The Macy's Cash Account Pension Plan: Everything You Need to Know
If you worked at Macy's before 2012, you may have a pension you've forgotten about. The Macy's, Inc. Cash Account Pension Plan is a company-funded pension: you never contributed to it, but your account may still be growing today.
This guide covers who's in the plan, how your balance is calculated, when and how you can take it, and the mistakes that can cost you.
The plan rules below are based on the Macy's, Inc. Cash Account Pension Plan Summary Plan Description, amended and restated as of January 1, 2020, with amendments through January 1, 2022. If you're covered by a collective bargaining agreement or participated in the former May Company retirement plan, some rules may be different for you.
Are you in the plan? The freeze explained
The plan is closed and frozen, but that doesn't mean your benefit stopped growing. Here's the timeline:
January 1, 1997: The plan replaced the company's earlier pension plans, including the Federated Department Stores, R.H. Macy & Co., Allied Stores, Broadway Stores, The Emporium, and Joseph Horne plans.
January 1, 2012: The plan closed to new entrants. The last enrollment date was December 1, 2011.
December 31, 2013: Pay credits were frozen. Starting January 1, 2014, participants stopped earning new pay credits.
Who's in: You generally joined automatically if, by December 1, 2011, you were on Macy's payroll, were at least 21, and had completed one year of eligibility service (generally 1,000 hours in a 12-month period).
What still grows: If you joined before January 1, 2012, your account generally still earns quarterly interest credits until you take your benefit, and you still earn vesting service while you work at Macy's.
Exceptions: Certain collectively bargained employees still earn pay credits. If you were an active participant in the May Company defined benefit plan on or after August 30, 2005, you're covered by a separate summary plan description.
How your cash account works
Your benefit is generally based on a "cash account," which is a bookkeeping account, not a separate pot of money held just for you. It's built from three pieces:
1. Opening balance. If you had a benefit under one of the company's pre-1997 pension plans, your accrued benefit as of December 31, 1996 was converted, using the plan's actuarial factors, into a lump-sum amount that became your starting balance.
2. Pay credits (1997 through 2013). For each year you were credited with at least 1,000 hours of service as a participant, Macy's credited a percentage of your pay based on your years of vesting service at the start of that year:
Less than 3 years: 2.0%
3 to 4 years: 2.5%
5 to 9 years: 3.0%
10 to 14 years: 4.0%
15 to 19 years: 5.0%
20 to 24 years: 6.0%
25 or more years: 8.0%
"Pay" generally included salary or wages, overtime, pre-tax 401(k) and cafeteria plan contributions, regular annual and retention bonuses, commissions, and tips. It excluded items like stock awards and options, deferred compensation, sign-on bonuses, and severance.
3. Interest credits. Your account earns interest at the end of each quarter (March 31, June 30, September 30, and December 31) until you start receiving payments. The rate is based on the 30-year U.S. Treasury rate for the November before each year, but it can't fall below the plan's minimum. As of January 1, 2017, that minimum was 5%.
Interest credits stop once you're given an election form with a start date on or after your normal retirement age.
Vesting: is the money yours?
You're generally 100% vested once you complete 3 years of vesting service. You're also fully vested if, while still employed by Macy's, you reach normal retirement age, become totally disabled, or die.
You earn a year of vesting service for each calendar year after 1996 in which you're credited with at least 1,000 hours of service. If you worked at Macy's before 1997, your vesting service under the earlier pension plans also counts. And because vesting service continues after the 2013 freeze, some people who weren't vested in 2013 have since become vested by continuing to work.
If you left before vesting: You generally forfeit your account. If you weren't vested and then had six or more consecutive years with fewer than 501 hours of service, you generally lose credit for your earlier service.
When you can take your benefit
You can generally only receive your pension after you leave Macy's. Once you've left and you're vested, you can generally start it by completing a benefit election form, even before 65.
Normal retirement age is 65, or if later, the fifth anniversary of the date you first joined the plan.
Once you've left, you generally can't delay past 65. You're not permitted to defer payment beyond your normal retirement date, generally age 65. If you haven't made a choice by then, the plan may start your benefit in its default form.
Leaving at or after normal retirement age: Your benefit must start right away. You'll get an election packet within 90 days of leaving. If you don't return it by the deadline, the plan will pay you in its default form.
Working past normal retirement age: When you eventually retire, the value of your benefit generally won't be less than what you'd earned at normal retirement age, increased using the plan's actuarial factors.
Disability: If you leave because of total disability before normal retirement age, you're automatically vested and can take your benefit. Total disability is generally determined using Social Security's definition.
If you're rehired: A benefit that hasn't started yet will generally be put on hold. If payments have already started, they generally continue, though you can elect to stop them until you leave again.
Your payout options
You can generally take your benefit as a lump sum or as monthly payments for life. A lump sum is generally equal to your cash account balance on the date it's calculated. Monthly payments are your balance converted into an annuity using the plan's actuarial factors, and any annuity other than a single life annuity generally pays a smaller monthly amount.
