Are Employer Pensions Reliable?
A long time ago this may have been true. But nowadays, with some businesses going bankrupt or out of business, the retirement pension funds are some times used to pay debts owed by the business. This can leave the former employee with nothing except their social security pay if they are eligible to receive them. Senior citizens will find they are not able to retire and have to go find jobs just to keep affordable health insurance for their families.
There are mainly two types of pensions. 1) Defined Benefits Plans are usually based on time worked and wages earned. There is not a separate account for each employee. The business keeps all pension funds in one account of a trust set up by the employer. 2) A Defined Contribution Plan, the employer regularly makes deposits into each account set up for each employee. The employee is only guaranteed to receive only the amount in the account when the employee retires.
Retirement pensions are governed by the federal government statutory law. Congress passed the The Employee Retirement Income Security Act (ERISA) in 1974. The ERISA was also created to mandate interstate commerce to be regulated. It mandates that employers provide on a regular bases detailed descriptions of benefits to be received by their employees to the Labor Department and their employees. ERISA does not apply to Defined Compensation Plans.
ERISA requires that employees who meet a certain number of years working for the company become vested after completion of the number of years. Some companies make time work to be vested five years, while others require seven years to be fully vested with the company. The ERISA Act also protects family survivors in case of the death of the vested employee. The employers must pay premiums so their payments are covered by the ERISA created Pension Benefit Guaranty Corporation. The PBGC must receive payments from the employers to be considered covered.
With the coming of age of the Baby Boomers retirements, employers of businesses are trying to move away from offering as good retirement pensions. They are simply doing this because as the number of retirees grows, paying their retirement benefits starts to eat away at their profits bottom line. Some businesses are starting to do away with retirement pensions completely. Some private businesses are not even required to have a retirement pension plan
Because of the above information, Employer Retirement Pensions are no longer reliable. They are no longer written in stone. People are having to find any kind of jobs to help with medical bills and other necessities to make ends meet, because the amount of their pensions and benefits are slowly decreasing.