What Happens to My Pension if My Employer Goes Bankrupt?

https://www.pbgc.gov/wr/benefits/guaranteed-benefits/maximum-guarantee https://www.governing.com/finance101/gov-pension-protections-state-by-state.html …


15 thoughts on “What Happens to My Pension if My Employer Goes Bankrupt?

  • Susan Reynolds

    (October 28, 2020 - 12:33 pm)

    What are your thoughts on taking a lump sum instead of the pension?

    Ron Larson

    (October 28, 2020 - 12:33 pm)

    You might want to mention that there is no protection for retiree health care benefits. I worked at a bank for 12 years that had a retiree health care plan. The bank failed in 2008 and all of those older people that I knew who had retired were hosed for their health care.

    Also… not all pensions are insured. The workers of a New York State hospital found that out the hard way when the hospital failed last year. Religious affiliated corporations were exempted by Congress.

    Anthony Richardson

    (October 28, 2020 - 12:33 pm)

    ERISA also has vesting procedures to prevent everything from going away. Pretty good backstop for private pensions.

    Raymond Marciano

    (October 28, 2020 - 12:33 pm)

    Josh. In California there is what's called the California rule that does protect public pensions. The problem we have is pension spiking and certain professions receiving 3 percent per year of service. This is unsustainable for many cities that will have to start cutting services in order to pay the cost of public service pensions. The 3 percent per year came about I think during Grey Davis' tenyor as Governor. He was recalled during the debacle of 2000 to 2001 electric power crisis. A judge determined early in the early 2010s or so that the then bankrupt city of Stocton could trim payments to CALPERS along with it's other creditors, but the city decided to continue it's payments to CALPERS in full. The California Rule thusly is not set in stone.

    Richard Biddle

    (October 28, 2020 - 12:33 pm)

    I work for the Postal Service with 18 years of federal employment, including military time. I’m 37 and definitely unsure how things will turn out with my pension.

  • Joel L

    (October 28, 2020 - 12:33 pm)

    As I understand it, the monthly maximums from the PBGC are based on your age at the time your company's pension plan defaults, not based on the age you retire. Hence, the pension I currently receive will continue to be be paid in full if my current monthly benefit is less than the maximum limit for the age I will be when my pension plan defaults. Someone please correct me if I have misstated this. Thank you.


    (October 28, 2020 - 12:33 pm)

    Curiously, I can't find anything about how cash-value pension plans are structured. The stuff I get from my former employer suggests that the pool of investments to cover the total balances of all beneficiaries exists and is held outside of the company. I know that when you annuitize your balance, they just use your balance to purchase a single-life annuity from an insurance company. It seems pretty safe, but you can also roll the money into an IRA if you feel that is safer.

    John C

    (October 28, 2020 - 12:33 pm)

    Funny, but I've seen those same people on the PBGC website in many business settings. Those people sure are busy! 🤣

    Salvatore Xi

    (October 28, 2020 - 12:33 pm)

    Is there a method to create a pension on your own with the same guaranteed monthly payment to yourself until death? If so what is the cost to create a monthly payment ie $10 equates to a $1/month payment into perpetuity?


    (October 28, 2020 - 12:33 pm)

    PBGC can cover a finite number of pension failures (or for FDIC, a bank), however if there were a major national collapse in either pensions or banks, those organizations don't have enough funds to cover such a dire scenario. Whether we devolve into such a catastrophe is up for speculation, but Illinois, NY, CA, NJ should give one pause.

  • Lee Schroth

    (October 28, 2020 - 12:33 pm)

    Breaking an implicit contract. It's happening everywhere, public and private. Many people accepted lower pay in exchange for pension guarantee and then rug pulled out under them.

    Harry Chu

    (October 28, 2020 - 12:33 pm)

    How about the LIRR Pension King? Google it, he gets a $400k/year pension from NYC.

    Phil Sallaway

    (October 28, 2020 - 12:33 pm)

    Some states are so underfunded it is scary I think New Jersey is only 45% funded..! Calf is something like 68% funded and that 32% is in the Billions Ouch. Thanks Josh Great Vid. only thing missing is….. PAWblo..!


    (October 28, 2020 - 12:33 pm)

    If you belong to a multi-employer plan such as a union pension plan the guarantee percentages are much lower than for others. In addition two Republican senators (Chuck Grassley and Lamar Alexander) have proposed a law to put additional fees and taxes on these plans which would essentially put them out of business. Please write or call your senator and voice your opposition to this proposed law.

    Alberto Santa Barbara County CA

    (October 28, 2020 - 12:33 pm)

    Yikes! For private pensions in California, does this applies to pensions to be taken or pension aunties that already started?

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