It can happen to the best of us. You're a hard worker who has devoted 28 years for a shoe manufacturer which has decided to close its U.S.-based factories, with plans to lay off everyone by the end of the year. You were promoted a few times and always got positive feedback from your employer, but now you're concerned that not only will it be difficult switching careers at this point in your life, but what about the pension that you were promised after 30 years of service? Can you get your pension money if you were laid off?
It really depends on the type of retirement plan your employer offers; and in many cases, the difficult truth is that you may in fact lose your pension if you're laid off before the plan matures. This article provides a general overview of your retirement entitlements in the face of layoffs.
ERISA and Retirement Plans at a Glance
The administration of employee benefit plans, including pensions and 401(k)s, is governed by a federal law called the Employee Retirement Income Security Act (ERISA). One of the purposes of ERISA was to provide more transparency for employees in order to help them better manage their retirement. For example, ERISA sets minimum standards for retirement plans and requires employers to notify plan participants (employees with pensions and other benefits) when there are any changes to a benefit plan. It also holds plan fiduciaries (those in charge of investing pension funds) accountable for any possible conflict of interests.
Thus, virtually any wrongdoing by an employer or plan fiduciary with respect to an employee's retirement plan would invoke ERISA's statutory protections.
Lump Sum Distribution
Generally, if you are enrolled in a 401(k), profit sharing or other type of defined contribution plan (a plan in which you have an individual account), your plan may provide for a lump sum distribution of your retirement money when you leave the company.
However, if you are in a defined benefit plan (a plan in which you receive a fixed, pre-established benefit) your benefits begin at retirement age. These types of plans are less likely to contain a provision that enables you to withdraw money early.
Plan Documents, Specified Ages
Whether you have a defined contribution or a defined benefit plan, the form of your pension distribution (lump sum, annuity, etc.) and the date your pension money will be available to you depend upon the provisions contained in your plan documents. Some plans do not permit distribution until you reach a specified age. Other plans do not permit distribution until you have been separated from employment for a certain period of time. In addition, some plans process distributions throughout the year and others only process them once a year. You should contact your pension plan administrator regarding the rules that govern the distribution of your pension money.
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 also may give you-or you may request-an individual benefit statement showing the value of your pension benefits-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
Being laid off from a job is always an unpleasant experience, but much more so for older workers nearing retirement. If you believe you are not receiving the retirement benefits to which you are lawfully entitled, you may want to speak with an attorney well-versed in ERISA-related legal matters.