When an employee is terminated due to corporate cutbacks, he or she is usually referred to as having been “laid off.” This can be a frustrating and financially difficult time for a worker, and many people are left wondering whether or not they will still be able to collect their pension. In general, this will depend on the specific plan type and a few other factors regarding your employment terms. The following information will help you understand the state of your pension after a lay-off.
Types of Pension Plans
Defined contribution plans do not promise a specific benefit amount at retirement. Instead, you and your employer will contribute to a single plan account, usually at a set rate. At retirement, you will receive the balance in your account, which will be based on the contribution amount and the status of your investments. This amount will usually increase and decrease along with the value of your investments.
Defined benefit plans will provide you with a specified monthly benefit once you retire. These plans may or may not promise an exact dollar amount, and your benefits will usually be calculated using a complex plan formula. This formula will take factors such as your salary and years of service into consideration in order to calculate a reasonable monthly benefit amount.
In most cases, if you are enrolled in a profit sharing or defined contribution plan, such as a 401k, you will be able to receive a lump sum distribution of your retirement funds after your termination. On the other hand, if you are enrolled in a defined benefit plan, or a plan that provides you with fixed predetermined benefits, you will usually receive your benefits at retirement age. This is because the vast majority of these plans lack a provision that will allow you to withdraw your money prior to retirement. Before you attempt to collect your pension, you should understand what type of plan you are enrolled in.
Regardless of your plan type, the distribution of your pension, the date that your pension will become available, and your ability to withdraw money will depend on other provisions of your plan. These provisions are usually available within the plan documents, and it is important that you thoroughly read these documents before taking any sort of action. Many plans will not distribute your pension until you reach a certain age. Other plans prohibit distribution if you have been unemployed for a specific period of time. There are also some plans that only process distributions during certain times (many of these plans only process distributions once a year).
If you need further information regarding the distribution of your pension, you should contact your pension plan administrator directly. He or she will be able to address any questions or concerns that you may have and determine whether or not you will be able to withdraw funds prior to retirement.
The Summary Plan Description, or SPD, is one of the more important pension documents that you will have access to. This document will provide you with comprehensive details about your benefits and how they will be calculated. Most workers can receive a copy of their SPD from their employer or pension plan administrator.
In addition to your SPD, your place of employment may also provide you with an individual benefits statement. This statement will show you the current value of your pension benefits; this is the amount that you have earned to date, as well as your vesting status. These documents will help you understand whether you can withdraw your money now or at a later date.
In short, whether or not you will have access to your pension after you are laid-off will depend on the specific pension plan that you are enrolled in. To better understand your plan and its provisions, consult your administrator or employer.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.