The Rich Life Blog

GE Employees: A Closer Look At Your VPA / PPA

Posted by W. David Kern

June 6, 2017

If you’re nearing retirement from General Electric (GE), chances are you’re becoming familiar with the various payout options available for both your Retirement Savings Plan (RSP) and your General Pension Plan (GPP). These two vehicles draw a majority of the spotlight when determining your retirement benefits, but there are two other pension accounts that will also require your attention: your Private Pension Account (PPA) and Voluntary Pension Account (VPA).

As a quick refresher, the VPA allows individuals to voluntarily contribute up to 3% of the first $100,000 of their salary into an after-tax savings account. The PPA is different in the sense that GE requires and automatically withholds 3% of an employee’s salary over $100,000 – these contributions are also made on an after-tax basis.

Just as you are given different distribution options for your RSP and GPP, the same is true for your VPA & PPA. You can either elect the:

  • 50%, 75%, or 100% survivorship pension payout
  • Partial or lump sum cash withdrawal
  • Lump sum rollover to an IRA

Many retirees default to taking their PPA/VPA as a pension payout without considering their alternative options. However, this decision shouldn’t be made in default mode. In fact, there are several variables that should be considered and analyzed before the distribution method is chosen – these variables include: taxes, current interest rates, and personal preference. For example, choosing the monthly pension payout option guarantees a monthly benefit, but did you know that during a period of low interest rates the monthly benefits are also lower? On the other hand, choosing a lump sum rollover into an IRA will defer taxes and allow the opportunity for growth, but one forfeits a guaranteed monthly payment. These tradeoffs, and more like them, make this decision a little muddy.

Fortunately with a few key pieces of information and strategic analysis, we find the PPA/VPA distribution strategy becomes very clear. Our approach starts with a Breakeven Analysis that shows how long a pension payout would need to be received before it would equal the future value of a lump-sum rollover. Once we’ve built that framework for the decision, we analyze interest rates, taxes, and personal preference in order to help our clients make a decision that is in their best interest.

If you are a GE professional nearing retirement and would like help determining your best payout options for your RSP, GPP, VPA, & PPA, the professionals at Wealthquest stand ready to help. To start the conversation and request a complimentary Breakeven Analysis of your PPA/VPA payout options, let’s Start the Conversation. 

David Kern is a Wealth Management Advisor at Wealthquest – a Cincinnati based financial planning and wealth management firm that offers a full range of financial services under one roof, for one simple fee.

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