If a company has a pension plan, can they void or stop paying once you are locked in?

Question

My company has a pension plan as well as 401K.....i have just started and one of the drawing factores to the job is the pension, but I am worried I will put in my time only to have them take away the pension before I get a chance to collect.....can they do that? Or will I recieve a cash settlement or do they have to pay out a pension once im locked in no matter what?

Answer 1

The $$ in the pension is owned by the company - yes they decide what happens in the future and you can wind up getting nothing if they ever run into financial troubles. (this is like social security - not guaranteed)

401K is money in YOUR account under name - no one can "take" the money from you. You can purchase shares of various different companies through mutual funds. Typically a good growth fund will do about 12% per year on average (there will be ups and downs).

Answer 2

Companies can cancel pension plans as they are company asserts. The only time the pension plan becomes useless is if the company goes insolvent (bankrupt). Otherwise, they have to distribute the funds to members. The distribution will be based on the amount in the fund and how many people participated. For example, if the fund were to pay you $10 a week for life but was dissolved (not because of insolvency). You would get the value of what you put in, not the value of the pay out. If you put in $100 and that $100 was invested in a bond that only paid $90. You would get the $90 minus expenses, or probably about $80. If on the other hand, that bond did well and made it to a value of $150, you would get that amount (minus expenses).

A company cannot seize a pension fund's asserts other than for paying debtors. 401K is how most companies are going these days and are a bit safer if not as lucrative.

Answer 3

They can discontinue the plan, but you'd be entitled to whatever you had already earned and vested.