and make it last for 30 years, not to mention it would have given me an extra 20 years to spend with my father, which for obvious reasons would have been priceless.. I know this is already more money than the vast majority of blue collar workers will ever see in their entire lifetimes, and I get that, but I'm pissed at the whole situation. His death was so difficult, not only because of all the right reasons to feel grief and sadness about losing a parent, but because of the financial issues attached to it. Most people with rich parents catch a windfall of money and can't wait to get their hands on the inheritance. In our case, he and I were very close, so there was never any question that I'd eventually get all the money. He was worth so much more to me alive than dead it's frightening. That made his death like a double whammy - two hard hits to the face instead of one.  "We're sorry for your loss, and by the way, your annual household income just got cut by almost 75%, give or take.  Thanks for playing."

My mother also has had work/real estate issues in the past, some of which haven't been completely resolved yet, that have cost her in the hundreds of thousands, long term. It's not about having money or about having what is probably "enough" money. It's about being SURE there will be "enough" money.  Knowing that if better decisions had been made or if things had been done differently, or if luck would have lent a helping hand, it would be so much easier for me to rest knowing there will always be enough.  I don't have a high paying job and I probably never will.  I'm not going to blow the money on frivolous things, at least not quickly, but I'm not really sure if it's enough to last 50 years without substantial growth, and that troubles me, especially in this market the way it is now.  All the root causes of the 2008 meltdown are still lingering.  None have been addressed effectively, and the world's population is growing and consuming at ridiculous rates.  I think we're all in a lot of trouble, and it's not going to matter how many digits of numbers on a computer screen anyone has when the shit really hits the fan for real.

DTASFAB, first of all what I was trying to do was to help you calm down a bit. You come off as someone acting like some person/entity just literally stole $17k from you. A) That will lead to some rash decisions and generally an unnecessary pissed off attitude which isn't going to help anything. and B) That isn't entirely accurate of the situation. Instead you had customer service reps who misled you and a pension system that dragged their feet. That is something legitimate to be ticked about, but you'll think clearer and feel better for distinguishing the difference. You'll feel better and think clearer if you thought of the extra $17k as something to either be partially or entirely gained from here instead of money you lost that you're trying to get back.
DTASFAB said: Actually the main point is that they took a long time to send the money, because if you remember, there was a nice rally that occurred in January that I missed

Hindsight is 20/20. You should at least acknowledge that you were given something that had at least some financial value and that was security while it was there. Now I understand that you may not have wanted that much assets safe and would have prefered more at risk, but you also can't exactly act like you didn't get any value while it was there otherwise why does anybody use a deposit account? They use it for it's security and safety despite it's low return(clearly that has value to people). So while I definitely understand your frustration that you would have preferred more of this at risk and less of it in safe place, but you also can't exactly use hindsight to act like stock market would have been just as safe, but higher returning. I guess what I'm saying is that they screwed your desired decision making up, it's not like they didn't give you any value relative to the market. At least it was safer there(despite hindsight clearly showing that it would have been better in the market). I would still be unhappy if I were you, but I don't know if I was go as far as 'they screwed me'.
DTASFAB said: That made his death like a double whammy - two hard hits to the face instead of one. "We're sorry for your loss, and by the way, your annual household income just got cut by almost 75%, give or take. Thanks for playing

Wait what is this ^^^ You haven't said anything about this before. 




 


DTASFAB said: That made his death like a double whammy - two hard hits to the face instead of one. "We're sorry for your loss, and by the way, your annual household income just got cut by almost 75%, give or take. Thanks for playing

Wait what is this ^^^ You haven't said anything about this before. 

  That was a very general reference to the overall situation, nothing to do specifically with the topic of this thread.  I was unemployed for over a year until May 2012, when I got a relatively easy, stress-free, low-paying job.  Three months later, when my father died, his $64K/year pension stopped, his $16K/year social security stopped, and the 7% fixed return on the bulk of his assets that were in his 403(b) TDA stopped.  Now I have what was there when he died, but it's hardly earning anything, and my salary is only around $30K.  Additionally, the vast majority of what he left me is tax deferred, so it's not really as much as the account balance shows, because I still owe taxes on all of it.  If he could have simply stayed alive longer, the long-term financial benefit for me would have been enormous.

Regarding your other comment, I know hindsight is 20/20, but I had discussed specifically in January with my FA that if the money comes in soon, we'd be investing all of it rather quickly.  Then the rally happened, then the check came in, and then we (me and the FA) both got cold feet, thinking the rally was basically over and we stood on the sidelines waiting for a market correction as all the indexes kept soaring.  So I realize I didn't explain the whole thing, but this is not really Monday morning quarterbacking.  We were all set and ready to go a few days after New Years.  We just didn't have the funds available yet.

I appreciate your effort in trying to help me calm down by looking at this from a different perspective, but I've had many months to think about this.  I'm not easily excited by this anymore.  It does not make my blood boil and it does not make steam shoot out of my ears.  Early on, it certainly did.  Now it's just a dull bitterness and resentment I will always feel towards the entire system in general, not necessarily all directed at this particular pension administrator.

My main goal in starting this thread was to determine if I had any legitimate claim to additional funds from the 403(b) and based on the responses, it seems highly doubtful.  The rest is just tangential.



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