You have worked hard your whole life and you deserve to get paid. If you have been paying into your pension for years, but now that it is time to start receiving those benefits the company is gone or your money is nowhere to be found, do not panic. The Employee Retirement Income Security Act (ERISA) of 1974 was created to help protect you and ensure that you are paid the money you are owed. There could be many reasons why you are not getting the pension benefits you are entitled to. Regardless, our team can help.
Did you know that 21 percent of workers participate in a pension plan? If a defined benefit plan is terminated, ERISA requires plans to “guarantee payment of certain benefits through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation (PBGC).”
Tittle & Perlmuter is currently investigating pension benefit claims. If you or a loved one are not receiving the money you are owed and have worked hard for, our experienced ERISA attorney, Scott Perlmuter, can help. Below are some frequently asked questions regarding ERISA, pension plans, and more.
What is a Pension Plan?
A pension plan is a retirement plan sponsored by an employer to provide retirement income to employees. A defined benefit plan is the most common type of pension plan, and most provide retirees with guaranteed lifetime payments.
What is the Employee Retirement Income Security Act (ERISA)?
The Department of Labor states that ERISA is “a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.”
What Does ERISA Enforce?
ERISA covers defined benefit plans and contribution plans. It requires these plans to:
- Provide participants with plan information about plan features and funding
- Set minimum standards for participation, vesting, benefit accrual, and funding
- Provide fiduciary responsibilities for those who manage and control plan assets
- Establish a grievance and appeals process for participants to get benefits from their plans
- Give participants the right to sue for benefits and breaches of fiduciary duty
- Guarantee payment of certain benefits through the Pension Benefit Guaranty Corporation (PBGC), if a defined benefit plan is terminated
What Does ERISA Not Cover?
ERISA does not cover any of the following:
- Plans established or maintained by governmental entities
- Churches for their employees
- Plans that are maintained only to comply with applicable workers compensation, unemployment, or disability laws
- Plans maintained outside the United States for the benefit of nonresident aliens or unfunded excess benefit plans
Why are Pensions Important?
Pensions play a vital role in the overall retirement security of American workers, retirees, and their families. Below are some important statistics to note:
- Average yearly Social Security payment: $18,579
- Annual minimum-wage salary: $15,080
- Average portion of pay Social Security replaces: 34.5%
Pensions help support retirement because most people do not have large personal savings to fall back on. Did you know:
- Median total savings of older households is $54,300
- Median income from savings of older Americans is $1,609
- Median income of older Americans is $27,398
Pensions can help increase income security. For instance:
- Median pension income for people ages 65 and older: $14,821
- Percentage of older Americans with a pension: 31%
Pensions also contribute to the economy. Pensions are the world’s largest source of capital, at $25.6 Trillion. The cost in tax subsidies is $290 Billion.
What Are the Different Types of Retirement Plans?
The Employee Retirement Income Security Act covers two main types of retirement plans:
Defined Benefit Plans
Promises a specified monthly benefit at retirement (may be an exact dollar amount or a formula that calculates salary and service).
Defined Contribution Plan
The employer or the employee (or both) contribute to the employee’s individual account under the plan, sometimes at a set rate. Examples include 401(k) plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans.
- Simplified Employee Pension Plan (SEP)
- Employees make contributions on a tax-favored basis to individual retirement accounts (IRAs) owned by the employees
- Profit Sharing Plan or Stock Bonus Plan
- Plan provides or the employer determines how much will be contributed to the plan annually
- 401(k) Plan
- Employees can elect to defer receiving a portion of their salary which is instead contributed on their behalf, before taxes, to the plan (employer may match these contributions)
- Employee Stock Ownership Plan (ESOP)
- Investments are primarily in employer stock
- Cash Balance Plan
- Defines the promised benefit in terms of a stated account balance
What is a Fiduciary?
ERISA upholds legal standards for the management of retirement funds. If money is mismanaged, that is usually a breach of fiduciary duty. A fiduciary is someone who takes care of a client’s money or assets. This person has a legal obligation to act in the best interest of the person whose money they have been entrusted with to manage. A fiduciary might include:
- Plan trustees
- Plan administrators
- Members of a plan’s investment committee
Sometimes a fiduciary fails to act in the best interests of their client, in which a breach of fiduciary duty occurs. They may not properly inform a participant or beneficiary which can lead to many complications such as:
- Acting against the beneficiary’s best interests
- Not diversifying the plan’s investments to minimize the risk of large losses
- Using another person’s pension fund for their own benefit
- Not following the terms of plan documents to the extent that they are consistent with ERISA
- Receiving compensation from those in charge of the fund’s assets
- Not reevaluating the pension plan twice per year and/or not examining the plan for viability
As a skilled lawyer familiar with pension plan claims could further explain, a fiduciary may be breaking the law if they are tapping your pension funds or benefiting from them in a way that is not directly related to your best interests. Problems can also arise when they avoid their duty and do not carefully examine a pension plan to ensure it benefits the participant rather than the employer. This could happen when the fiduciary first sets up the plan or when they are supposed to check it twice per year.
Even if your workplace hires someone to act in your financial interest when it comes to your pension plan, if that person incorrectly handles your funds or make a mistake, it is necessary to take action. This ensures that you are compensated for all the pension funds that you are entitled to. It is illegal for a fiduciary that was hired to take care of your retirement funds to not fulfill their duty to you.
Pension Plan Red Flags
There are usually warning signs or “red flags” that result in foreseeable pension deaths. The Department of Labor shares 10 warning signs that your 401(k) contributions are being misused:
- Your 401(k) or individual account statement is continually late or comes at irregular intervals
- Your account balance does not seem accurate
- Your employer failed to transmit your contribution to the plan on a timely basis
- A significant drop in your account balance occurs that cannot be explained by normal market ups and downs
- Your 401(k) or individual account statement shows your contribution from your paycheck was not made
- Investments listed on your statement were not authorized by you
- Former employees are having issues getting their benefits paid on time or in the correct amounts
- There are unusual transactions such as a loan to the employer, a corporate officer, or one of the plan trustees
- There are frequent and unexplained changes in investment managers or consultants
- Your employer has recently experienced severe financial challenges
What are Postmortem Benefits?
Some pensions terminate with a person’s death, while others provide financial support to spouses or dependents. This might be referred to as survivor benefits. Ultimately, it depends on what kind of pension plan the deceased was enrolled in prior to their death. If a spouse or parent of yours was paying into a pension and dies, it is important to investigate the plan to ensure your payment is not overlooked if you are supposed to receive those funds.
File Your Pensions Benefit Claim with a Skilled Attorney
Tittle & Perlmuter’s ERISA Attorney, Scott Perlmuter, can help if you have questions or concerns with your pension plans. Named as a “Rising Star” by Super Lawyers for five consecutive years, he stands in the top 2.5 percent of lawyers under the age of 40.
Scott strongly believes in fighting for the underdog and takes pride in overcoming the odds. He has won several pension lawsuits and can help you navigate your pension benefits claim. Contact our firm for a free case review. Our team is standing by and is ready to assist you.
