What will happen to my pension and health benefit if…?
Posted on 01. Sep, 2009 by admin in Absolute Returns, Blog, Retirement Planning
For those of us who are lucky enough to have a pension…
For those of us who are lucky enough to have a pension, here are some things to think about! In today’s tough economic climate, companies are cutting benefits and closing their doors!
If your former employer goes bankrupt what happens to your pension? The Pension Benefit Guarantee Corporation (PBGC) picks it up!
What is the PBGC?
The PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974 (ERISA). It currently protects the pensions of nearly 44 million American workers and retirees in 30,000 private single-employer and multiemployer defined benefit pension plans. The PBGC only becomes involved if a terminated pension plan does not have sufficient assets to cover all vested benefits.
What does the PBGC guarantee?
Generally, the PBGC guarantees most vested normal retirement benefits, early retirement benefits and certain survivors’ benefits at the level in effect on the date of a pension plan’s termination. However, the PBGC does not guarantee all types of benefits under covered plans. Also, the amount of benefit protection is subject to certain limitations so you might receive a monthly payment that is less than what you’re currently receiving.
If your former employer goes bankrupt what happens to your health benefit?
Your retiree health benefits may be terminated! ERISA law protects pensions, but not retiree health benefits. If your retiree health benefits are terminated, you need to find out what other health coverage is available to you as soon as possible.
If you are 65 or over, you are covered by Medicare
You should consider purchasing Medicare supplemental insurance to help you pay for prescriptions and expenses not covered under Medicare. (If you are under age 65, you are not yet covered by Medicare.)
Action Items
• Check if you are eligible for coverage under a spouse’s plan.
• Check out other health insurance options. Because group insurance plans usually cost less, see if any other group you belong to – such as a fraternal or professional organization– offers a group health plan.
• Check out Medicaid. If you are under 65 and disabled, with low income and few resources, you may be eligible for Medicaid. (Source AARP)