The Employee Retirement Income Security Act, or “ERISA,” is a federal Act designed to provide pension reform. It sets standards and regulations of protection for those involved in private sector company retirement plans. ERISA requires that set plans provide employees with accurate plan information, as well as facts about:
- Plan features and funding;
- Amount of time in which an employee must work for their employer before being allowed to participate in a retirement account;
- Minimum standards required for participation;
- Vesting, or when the employee has the right to the entirety of their share of the fund;
- Benefit accrual;
- Management and control features;
- Claims and appeals process for participants; and
- The right to sue when benefits have been breached.
ERISA establishes minimum standards in regards to vesting, funding, and fiduciary relationships. It also establishes a system of compulsory benefit insurance, as to protect the security of pension rights, specifically pension and benefit plan recipients and beneficiaries. The three main protections provided by ERISA are:
- Eligibility Guidelines: Employees aged 21 or over, and have worked at least twelve months for the employer, must be offered access to any pension or benefit plan that is in place;
- Management of Funds: Employers are liable and subject to prosecution for mismanagement of benefit funds; and
- Wrongful Termination: Employees cannot be fired in order to prevent eligibility for benefit plans.
Additionally, ERISA guarantees the payment of certain benefits through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation, should an employee’s benefit program be terminated. Program termination would result in the employee not being able to receive the benefits they are owed from that program. To simplify, ERISA protects the assets of working Americans by ensuring that the funds placed in their retirement plans are there when they actually retire.
How Do I Claim ERISA Survivor Benefits?
ERISA also protects the spouse of a deceased participant, when that deceased participant earned a vested pension prior to their death. In order to claim survivor benefits, the surviving spouse should contact the decedent’s plan administrator or employer to file a claim. Most likely, they will need to provide the decedent’s death certificate to the retirement plan administrator.
The surviving spouse should then be notified of the amount and form of benefits they are to receive, and whether the benefits may be rolled into their own retirement plan. If it is possible to roll the benefits into the surviving spouse’s own retirement plan, they will also be notified regarding how and at what time the rollover must be made.
Defined contribution pension plans are such that each participant has their own individual account. These benefits are paid out in a lump sum equal to the value of the person’s account at the time of issue. Terms for these plans vary, and payment may be paid in different forms, such as a life annuity.
An example of defined contribution plans include 401(k) plans, in which the surviving spouse automatically receives survivor benefits. Should the individual have decided on a beneficiary other than their spouse, the surviving spouse would need to sign a consent waiver in the presence of a witness.
Defined benefit pension plans are those in which participants do not have individual accounts; benefits begin at the person’s retirement age, in the form of a life annuity, and include a survivor’s benefit. This survivor’s benefit is a qualified joint and survivor annuity (or “QJSA”) and will continue over the participant’s lifetime, as well as their spouse’s lifetime. The spouse will receive a payment of at least half of the benefit that the participant received during their joint lives.
How Can I Change a Survivor’s Benefits?
In order to change your survivor benefit election after your retirement, you must put it in writing and within thirty days of your first regular annuity payment. If it is changed to anything other than the maximum benefit, you will need to get your spouse’s consent, or a waiver of consent.
You cannot cancel the survivor benefit after thirty days. You may be able to change your designation after thirty days, and before eighteen months has passed, under specific circumstances. These circumstances are electing a survivor annuity, or increasing a reduced survivor annuity amount.
If you had a previous marriage that lasted ten years or more, you may receive benefits on your ex spouse’s record regardless of if they remarried, if:
- You are currently unmarried;
- You are 62 or older;
- Your ex spouse is eligible to receive social security retirement or disability benefits; and
- Your own benefit, that you are entitled to receive, is less than the benefit you would receive based on your ex spouse’s work.
An ex spouse’s right to benefits does not necessarily dissolve after a divorce decree, settlement agreement, or court order. Thus, even if state law denies an ex spouse’s rights to benefits, it could still be possible to receive retirement plan payments.
As a divorced spouse, the benefit you would receive is typically half of your ex spouse’s full retirement amount. Additionally, it will not include any delayed retirement credits that they may receive.
In the case of divorce, you can access your IRA or 401(k) before retirement, with no tax penalty. This is due to the fact that the court could order part of your account to your spouse, which allows you to tap the funds tax free so as to comply with the divorce order. Your spouse could receive a portion, all, or none of your retirement account, depending on the specifics of your circumstances.
Do I Need an Attorney for Claims Involving Pension Benefits?
Retirement and estate planning can be complicated. Therefore, it is in your best interests to consult with a skilled and knowledgeable employment attorney that specializes in pension and benefits.
An experienced employment law attorney can advise you of your legal options, and your state’s laws regarding estate planning. Additionally, an experienced employment law attorney can help you develop a plan that works best for you based on your circumstances.
Additionally, if you are in a situation where you are going through a divorce and you have a pension and benefit plan, you should consult an experienced family law attorney. An experienced family law attorney will be able to calculate how much of your pension is owed by or to your spouse, and help you file all necessary legal documents. Finally, an attorney can represent you in a court of law, as necessary.