EDS pension lump-sum offer May 2020 (Updated
July 2, 2020.) Comments about this page to:
Other info for EDS alumni --
whether or not you ever worked for HP:
discussed on the
EDS Alumni LinkedIn Group]
A lump-sum pension buyout offer has been made to some who
have a legacy EDS pension plan
and have not started taking monthly annuity payments. Deadline: July 15, 2020.
Make sure that
HPInc and Fidelity have your current postal address. Even
if not classified by the company as a "Retiree" or if you
are long gone from the company -- in case of class-action
settlements or pension issues. (Some EDS people may have
missed out on a wage-and-hour class-action settlement. If
you were employed by EDS or "EDS, an HP Company" before
January 1, 2009 you may have an EDS pension that you have
forgotten about.) Update address at
document not included in the mailing: "EDS Retirement Plan Summary Plan
Description" (the "SPD") -- with many
key details, including annual interest credit and surviving
There are at least two vintages of the EDS plan. Download the SPD
from Fidelity that specifically applies to you -- based on
when you left EDS.
For example, the
"Updated as of January 2012" copy of the SPD does not apply if you left EDS
before July 1, 1998.
It says on page 1:
"Benefits for participants who terminated from EDS before
July 1, 1998 are subject to separate provisions not
described in this SPD. For more information about these
benefits, contact the HP Retirement Services Center."
The fine print -- details of the offer:
- Estimated. "The estimate is based on applicable interest rates as of
March 2020. However, your final benefit will be based on the
actual interest rates applicable for August 2020, as well as
the IRS mortality table in effect at that time, and may be
higher or lower than the estimate provided on your
Personalized Benefit Statement and the Retirement
- Taxable. "Payments will begin in October 2020." "Your payment will
be taxed as regular income in 2020. The IRS requires the
Plan to withhold 20% of your benefit for federal taxes, and,
if applicable, state taxes will be withheld. (Your actual
tax liability, including local taxes, may be more or less
than this amount.) In addition, you may be subject to tax
penalties if you are under age 59 1/2. For details, refer to
the Special Tax Notice on the Retirement Election
- If left EDS on or after July 1, 1998 -- and have not cashed out
or started taking the pension -- the account will grow at 5% per year.
"Personal Pension Accounts ...continue to receive
Interest Credits, even after ceasing to earn Pay-Based
Credits. Your PPA is credited with Interest Credits at a
predetermined rate that’s adjusted annually each January 1
subject to a minimum rate of 5% per year. Interest Credits
continue to accumulate until your PPA is paid to you or
converted to an annuity at retirement." [Page 9 of the
Summary Plan Description.
This SPD does not apply if you
left EDS before July 1, 1998.]
- If also in
other HP pension plans. "If you have a benefit in the Digital Equipment Corp
Pension Plan, HP Retirement Plan, Deferred Profit-Sharing
Plan (DPSP), or Cash Account Pension Plan (CAPP), you may
choose a lump sum payment outside of this election
opportunity, subject to Plan provisions." "If you
have more than one HP pension benefit... Your election
during this limited-time opportunity will apply to all of
your benefits." [Pages 1 and 2 of the second brochure]
- Additional options if you don't want to take a lump sum
"...you can choose to: "...begin monthly annuity payments in
October 2020, or wait until retirement age to commence your
If married. "If you are
married and wish to elect a lump sum or any monthly annuity
option other than a joint and survivor monthly annuity with
your spouse as beneficiary, your spouse must provide consent
by signing a Spousal Consent Form..."
Minimum. "To be
eligible for this limited-time offer, the lump-sum present
value of your accrued benefit as of August 1, 2020 must be
at least $5,000."
- U.S.-only. Employees "not subject to U.S. federal income
taxation" were not eligible for the U.S. EDS Retirement
- Read the SPD. "In the event that there is any discrepancy between the
Plan documents and this Election Guide, the Plan documents
- Note that
Fidelity Brokerage Services is a sales company.
"...speak with a Fidelity Representative at no cost to you.
These representatives can help you understand how this
decision may affect your personal financial situation and
help with your overall retirement planning and investment
does not provide legal or tax advice... Consult an attorney
or tax professional regarding your specific situation." "We encourage
you to carefully evaluate your personal situation and talk
to a trusted financial advisor to determine the right choice
If you did
not receive the second mailing, we have copies, including brochure, webinar schedule, and a
Personalized Benefit Statement:
"Opportunity is here" [Fidelity's filename makes
the objective clear.]
