retirement

Your pension when the unexpected happens

What happens to your pension if ...
What happens to your pension if ... © Michal Durinik/Shutterstock.com

What happens to your pension when the unexpected occurs? For instance, what happens to it if your employer offers a lump sum after you've already begun getting paychecks; if your company goes bankrupt before you claim benefits; if the Pension Benefit Guaranty Corp. takes over your plan; if your pension is frozen; or if it's converted to a cash balance plan? What happens to it if you divorce or die?

The short answer to most of these questions is that your pension will remain safe. Uncle Sam offers protections for private pension plans that help make sure you will get the benefits you were promised. These protections are guaranteed by the Employee Retirement Income Security Act of 1974, or ERISA, and they apply to both 401(k) plans and old-fashioned defined benefit pension plans.

More pension protections were layered on with the passage of the Pension Protection Act of 2006.

Together, these two laws hold employers to their commitments. Read on to learn the particulars of what happens to your pension if one of eight scenarios transpires.

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