An employer-based pension plan can help employees secure a financially stable retirement. A pension is similar to other retirement plans such as a 401(k).

This is because it may require you to make monthly contributions to maintain the account as you are employed with the company, but your employer will match your contributions. While the best retirement plan may differ for employees, the benefits a pension plan can provide them can be a significant advantage when preparing for retirement.

The following sections define what a pension is and how it functions in the workplace. Additionally, you can learn how to apply for benefits once you reach retirement age or want to take advantage of your funds early. Although pension plans are becoming less common because they require employees to remain with a single company for an extended period, they still exist in the private and public sectors. You should review the information listed below to make an informed decision about utilizing the funds in your account or choosing another type of retirement savings plan upon your retirement.

What is a pension?

A pension plan is often an employer-sponsored investment fund to which an employee or his or her employer contributes to while they are employed. Pensions, are then distributed to the employees during their retirement for up to 20 years. Pension benefits include fixed financial support based on employees’ earnings (in a defined-benefit plan) or their contributions to the account (in a defined-contribution plan). However, employers usually control pension plans.

Who is eligible for pensions?

Most employees are eligible for employment-based pension plans if they are currently employed at a company offering plans and have worked with the company for multiple years. The number of years employees are required to work before receiving pension may depend on the company, but most require up to 10 years of employment.

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How do you apply for pensions?

Depending on your pension plan, you may apply for benefits online or request paper applications by mail, phone, email or fax. Regardless of your application method, the formal pension benefit application will require you to provide the following information and documents:

  • Your full name, address and date of birth
  • Your birth certificate
  • Your Social Security Number (SSN)
  • The names of all employers for whom you have worked
  • The type of benefit for which you are applying
  • The payment plan option that you choose
  • When you plan on retiring
  • Your last work day
  • Your marital status
  • Your marriage certificate or divorce decree (if applicable)
  • Your spouse’s birthdate and birth certificate (if applicable)
  • Your phone number

The information you provide will help determine your benefit eligibility and locate your benefits. According to federal law, you can only apply for your pension up to 180 days before your pension effective date, which is indicated in your Summary Plan Description (SPD). You may call the pension fund office at 1-800-424-9608, fax your application to the office at 202-463-8098 or email the office to request a paper application. Pension plans must be distributed no later than April 1 once beneficiaries turn 70 years of age, but taking your benefits earlier than 65 years of age may affect your monthly annuity payments.

Note: All documents requested during the application process must be official copies.

How to Protect Your Pension

As a senior, your pension plan may already be established, but that does not mean it is protected. The following tips may help you get the proper amount of money from your pension and maintain it throughout your retirement:

  • Review your pension plan to determine the terms of your plan. In your (SPD), you will find useful information pertaining to your pension and its execution. To better understand how your pension plan operates, you should review this thoroughly along with your individual account information.
  • Learn what accrued and vested benefits are. Whereas vested benefits are financial incentives that you are fully entitled to receive regardless of their hours worked, accrued benefits are financial or other benefits awarded to you after you have been employed for a period. In other words, accrued benefits are based on years of service with employers while vested benefits are guaranteed to employees automatically.
  • Keep your own records. While your employer is responsible for managing your current pension, you should keep records of your places of employment, the dates of your employment and your wages. You are also advised to store copies of official benefit statements or plan documents you receive for future reference.
  • Communicate changes that may affect your benefits with your employer or plan administrator. Changes such as marriage, divorce and the death of your spouse may impact the frequency and amount of payments distributed to you. You should also be familiar with the main contact within your company that manages your pension to facilitate this communication and ensure you receive timely feedback if any issues arise. This person can give you detailed information about your plan, send additional documents and adjust payments as needed.
  • Track your company’s well-being. Acquisitions and mergers can affect your pension fund, so you must remain informed on the status of your current or former employer.
  • Know your pension legal rights according to state and federal laws. Pension plans should include all types of compensation to calculate benefits as well as accurate Social Security information. If you believe your assets have been incorrectly valued or your benefits were not calculated sufficiently, then you should discuss your concerns with your pension administrator or contact the Department of Labor’s Employee Benefits Security Administration.

While pension plans can provide much-needed financial assistance during retirement, they may not be ideal for all workers. Other retirement accounts like traditional IRAs and 401(k)s are considered more flexible than pensions and can be transferred to different employers upon the cessation of employment. For these reasons and others, many companies are converting their plans to 401(k)s, which may affect current benefits. However, your retirement pension plan can be protected and recovered if you fully understand your rights and responsibilities.

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