Across the world, there are public pension plans that pay out retirement benefits to public employees based on their years of service and average salary over a specific number of years of employment. Public employees also earn cost-of-living adjustments to maintain the value of their retirement benefits. Many workers rely on pension funds in addition to personal investments and retirement plan savings. But how are state pensions protected under the law?
Laws Protecting Against Bankrupt Employers
Large companies suffering financial difficulties have been known to justify withholding pension contributions to invest in operations. In the United States, for example, in the event that a pension plan is terminated by an employer due to bankruptcy, workers and retirees are protected by the Pension Benefit Guaranty Corporation (PBGC) created by the Employee Retirement Income Security Act of 1974 (ERISA). The PBGC will pay workers any pension benefits they were promised by a bankrupt employer, up to the guaranteed maximum amount. It’s important to note that pension finances are separate from business finances. This means that a company can be bankrupt while maintaining a well-funded pension plan, or its finances can be healthy yet the pension is underfunded.
After putting in years of creditable service, retirees have the legal right to access their pension benefits. My State Pension, for instance, is dedicated to helping American public employees maximize their benefits and retire with ease. The network of licensed agents and registered investment advisors has years of experience helping educators and state workers with their financial and retirement plans. The experts at this organization can help with pension plans, 403(b) retirement plans, 457(b) retirement plans, life insurance with living benefits, and debt relief and management.
Laws for Underfunded Pension Plans
It’s widely regarded that traditionally defined-benefit pension plans suffer from underfunding. This is especially true with multiemployer pension funds that union members participate in when working for multiple companies. The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) maintains a list of pension plans with varying funding statuses. 121 plans were deemed in critical condition, while 65 were deemed critical and declining, and 61 were deemed endangered in 2020.
Workers and retirees in traditionally defined-benefit pension plans are protected by the ERISA and PBGC. Regardless of participation in a single-employer or multi-employer pension plan, workers and retirees are guaranteed pension benefits up to certain maximums by the PBGC. The PBGC is funded by pension plan sponsors, meaning companies with defined-benefit plans pay an annual fixed-rate insurance premium on behalf of all participants.
If you wish to learn more about your rights as a working citizen in regards to your pension and the legalities behind it, consider reaching out to a lawyer who specializes in employee rights. For example, in Canada, no one knows more about labour law and complex litigation better than the Tamil-Canadian lawyer Malliha Wilson. Wilson has built an impressive career in global law and specializes in areas of human rights, indigenous, constitutional, corporate and labour law, as well as other complex litigation. Consulting a legal professional in your country like Wilson can give you insight into the legal processes of pensions and basic workers’ rights.
Laws for Loophole Pensions
Pension plans that fall under church status at the federal level aren’t obligated to pay into the PBGC’s pension insurance fund unless they opt to. This means that workers who contribute to pension funds aren’t protected under ERISA and won’t receive pension benefits in the event of underfunding or bankruptcy. Most church status pension plans choose not to pay into federal pension protections. They also aren’t obligated to pay equitable pension benefits, ensure pension funds are adequately funded, or provide workers with important information regarding retirement benefits or plan investments. State laws apply to such loopholes and require those who manage religious plans to act carefully and in the best interest of plan participants.
No matter what type of pension plan public sector workers and retirees participate in, they have a legal right to receive pension benefits after completing years of creditable service.