Are Your Retirement Benefits Protected by Law?

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There has been uncertainty surrounding American workers’ retirement benefits. For instance, in 2019, General Electric announced that it would freeze its defined pension plan for 20,000 employees starting January 2021. The company further stated that the employees would afterward halt their contributions and receive no additional benefits. That’s not all; close to 100,000 staff who hadn’t begun receiving their benefits would receive a lump sum rather than the expected monthly income.

Earlier in the same year, CNBC reported that multi-employer pension plans were going broke. What this news meant is that American workers’ retirement benefits were at stake. According to Kevin Patrick Brady, the U.S. Representative for Texas’s 8th congressional district, these pension plans were also underfunded. In 2007, the deficit stood at $193 billion. In 2015, the figure jumped to $638 billion. Having read this, you might be wondering what this means for your retirement benefits. Is your retirement plan safe, and does the law protect it? Here’s what you should know.

Does the Law Protect Your Retirement Plans?

Yes, the law protects your retirement benefits to a certain extent. The Employee Retirement Income Security Act of 1974 (ERISA) federal law shelters employees under defined contribution(401(k)) and benefit plans(pensions).

Different Ways the Law Protects Your Retirement Benefits

let us see the some of the important ways the law protects your retirement benefits. It is very crucial that you know these details.

Are Your Retirement Benefits Protected by Law Protect Your Retirement Plans-Wikipedia of Finance

1. Guarantees benefits for underfunded retirement plans

For multi-employer pension plans, underfunding has been a chronic problem. The U.S Department of Labor Employee Benefits Security Administration (EBSA) has, over the years, been disclosing the financial status of multi-employer pension plans. Three phases exist, namely:

  • Critical
  • Critical and declining
  • Endangered and WRERA

In 2020, many multi-employer pension plans were underfunded. As a result, Congress encompassed them under the 2021 American Rescue Plan Act. This law dedicates funding for the Pension benefit Guaranty Corporation (PBGC) to safeguard struggling retirement plans from insolvency.


How the law protects you?

The PBGC exists because of ERISA. Therefore, as long as your pension plan falls under PBGC, you should expect to receive your retirement benefits. Currently, the PBGC program protects more than 34 million people’s retirement benefits.

For instance, in FY 2020, the multi-employer PBGC program supported struggling plans in paying more than 90 plans for close to eighty thousand retirees. The single-employer PBGC program paid about 5000 projects for over 900,000 retirees.

2. Offers protection when your employer files for bankruptcy

Last year, Neiman Marcus, a luxury department store enterprise, filed for chapter 11 bankruptcy. The company also halted some executives’ retirement benefits and a monthly income that would cover medical expenses. While the latter was reinstated, the supplemental benefits were greatly affected. What if the same happens to you?

How the law protects you?

The ERISA and PBGC also apply here. PBGC will pay your retirement benefits if your employer discontinues its pension plan because of bankruptcy. In case you are wondering, your employer’s finances are not tied to the pension funds.

This distinction means that while a company may have declared bankruptcy, it may still have a solid pension plan. Another advantage of this separation is that it shields the company’s pension finances from creditors.


3. Caters to ambiguous pension plans

While retirement plans are voluntary, once offered, they receive protection under state and federal law. One exception exists. Due to the segregation of the state and the church, church pension plans do not receive complete protection.

These church pension plans:

  • Are not mandated to inform their staff about their benefits
  • Do not need to pay these benefits equitably
  • Are not under a decree to sufficiently fund members’ benefits

How the law protects you?

Thankfully, you may still receive some form of protection even if your employer chooses to dismiss federal pension laws. According to the Pension Rights Center, State laws direct religious organizations to act in their employees’ best interest. So, if you feel that your employer is refusing to pay your benefits, it would help if you registered a lawsuit against your employer.

Protecting Your Retirement Plan

Specific actions could help safeguard your retirement nest egg. These include:

  • Keeping track of your pension and defined contributions
  • Saving your employment records and annually evaluating them
  • Utilizing available resources such as Pension Help America. This site connects you with licensed employment lawyers and government agencies that provide free retirement advice. You may also want to visit the Employee Benefits Security Administration’s website to talk to advisors willing to empower you on all things retirement.

Conclusion

Different circumstances that could prevent you from receiving your retirement benefits exist like: underfunding, bankruptcy, indemnities, etc. Thankfully, the law offers protection against these problems. We recommend speaking to an employment lawyer for guidance and updates to avoid missing out on any benefits. Due to the uncertainty of multi-employer pension plans, it would be wise to set aside different retirement accounts. By following these tips, you can be confident of a good retirement.

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