What happens to my pension if my employer declares bankruptcy?

What happens to my pension if my employer declares bankruptcy?


I recently came across a helpful Department of Labor fact sheet – Your Employer’s Bankruptcy – How Will It Affect Your Employee Benefits? Given the current state of the economy, it’s never too early for workers to know what might happen to their benefits if their employer goes bankrupt.  The fact sheet highlights the important fact that, even if an employer declares bankruptcy, its pension assets cannot be touched by the company’s creditors to pay off debt.

Another thing to keep in mind is that because pension assets are separate from company assets, pension plan funding levels are not directly tied to a company’s financial health.  This means that a bankrupt company could have a fully-funded pension plan.

One thing the fact sheet leaves out is a way for workers to figure out the financial health or funding level of their pension plan.  Instead, use our fact sheet, How Well-Funded is Your Pension Plan?, to find out about the funding level of your pension plan.

Furthermore, all workers covered by defined benefit plans should receive an annual pension funding notice from their pension plans.  This notice contains information on a pension plan’s funding status, the number of participants covered by the plan, and a comparison of the value of the plan’s assets and the amount of benefits being paid out.

Wisely, the DOL recommends that employees should keep track of their pension plans – especially after switching jobs.  This is particularly important if the company goes out of business, changes its name or terminates the pension plan.  Read our fact sheet, Tips for Keeping Track of Your Pension, for things to do to ensure you get your pension when you retire.

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