Pensions are retirement benefits provided by your employer. These benefits replace some of the personal savings you need when you retire. However, sometimes companies terminate employees before they retire. If you are fired, the issue of whether or not you will still receive your pension benefits depends on your employer's pension policy and whether it includes a vesting policy.
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Your pension benefits are protected by the Employee Retirement Income Security Act (ERISA), so they won't be lost when you're terminated. The law generally requires that your benefits be paid out when you retire. However, your plan may include provisions consistent with the law that provides for payments that are earlier than your normal retirement age.
You get retirement benefits you've earned regardless of your employment status. In other words, you won't lose benefits after having worked for your employer for 20 years. You earn and accrue your benefits. As long as you've earned those benefits, you cannot be denied them. You won't have to come up with additional savings to replace the pension.
Your employer may have a vesting schedule by which employees earn pension benefits. A vesting schedule specifies the length of time you must remain employed with your employer to receive full benefit payments from your pension plan. Your pension generally provides for one of two vesting schemes. You may either use a five-year cliff vesting or a seven-year graduated vesting. A cliff vesting means that you receive no benefits for the first five years of employment. After your fifth year, you earn 100 per cent of your employer's contributions to the plan. Graduated vesting means that you earn your benefits over a period of seven years. If you're fired prior to earning your full benefits, you get only the portion you've earned. If this is nothing, you get nothing from your pension.
Keep a personal savings outside of your pension plan. Personal savings allows you to rely more on yourself than your employer. This is especially beneficial if you change jobs frequently or don't expect to stay with your employer until you fully earn your benefits. You won't be committed to your pension plan or your employer, allowing you to focus on pursuing other employment opportunities without worrying about your retirement savings being there for you.
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