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In the past few days, large companies on Wall Street have been closing left and right, making the people who work at these companies jittery about many issues, including their retirement security.
The good news for these employees is that the money in their pension and 401(k) plans is protected from creditors, so that even when a company goes into bankruptcy, they don’t have to worry about their retirement money being used to pay back debts instead.
Furthermore, if you’re worried about the value of your company’s pension plan because it may contain too much of your own company’s stock, a little-known provision of the Employee Retirement Income Security Act of 1974 (ERISA) prevents companies from investing more than 10 percent of plan assets in their own stock. So, if you were a participant in the Lehman Brothers defined benefit pension plan, ERISA protects you from a potentially catastrophic Enron-like loss of your retirement funds.
Unfortunately, the same protections aren’t in place for your 401(k) and other defined contribution plans so if your money is invested in your company’s stock, it isn’t as safe. But, a provision of the 2006 Pension Protection Act allows participants who have worked at their company for three or more years to shift investments out of employer stock and into other investments offered by the plan.
Generally, the Pension Rights Center doesn’t like to give out investment advice, but even a novice knows that it isn’t a good idea to put all of your eggs in one basket.
