Wednesday, January 14, 2009

More reassurances for employees and retirees whose companies go broke


Paul Katzeff has an important column on Yahoo! Finance about what happens to your 401K accounts after a layoff, particularly if your employer goes bankrupt, or terminates contributions to your 401K, or terminates your pension.

Your money is encapsulated inside your account. It is not comingled with the company’s. The account is yours; you are not a “creditor” of the employer. Usually, the retirement account is managed by a third party. In case of termination, you’ll have 60 days to move the account into an IRA.

You have rights under ERISA for your defined benefit pension if terminated (whether you're a vested employee or already a retiree). Most employer plans are “qualified” and PGBC can pay up to $54000 for fully earned benefits. Some pensions are “collective” and organized by guilds or unions, and have contributions from several companies.

The text of the article, “Securing Your Nest Egg Against Layoffs,” dated Jan. 13, is here.

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