A pension plan is retirement plan set up by an employer (or by a group of employers and a union) that typically provides lifetime income at retirement age. The Department of Labor has a fact sheet that explains the differences between pensions and retirement savings plans, such as 401(k), profit sharing, and 403(b) plans:
If your pension plan is paid by a company you worked for, the plan’s rules most likely will say that your pension must be temporarily stopped if you go back to work for the same employer.
If you are in a plan run by a union together with employers, your plan may suspend your pension benefits if you return to work. In some cases, the pension plan must reimburse you for the missed retirement benefits when you retire again by either paying you once for all the missed payments or by increasing your monthly pension payments going forward.
In other cases, the pension plan does not have to make up the payments you missed while you were working. This will depend on whether you retired early, whether you returned to work in the same geographic area that the pension plan covers, and whether you returned to work in the same industry, trade or craft that you were working in before you retired.
To understand the exact rules of your plan, ask the plan to provide you with a copy of its “Summary Plan Description.”
Companies often move, change their addresses, and are bought and sold. They also go bankrupt and end or combine their pension plans. When this happens, it may be difficult to locate the company in order to get information about your retirement benefits. But with enough detective work it may be possible to track them down. To find resources that may be able to help you find a “lost” retirement plan you can read our fact sheet.
Federal law sets limits on how much can be put in 401(k). These limits are changed by the IRS each year. Here is a link to our chart that outlines the contribution and benefit limits for several types of retirement plans:
Most experts advise against taking a lump sum unless you have a serious illness or other special circumstances. Also, some special early retirement benefits can be lost if you take a lump sum. But individual situations differ. We have a fact sheet that provides information about the pros and cons of lump sums:
Also, if you know a financial planner or investment advisor, you might want to ask their advice.
Yes, this may affect whether your pension is protected by the federal pension law known as the Employee Retirement Income Security Act (ERISA). You should read our fact sheets on church pension plans if you think your pension plan might be affiliated with a church:
For individuals in employer sponsored pension plans (i.e. plans that offer lifetime monthly benefits), the law allows these plans to set a retirement age no higher than age 65. If individual pension plans want to offer monthly benefits at an earlier age they can, but it has to be outlined in the rules within the plan booklet known as the Summary Plan Description (SPD). It is important to note that the plan may reduce monthly benefits that begin prior to age 65 to account for the longer period individuals will receive their benefits. To find out whether your pension plan provides retirement benefits prior to age 65, at a full or reduced amount, you should contact your pension plan to request the SPD.
Unless you and your husband or wife decide to do something different, a company or union pension plan will usually make monthly benefit payments to your husband or wife every month for life. Then, if s/he dies before you, the pension plan will pay you at least half of what s/he was receiving every month for life. This is called a survivor benefit.
The pension plan may give you and your husband or wife the option to receive the pension a different way. For instance, it may allow you to give up the survivor benefit in exchange for the plan making higher monthly payments to your husband or wife while s/he is alive. Or, the plan might allow you and your husband or wife to take a large, one-time payment instead of monthly payments for life.
If you and your husband or wife decide to receive your benefit in a way that does not provide a survivor benefit, the plan will ask you to sign a form stating that you are giving up your survivor benefit. This is to make sure that your husband or wife does not give up your survivor benefit without your permission.
For government employees these rules vary from state to state. You can read our fact sheet on spousal consent in state retirement plans here:
In many cases, yes. It depends on what your husband or wife elected when he/she retired. Company and union pension plans give retirees the option to receive monthly payments for life, and will then continue to make smaller payments to a retiree’s spouse every month for the rest of his/her life. If your husband or wife selected this option, you should continue to receive monthly benefits worth at least half of what s/he was receiving.
If your husband or wife earned benefits under a company or union plan and you did not agree to give up your right to a survivor benefit when he or she retired, you can ask the person running the plan, the plan administrator, to provide you with the paperwork your husband or wife filled out when he or she retired and the form that you signed giving up the survivor benefit. If the signature on the form does not looks as if it is yours, you should contact a pension counseling project or, if there is no project in your area, contact the Pension Rights Center.
