The word “pension” usually refers to payments that a person receives upon their retirement. These regular payments are disbursed to the retired worker from an investment fund, which the worker contributed to during the time that they were working. The overall investment terms and details are referred to as the “pension plan,” which is usually determined by legal agreement between the worker and their employer.
Pension plans or retirement plans are often worked out by the employee and their employee. Some other institutions may help a worker with pension plans, such as a trade union and some employer associations. The person receiving the pension payments is known as the “pensioner”.
What Is the Difference Between a Pension Payment and Severance Pay?
Pension payments are different from severance pay, which is a one-time lump sum payment. Severance pay is often issued for persons who elect to leave work early before retirement. Severance pay is a voluntary offer of payment by the employer to an employee who has been let go or whose job has been eliminated. Employers voluntarily choose to provide severance pay to employees that have been let go or laid off to protect their own interests and release themselves from liability.
Who Is Qualified to Receive a Pension?
To qualify for a pension program, employees must generally wait for their rights for the pension plan to vest. Pension plan rights usually vest when an employee has worked five to ten years with the same employer. An employee can lose the rights to the pension if they leave the job before the rights have vested.
Once the pension has vested and the employee has rights to the money, the employee can either keep the money in the pension account until the employee retires, or remove the money early. If the money is removed before the age of retirement, tax penalties will incur.
What Are Some Benefits Associated with Pensions?
Pensions may often be advantageous for several reasons. For instance, a person who has invested in a pension plan may have legal advantages in terms of issues like:
- Tax purposes: Pensions can have overall benefits for both the retired person as well as their employer.
- Insurance: Many pension plans include some for of insurance coverage. This is important, as retirees are usually either aged or disabled.
- Controlled management: Pension plans help a person to avoid overspending. Rather than having access to all of their funds, pensions are dispersed periodically according to the plan terms.
Lastly, there are many different types of pension plans available for workers. These all differ according to factors such as the employer’s salary rate and length of employment. Thus, the worker can often choose a plan that would work best for them.
Can I Borrow Money from My Pension?
An employee may borrow up to 50% of the vested amount in their pension plan, but only if the employer’s pension plan allows borrowing. An employee can also rollover their pension to a new plan if the employer allows it. However, when you borrow from your pension plan, you would need to pay it back on time or you can face harsh tax consequences on the money that you borrowed.
What If I Have a Dispute Involving Pensions or Benefits?
Pension disputes can sometimes be resolved privately between the employer and the employee. Oftentimes the dispute is originating from a mistake or an error in the pension plan terms. These types of issues can often be resolved through the company’s internal management departments.
However, more serious disputes, such as a denial of pension benefits can require legal action to resolve. This may involve a civil lawsuit resulting in a damages award for the pensioner. Such legal remedies may help the person to recover the amounts they’re entitled to under state laws and according to their pension contract.
Should I Hire a Lawyer for Help with Pension Plans?
Pensions can sometimes be the source of legal disputes or conflicts. You may need to hire an employment lawyer if you have any questions or concerns involving pensions. Your attorney can help review the pension contract to determine your rights. Also, if you need to file a claim against an employer or other party, your attorney can help represent you in a court of law.