Understanding Arch Coal Pension Plan Benefit Options

Article written by Brian Bickett


I’ve been able to help a handful of people make educated decisions concerning their Arch Coal Pension Plan in the recent months. While it all comes down to your personal financial goals, here are a few points that have helped my clients and I hope they help you too. 

As always, if I can answer a specific question, please feel free to reach out. 

What happened? 

In October of 2019, Arch Coal, Inc. sent all eligible participants of their “Cash Balance” Pension Plan a folder containing the details of newly available distribution options for current employees. 

Participants now have the option to begin receiving their pension benefits as early as age 62, even as they continue to work for Arch Coal. The introduction of the lump-sum payment option in addition to the many annuity options has caused considerable anxiety amongst the several Arch Coal employees I have spoken with.

What does it mean?

The availability of the lump-sum payment combined with Arch Coal, Inc.’s financial history as a company has many wondering if they should take the lump- sum payment, simply to protect the benefit amount in the event that the company were to have future financial issues. I think it is important to address this concern first so that it does not cloud the analysis of the available distribution options.

The Arch Coal, Inc. Retirement Account Plan (the “Cash Balance” Pension Plan) is a “covered” single- employer pension plan insured by the Pension Benefit Guaranty Corporation (PBGC). 

You can verify for yourself using this link (PBGC Arch Coal Pension Search) as well as read up on the details of the PBGC using this link (FAQ for PBGC). The take-away is that pension benefits for participants currently receiving one of the annuity distribution options are insured by the PBGC if the Arch Coal, Inc. Retirement Account Plan was to run out of funds. The details of this insurance are included in the above FAQ for PBGC resource as the maximum benefit guarantee is set each year and is dependent on many variables including the age that monthly benefits begin.

With the financial security of the Arch Coal, Inc. Retirement Account Plan more understood, let’s explore two hypothetical couples who, from the outside, appear to be in similar situations but would likely make different decisions on their pension distribution options.

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Let’s meet Bob and Alice. 

Bob, 64, has worked at Black Thunder for 32 years and Alice worked for the county for 25 years before retiring last year at age 65. Life happened and they were not able to consistently contribute to retirement accounts, Bob’s 401k has a balance of $54,000. Analysis of their personal situation resulted in finding that their expected monthly retirement expenses will be covered by their combined Social Security Retirement Benefits and Alice’s Wyoming Retirement System monthly pension benefit. Their three daughters and their grandchildren have all moved to Arizona and they plan on relocating there when Bob retires.

Next, let’s meet John and Mary. 

John, 64, has also worked at Black Thunder for 32 years and is in Bob’s carpool and Mary, 65, worked part-time once the kids moved out. They lived modestly, invested regularly and John’s 401k has a balance of $575,000. Analysis of their personal situation results in finding that their expected monthly retirement expenses will be $1,275 more a month than their combined Social Security Retirement Benefits. They have two sons who live in the Gillette area and John and Mary have no plans to move.

The decision concerning which pension benefit to elect for each couple is likely influenced by many factors which may include the following questions:

  • Does their Social Security and other pension benefits cover their expected monthly retirement income?
  • Do they have access to readily available funds in the event of a major life event?
  • Will they need access to large sums of money to implement their retirement plan?
  • What is their investment experience? Would they need to hire a fiduciary financial planner help to manage the lump sum if elected?
  • What are their respective life expectancy’s? Is there a family history of hereditary health issues?
  • Do they have charitable goals or desires to leave specific amounts to their heirs? Do they want to fund these goals at their passing or while they are still living?

As you can tell, each couple has many factors to consider when deciding which Arch Coal Pension Benefit option to select. The fact that the decision is irreversible, and the likely size of the lump sum payment only add to the stress they already feel about transitioning into retirement. 

My hope is that both couples are talking to someone other than just those in their carpool concerning their personal finances and retirement plans.  In an ideal world, everyone giving them financial advice would always act as a fiduciary, providing recommendations in the client’s best interest at all times.  Sadly, this is not the case.

You may find my experience with these options helpful to you. If you’d like to have a conversation about your Arch Coal choices or your retirement plan goals, click here to schedule a call. 

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