If your husband or wife worked for a state, city, or county government, you may find that the pension plan rules say that retirees do not have to get the consent of their husbands or wives to give up survivor benefit protections. This allows the retirees to receive higher benefits during their lifetimes. But the benefits stop at their deaths.
Note: The rules for retirement savings plans such as 401(k), 403(b), and profit sharing plans are different that the rules for pension plans. You can contact the Pension Rights Center for information about these rules.
Most pension plans only provide benefits to retirees and to the widowed husbands or wives of married retirees. They do not provide benefits for children. If your mom or dad was in a retirement savings plan, such as a 401(k) plan, it is possible that your parents agreed to provide a benefit for you. You should check with the person running the plan.
Yes, retirement benefits can be divided at divorce, but there are certain steps you will need to take. First, the divorce decree must specifically discuss the pension, 401(k) or other retirement plan and how it should be divided. In addition, you will also need a separate court order directing the retirement plan to pay the benefit to you. You can read our fact sheets on this subject for more information:
In 2014, Congress passed a law called the Multiemployer Pension Reform Act (MPRA) that allowed financially-troubled multiemployer pension plans to cut retirement benefits under certain circumstances. Before these plans can make cuts, they must get approval from the federal government. If approved, these pension plans can cut the benefits of people who are already retired as well as active workers. An earlier law allows trustees to cancel certain early retirement and disability benefits for active workers. To learn more about the 2014 MPRA law, and what you may be able to do to protect your pension, you should read our fact sheets:
Facts About Multiemployer Pension Plan Funding
Resources for Participants in Multiemployer Pension Plans in “Critical and Declining” Status
A growing number of companies are transferring the money in their pension plans to insurance companies. Instead of federally guaranteed pensions, retirees receive what are known as annuities. This is sometimes called risk transfer or de-risking since the company no longer is responsible for paying benefits. The amount you receive in retirement should not change, but the protections you will receive if something goes wrong will be different. Our fact sheet explains how this practice could affect you.
What happens when a pension plan is transferred to an insurance company:
A pension freeze can result in different kinds of changes to a pension plan. You should ask fora letter from the person running your plan, to find out exactly what is being changed. We have a fact sheet that outlines several types of pension freezes and how they impact employees:
A federal insurance agency, known as the Pension Benefit Guaranty Corporation (PBGC), insures most company and union pension plans up to certain limits if the plans run out of money. The guarantee limits for plans set up by a single company are different from plans set up by a union and a group of employers. You can read about these protections in our fact sheets below.
Federal Pension Insurance Protections
Company and union pension plans are required to send a funding notice each year to plan participants. If you have difficulty understanding this notice or did not receive one, you should contact the person running the plan or a Benefits Advisor at the Labor Department at 1-866-444-3272. Here is our fact sheet on the notices.
Company and union pension plans are also required to file a financial form (Form 5500) with the Department of Labor each year that details the plans’ finances. These forms will also tell you if your plan is well funded.
Our fact sheet outlines where this information can be found.
Pension plans make mistakes in figuring benefit amounts that may not be discovered for many years. Although plans are not required to seek repayment from retirees, many do. If a plan is demanding repayment for a mistake that was not your fault, you should contact a pension counseling project or the Pension Rights Center. It may be possible to persuade the plan to drop its demand.
For more information you should read our fact sheet on overpayments.
Six regional federally-funded pension counseling and information projects provide free legal assistance to residents of 30 states. The projects can assist individuals who live in a state served by the project or earned the retirement benefit in a state served by the project. They can also help if the company/pension plan is headquartered in a state served by a project.
You can find a list of the pension counseling projects on our website.
You may also be able to find help from a government agency or nonprofit organization through our online referral service, PensionHelp America.
You can also reach out to the Pension Rights Center for referral to a private attorney through our National Pension Lawyer’s Network.
For free assistance calculating the amount of your benefit, you can reach out to the Pension Assistance List, a service of the American Academy of Actuaries.
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