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Can I Get My Pension Money If I Get 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 get laid off by the end of the year. At your age, will you be able to switch careers? And what about the pension they promised you for 30 years of service?

This article provides an overview of what can happen with pension and retirement benefits following a layoff.

ERISA and Retirement Plans at a Glance

A federal law called the Employee Retirement Income Security Act, or ERISA, governs employee pensions. The U.S. Department of Labor plays a key role in ensuring compliance with ERISA standards. One of the purposes of the act was to provide more transparency so employees can see what is happening with their pension and retirement funds.

For example, ERISA sets basic standards for retirement plans. It requires employers to notify plan participants (employees and beneficiaries) when plan changes happen.

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.

Read FindLaw's article, FAQ: Pension Plans and ERISA.

What Does it Mean To Be Vested?

When a person is vested in a retirement plan, it means they have met the eligibility requirements to claim the employer-contributed part of their retirement funds. Being vested provides financial security because if an employee gets laid off or fired before retirement age, they can take the vested amount with them. The vested funds are typically transferred to an individual retirement account (IRA) or another eligible retirement savings vehicle. This ensures the employee keeps the contributions made by the employer, offering some financial flexibility and allowing them to continue building their retirement nest egg despite unexpected career changes, such as losing a job.

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 can't take it away. That doesn't necessarily mean you will be able to access the money right away, as most plans need 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
  • Graduated vesting, in which you get an increasing percentage of vestment in the pension over time.

Keep in mind that a pension, unlike an individual retirement plan account — like a 401(k) — doesn't transfer to a new job. So, the difficult truth is that it's 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 Will Your Pension Funds Be Accessible?

If you take part in a "defined contribution plan," such as a 401(k), 403(b), or profit-sharing plan, which features an individual account, your retirement funds are generally available as a lump-sum distribution when you leave the company.

If you're part of a "defined benefit" plan, where you get a fixed benefit or annuity, your benefits typically begin at retirement age. Withdrawal options are more limited in these plans, discouraging early access.

The availability of your pension money hinges on the eligibility specifics outlined in your plan documents. Those vary from one plan to another. Some plans allow distributions when you reach a specified age or after a specific period of separation from employment. The frequency of distribution also differs among plans. Some allow it throughout the year, while others process it annually.

For detailed insights into the rules governing your pension fund distribution, reach out to your pension plan administrator.

The Pension Documents to Look Over

Examining documents is vital in this process. Get a copy of the Summary Plan Description (SPD), which explains your benefits and their calculation. Your employer or pension plan administrator can provide you with this document. Also, your employer may give you, or you can request an individual benefit statement. It outlines the value of your pension benefits and details the amount earned to date and your vesting status. These documents contain important information for your financial planning.

Consider Meeting with an ERISA Attorney About Your Retirement Plan

If you believe you are not getting the retirement benefits to which you are lawfully entitled, speak with an ERISA attorney. An ERISA attorney can offer legal advice on whether your employer complies with ERISA regulations, review the terms of your retirement plan, and determine if any violations or discrepancies exist. Also, an ERISA attorney can guide you through the process of filing a claim or lawsuit if necessary. They'll advocate for your rights and seek the retirement benefits you deserve.

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