If you're single, the default is a single life annuity: monthly payments for your lifetime that stop when you die. You can instead choose:
A lump sum
A life and period certain annuity (5, 10, or 20 years), which continues to your beneficiary if you die before the period ends
A joint and survivor annuity, which pays your named beneficiary 50%, 66⅔%, 75%, or 100% of your monthly amount for life after you die (age restrictions apply to the beneficiary)
A Social Security leveling annuity, which pays more before Social Security starts and less after, to create a more level combined income
If you're married, the default is a joint and 50% survivor annuity, which pays your spouse 50% of your monthly amount for life after you die. You can switch to a 66⅔%, 75%, or 100% survivor version on your own.
Every other option, including the lump sum, requires your spouse's written consent, witnessed by a notary public or a plan representative.
Small balances: If your benefit is worth $1,000 or less, it's paid automatically as a lump sum. If it's worth more than $1,000 but not more than $5,000, you can choose cash or a rollover to an IRA. If you don't choose within 60 days, it's automatically rolled into an IRA at Merrill Lynch.
Extra protections if you worked at Macy's before 1997
If you were in one of the company's older pension plans before 1997, the plan includes minimum guarantees so the switch to the cash account didn't leave you worse off. In general, your benefit can't be less than what you would have received under the old plan had you left by December 31, 1996.
The most valuable protection: If you had reached age 55 and completed at least 10 years of vesting service before January 1, 2002, you may qualify for a "grandfathered" benefit. If you take your pension at a time and in an annuity form (other than a single life annuity) that your old plan allowed, your monthly payment won't be less than what the old plan would have paid if it had continued through December 31, 2013.
Two catches: the grandfathered benefit can't be paid as a lump sum, and some payout options may not be available for it. If you think this applies to you, ask the plan to show you the grandfathered amount before choosing a payout.
What happens if you die before payments start
If you die while working at Macy's, or after you're vested but before your pension payments begin, your beneficiary receives a death benefit. It's generally equal to your cash account balance at the time it's paid.
Who gets it: If you're married, your spouse is automatically your beneficiary. If you're not married, or your spouse doesn't survive you, it goes to the beneficiary you named on the plan's form. If you didn't name one, or your beneficiary died before you, it goes to your estate.
How your spouse is paid: By default, your spouse receives a single life annuity starting the month after the later of your death or the date you would have reached normal retirement age. Your spouse can instead elect to start payments earlier and/or take a lump sum. If the benefit is worth $5,000 or less, your spouse automatically receives it as a lump sum.
Once your own payments have started, what your survivors receive depends on the payout option you chose.
Taxes and rollovers
Pension payments are generally taxable income when you receive them, whether monthly or as a lump sum.
Rolling over a lump sum: You can generally roll a lump sum directly into an IRA or another employer plan. A direct rollover keeps it tax-deferred, and nothing is withheld.
Taking a lump sum as cash: Federal law generally requires the plan to withhold 20% for taxes. You'll owe income tax on the full amount, and you may also owe a 10% early withdrawal penalty if you're under 59½, unless you left Macy's in or after the year you turned 55 or another exception applies. You can still roll the money over within 60 days to avoid tax, but you'd need to replace the 20% withheld from other savings to roll over the full amount.
Common mistakes to avoid
Forgetting you have it. If you joined before 2012, you may still have a balance earning interest credits, even if you left Macy's years ago.
Not updating your address or marital status. You're required to notify the plan of changes. If payments can't be delivered, they can be delayed or even forfeited.
Letting the default decide. If you leave at or after normal retirement age and don't return your election packet in time, you'll be paid in the default form: a single life annuity if you're single, or a joint and 50% survivor annuity if you're married.
Starting early without comparing. Your balance keeps earning interest credits, with a 5% minimum rate as of January 1, 2017, generally until payments begin.
Taking a lump sum as a check. A direct rollover avoids the 20% withholding and keeps the money tax-deferred.
Choosing a lump sum without checking for a grandfathered benefit. If you qualify, the grandfathered amount can only be paid as an annuity.
Not deciding with your spouse. If you're married, you can't take a lump sum or most other options without your spouse's written consent.
If you're going through a divorce, your pension can only be divided by a qualified domestic relations order (QDRO).
Get help with your Macy's pension
Whether you're choosing between a lump sum and monthly payments, checking for a grandfathered benefit, or fitting your pension into the rest of your retirement plan, the right move depends on your full financial picture. Book a 30-minute call and we'll walk through your options together, with no obligation.
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About the author
Michael Walstedt, CFA, CFP®, is the founder of Reliant Wealth Advisory, a fee-only fiduciary firm in Hoboken, New Jersey. He helps business owners, executives, and professionals in the New York/New Jersey area, as well as nationwide, with financial planning and investment management.
Reliant Wealth Advisory is not affiliated with Macy's, Inc. This article is for educational purposes only and is not tax, legal, or investment advice. It summarizes the Macy's, Inc. Cash Account Pension Plan Summary Plan Description (amended and restated as of January 1, 2020, with amendments through January 1, 2022) and general federal tax rules. Plan details vary and may change, so confirm your specific benefit with the Macy's Pension and Profit Sharing Committee at (513) 782-1200 and your official plan documents. Consult a qualified tax professional and attorney before acting.
