Former Employee Agents
Nancy Fish,
For the most part, Allstate stopped hiring employee agents in 1990. Then in the year 2000, the company terminated all its remaining employee agent contracts, except for those located in certain jurisdictions, such as the state of New Jersey.
At the time, the company had 6,171 employee agents who were affected by the “Preparing for the Future” initiative, wherein agents were allowed to continue their careers only if they agreed to become independent contractors and suffer the loss of their employee benefits.
Most of those affected were over the age of forty. Of the 6,171 affected agents, 3,772 converted to the EA agreement and continued their agency relationship; 2,399 selected another option, and parted ways with the company. Virtually all 6,171 employee agents were vested in the Allstate Agent Pension fund at the time their employment contract was severed, and many of those are now approaching retirement age.
Vesting in the pension plan required a minimum of five years as an employee of Allstate. Employment at Sears prior to 1995 could also be counted towards vesting eligibility for Sears employees who left and became Allstate agents. Vested former employee agents who were not yet 65 when employment ended became “terminated deferred vested Participants.”
Who is eligible to withdraw benefits under the plan?
Normal retirement age is 65. Agents hired before 1989 are eligible to receive early retirement benefits payable at age 63. In addition, agents with 20-plus years of continuous employment can receive early retirement benefits at age 55.
Early retirement benefits – paid prior to age 65 – are calculated at a reduced amount based on your actual age.
Current Allstate Exclusive Agent independent contractors can take their retirement benefits as soon as they are eligible based on age and years of employment. In other words, you may collect your benefit while still under contract as an EA independent contractor agent.
The deferred vested benefit is payable as an annuity. While several annuity payout options are available, it is important to note that monthly payout amounts are “frozen” and will not change as the participant ages. Currently, a lump-sum payout option is still available, but the plan is under no obligation to continue it. The lump sum is calculated by applying a conversion factor – which includes interest rate and mortality assumptions – to the straight life annuity benefit. Consequently, the benefit amount under the lump sum option may increase or decrease depending on the prevailing assumptions in effect at the time a lump sum is requested.
The Pension Protection Act (PPA) of 2006 changed the interest rate used to calculate lump-sum payouts of the Agents Pension Plan from the 30-year Treasury Bond Rate to a corporate bond segmented yield curve. As a result, there is no longer a single interest rate used for lump-sum payments. As a general rule, if the average interest rates decrease, the lump sum equivalent increases, and vice versa.
If you receive your pension benefit in a lump sum, you can “roll” it into an IRA to maintain the tax deferred status. This must be a direct transfer or the Agents Pension Plan will withhold 20% of the payout for income tax purposes.
Social Security offset
Agents who became participants in the plan prior to Dec 31, 1988 should be aware that pre-1989 benefits contain a Social Security offset which is calculated based on estimated compensation earned from 1951 through 1988.
You have the option of having your actual compensation from 1951 through 1988 – as recorded by the Social Security Administration – used in the calculation instead of your estimated compensation. Using your actual compensation in the calculation of your pension benefit may produce a higher pension benefit. More importantly, using your actual prior compensation will never result in lowering the pension benefit you are entitled to receive and will not affect the Social Security benefit you are eligible to receive.
You can obtain your actual 1951 through 1988 earnings history by requesting your “Social Security Statement” from the Social Security website at http://www.ssa.gov or by contacting your local Social Security office. The information is free of charge. Remember to request your “Social Security Statement,” not your “Detailed Earnings Information.”
Then you must forward your compensation history to the Allstate Benefits Center before requesting the distribution of your pension. The Allstate Benefits Center must receive your compensation history no later than four months from your Payment Start Date.
Death Benefit
If you die as a terminated deferred vested participant, a death benefit will be payable to your spouse or other designated beneficiary. Participants should be sure all beneficiary information is up to date.
Estimated Death Benefit Amount
Your estimated death benefit amount – stated as a lump sum form of payment – is payable if you die before commencing payment of the Plan benefit. You can access your estimated death benefit amount – calculated as of the prior yearend – by calling the Allstate Benefits Center at 888-255-7772, where you will be connected to an automated system. Following the prompts, select the “Retirement and Investments” option and then the “Pension” option. You will then be connected with a benefits representative who will assist you with your request.
The value of your estimated death benefit could increase or decrease from time to time because the interest rate the Plan uses to calculate lump-sum benefits fluctuates over time.
Eligible agents can learn more about retirement benefits at the Your Benefits Resources™ website at http://resources.hewitt.com/allstate or by calling the Allstate Benefits Center at 888.255-7772. By creating a log-in, agents can view the Summary Plan Description, project retirement benefits, compare the payout options, and start the pension payment process.
Ef Spring 2013
The views expressed by NAPAA, or any of its positions relative to its activities and those of its members’ actions on behalf of this organization, are expressly those of NAPAA, and do not reflect the views or opinions of Allstate Insurance Company, or any of its affiliates.