Pensions and Your Legal Rights

A pension is a type of retirement plan. In a pension, your employer sets aside money for you. Then it, or someone it hires, manages your money. When you retire, you can start taking money out of your pension. You can use it to live, take vacations, or anything else.

This article explains pensions. It starts by explaining what a pension is. Then it describes how the government regulates your pension. It also explains what you can do if you need help with your pension. Pensions can be complicated. Contact an ERISA attorney in your area for legal advice about your situation.

What Is a Pension Plan?

A pension plan is a type of retirement plan. Your employer makes regular contributions to a pool of money. Then it uses that money to fund payments to retired employees. When someone mentions a pension plan, they’re usually talking about a defined benefit plan.

In a defined benefit plan, your employer guarantees you’ll receive a specific monthly amount for your life. A formula based on years of service, age at retirement, and earnings usually determines the amount.

Your payment amount is fixed, even if the fund underperforms. Some plans allow you to take your distribution in one lump sum instead of the monthly annuity.

Your plan may have a vesting requirement. Vesting is the time you must work for the company before becoming eligible for benefits. For example, you may have to work for your employer for three years before you’re eligible for the pension plan.

A defined contribution plan is another type of plan. In that plan, you make contributions out of your paycheck. Your employer may match some of what you contribute. These plans are also called a 401(k).

What Is ERISA?

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that protects your retirement assets. It keeps fiduciaries from misusing your pension plan’s assets. A fiduciary is anyone who has control over plan assets.

ERISA allows plan participants to sue for a breach of fiduciary duty. Any fiduciary who breaches their duties may have to reimburse the plan for any losses they caused.

The plan sponsor is the company that’s providing the pension plan. ERISA requires the plan sponsor to fund the plan adequately.

The plan administrator must give you a copy of its Summary Plan Description (SPD). The SPD explains your plan’s rules. It also summarizes material changes to your plan since the last time it issued the SPD. You should receive your first SPD within 90 days after you become covered by the plan. You’re also entitled to your plan’s summary annual report every year.

ERISA sets minimum standards for the following plan characteristics:

• Participation
• Vesting
• Benefit accrual
• Funding

ERISA only covers private-sector employers. It doesn’t apply to churches and government entities.

What Can You Do if Your Plan Denies Your Benefits?

Every plan must have a written procedure to claim retirement benefits. It also must have an appeals process for denied claims.

Generally, your plan has 90 days to notify you in writing of the result of your claim. You have 60 days to appeal a denied claim. Your plan then has 60 days to review your appeal. It must notify you in writing if it denies your appeal. It must also give you the following information:

• The reason for denying your appeal
• The extra appeals that are available to you
• Your right to seek judicial review of the decision

You can contact an attorney for help with your appeal. You can also contact the US Department of Labor (DOL).

What Happens if Your Employer Terminates Your Plan?

You immediately become 100% vested if your employer terminates your plan. That means you have the right to all the benefits you earned when the plan ends.

Things get more complicated if your plan lacks the money to pay its beneficiaries. The Pension Benefit Guaranty Corporation (PBGC) is a federal government agency. It insures private defined-benefit plans. The PBGC guarantees your vested pension benefits up to a certain amount. You can contact the PBGC through its website.

Contact an ERISA Attorney for Help

Retirement savings are essential. Unfortunately, they can also be complex. Contact an ERISA attorney if you’re the victim of a breach of fiduciary responsibilities. An attorney can tell you what options you have. They can also represent you in your case.