Can I Get My Pension Money If I Am Laid Off?
You've devoted decades of your life to your job at a local manufacturer. Now the company has decided to close its U.S.-based factories. Everyone will be laid off by the end of the year. At your age, will you be able to switch careers? And what about the pension that you were promised for 30 years of service?
Can you get your pension money if you are laid off? This article provides an overview of what can happen with pension and retirement benefits following a layoff.
ERISA and Retirement Plans at a Glance
Employee pensions are governed by a federal law called the Employee Retirement Income Security Act, or ERISA. One of the purposes of the Act was to provide more transparency so employees can see what is happening with their pension/retirement funds.
For example, ERISA sets minimum standards for retirement plans. It requires employers to notify plan participants (employees and beneficiaries) when there are changes to a plan.
It also holds those in charge of investing pension funds (plan fiduciaries) accountable for conflicts of interest. Any wrongdoing by an employer, or a plan fiduciary, involving funds held in an employee retirement plan, would fall under ERISA.
Can You Keep Your Pension Money?
It depends. It depends on the pension plan you have from your employer and when you became - or would have become - vested in the plan. To be vested in the pension means that you own it. If you are 100% vested in a pension, you own the pension and the employer cannot take it away. That does not necessarily mean that you will be able to access the money right away, however, as most plans require you to be of typical retirement age.
When you become fully vested in a pension can depend on your plan. There are typically two types of vesting plans:
- Cliff vesting, in which you become 100% vested all at once after a set amount of years, and
- Graduated vesting, in which you obtain an increasing percentage vestment in the pension over time.
Keep in mind that a pension, unlike an individual retirement plan account (like a 401k) does not transfer to a new job. So, the difficult truth is that it is possible you could lose all or some of your employer's contributions to your pension if you're laid off before you become vested. You need more information about your retirement plan to know for sure.
When Can You Get Your Pension Money?
Generally, if you are enrolled in a "defined contribution plan" — a 401(k), 403(b), or profit-sharing plan where you have an individual account — your plan provides for a lump-sum distribution of your retirement money when you leave the company.
If you are in a "defined benefit" plan — one in which you receive a fixed benefit, or annuity — your benefits begin at retirement age. These types of plans are less likely to allow you to withdraw money early.
Plan Documents, Specified Ages
Whether you are invested in a defined contribution or a defined benefit plan, the date your pension money will be available to you depends upon the provisions of your plan documents.
- Some plans do not permit distribution until you reach a specified age.
- Some plans do not permit distribution until you have been separated from employment for a certain period of time.
- Some plans process distributions throughout the year,
- Some plans only process them once a year.
Contact your pension plan administrator to ask about the rules that govern the distribution of your pension money.
The Pension Documents to Look Over
One of the most important documents you should have is the Summary Plan Description (SPD). It outlines what your benefits are and how they are calculated. A copy of the SPD is available from your employer or pension plan administrator.
In addition to the SPD, your employer may give you — or you may request — an individual benefit statement showing the value of your pension benefits. It should show the amount you have actually earned to date and your vesting status.
These documents contain important information for you, whether you withdraw your money now or later.
Consider Meeting with an ERISA Attorney About Your Retirement Plan
If you believe you are not receiving the retirement benefits to which you are lawfully entitled, speak with an ERISA attorney to understand your rights.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.