When a company faces a merger or bankruptcy, employees often worry about their pension rights. Taking proactive steps can help make sure those pension rights remain intact during uncertain times.
Understand your pension plan
The first step in protecting pension rights is understanding the type of plan you have. Defined benefit plans provide a specific monthly payout upon retirement. Defined contribution plans, such as 401(k)s, depend on contributions and investment performance. The Employee Retirement Income Security Act (ERISA) requires companies to provide plan documents that detail the benefits and obligations.
Stay informed during company changes
Employees must stay updated when their company undergoes mergers or bankruptcies. ERISA mandates that companies notify employees of any significant changes to their pension plans. Employees should carefully read these notices. If the company files for bankruptcy, the Pension Benefit Guaranty Corporation (PBGC) may step in to take over certain pension plans. They offer additional protection, particularly for defined benefit plans.
Monitor the financial health of the pension
For employees with defined benefit plans, it’s essential to keep an eye on the plan’s financial health. ERISA requires employers to contribute enough to pension plans based on actuarial calculations to ensure they can meet future obligations.
The exact amount varies each year, depending on factors like workforce age and expected retirement dates. You can review the plan’s annual funding notice. If you notice signs of underfunding, contact your plan administrator or the Department of Labor (DOL).
Know PBGC protections
The PBGC provides coverage for defined benefit plans when companies can’t meet their pension obligations. PBGC doesn’t cover all benefits, and it caps the payout at certain limits. Employees should review PBGC rules to know the level of protection and coverage for their pension.
Protecting your pension
In times of company uncertainty, staying proactive and informed is key to securing your financial future. By closely monitoring your pension plan and understanding the protections in place, you can help ensure that your retirement remains secure, even during challenging transitions.