Webinar Schedule (June 16 and June 30)
Benefit Statement - page 1 [Member's info amount
Benefits Statement - page 2
HP goes out of business?
The EDS pension plan is backed by a trust fund (SPD page 33) set up by
EDS decades ago, currently administered by Fidelity.
Main number for HPInc pensions:
1-800-457-4015, M-F 7:30 AM to 11:00 PM Central Time. Outside the US,
call 1-508-787-9902 collect.
The Fidelity number
given in the lump-sum offer brochures is different --
1-866-602-0406 -- and has longer hours.
The Summary Plan Description says: "Your pension benefits under the EDS
Retirement Plan are insured, up to certain limits, by the Pension
Benefit Guaranty Corporation (PBGC), a quasi-governmental agency. If the
Plan terminates (ends) without enough money to pay all benefits, the
PBGC will step in to pay pension benefits..." (page 34)
The plan is listed
on the PBGC website as an insured single-employer plan. Go
Insured Plans Search
page and enter "HP Inc" in the search window. Like the FDIC, which insures banks, and the NCUA,
which insures credit unions, the PBGC is funded by premiums paid by plan sponsors,
investment income, and recoveries.
However, the PBGC does not
guarantee full payout for larger pensions.
For example, $5,812
per month maximum for someone who starts taking their
pension at age 65. Here's the table
with the maximum amounts:
PBGC Maximum Monthly Guarantee Tables
companies offer lump-sum payouts on defined-benefits plans?
an important tool for effective management of an employer
sponsored defined benefit pension plan... The risk may be
transferred to former employees by offering these former
employees an immediate lump sum benefit from the pension
plan in lieu of a monthly annuity sometime in the future."
Society for Human Resource Management website
the key factors to consider?
From the second HP brochure:
"Things to consider. Everyone’s financial situation is
unique. Spend some time thinking about your retirement goals
and how the different payment options can help you reach
- Time horizon: Your age, remaining working years, and
expected retirement date
- Other sources of retirement income: For example, Social
Security, other pension benefits, savings plan balances, and
- Risk tolerance and investment responsibility: Your comfort
level with market fluctuations, investment decisions, and
the risk of not earning the return that you expect from your
investments. Earning lower investment returns or living
longer than expected may result in you outliving your assets
if you choose the lump-sum payment
- Tax consequences: How taking a lump-sum cash payment vs. a
rollover may impact your tax liability
- Beneficiaries: The ability to provide benefits to a
spouse, domestic partner, or other eligible beneficiary"
financial columnist Jane Bryant Quinn:
Bets -- You might be making one if you take a lump sum
Money Manager -- Demand these things from your financial
From the Pension
Rights Center, a non-profit consumer organization:
"While a lump
sum seems like a lot of money, it will short-change most
retirees... because of interest rate assumptions, loss of
legal protections, and insurance of benefits, retirees will
lose a significant part of the value of their pension by
taking a lump sum.
with serious illnesses or who believe they don’t have much
time left should even consider it. ...sick people may live
longer then they think."
think... they can do a better job investing it themselves in
the stock market... rarely, if ever, can people replicate
the security of a pension.
to pay high fees to investment advisors and to mutual funds
who take no responsibility if the market dips and their
investments lose value...
lose the automatic survivors benefits... Women typically
live longer than men so losing that annuity is going to put
a spouse at dire risk of losing out..."
"The EDS pension plan has survived the sale to GM in
1984, spin-out from GM in 1996, sale to HP, and the split of
HP into HPInc and HPE."
"You need to
evaluate your health, family situation, and finances."
"I don't want
the lump sum because I will need this amount when I retire."
advantageous time to take a lump sum is when interest rates
are low. Given that they are VERY low right now, this is
probably a good deal for those whose financial circumstances
allow them to treat it as an investment asset, which is to
say those who don't need it for essential income."
"The cash is
ours to pass to heirs if we have it in our IRA but not if it
is in an annuity."
metrics are different and this decision should not be
emotional or looked at as a windfall. My key metric is the
answer to only one question: if I am not here will my wife
and family require the ‘guaranteed’ pension?"
if the lump sum is much lower than the estimated amount
stated on the brochure?"
"It is well
worth the effort to investigate the options presented by HP.
The option I chose was not the expected option. Please do
One person referred to EDS founder Ross Perot
EDS Alumni LinkedIn Group:
"Ross is the gift that doesn't stop giving."
The Hewlett-Packard Alumni Association is operated by former employees
who volunteer their time. Not officially endorsed or supported by any