Types of Employer-Sponsored Retirement Plans Generally
Most employer-sponsored retirement plans are governed by the Employee Retirement Income Security Act (“ERISA”), unless you are employed by the government or a church-related entity. These plans fall into two major categories: defined benefit plans and defined contribution plans.Defined Benefit Plans (Pension Plans)
Defined benefit plans, most commonly known as pension plans, are primarily funded by your employer. These plans provide eligible employees with guaranteed income upon retirement. The benefit amount is based on a formula set forth in the plan, which typically considers factors such as your age, years of service, and earnings. Employers are responsible for investing contributions and distributing the funds for defined benefit plans. This means that employees have little control over these funds leading up to their retirement. Likewise, employers bear the risk that the investment returns will not cover the defined benefit guaranteed to the employee. Because of this risk, administering these types of plans has become increasingly complex and expensive for employers. As a result, defined benefit plans are becoming increasingly scarce.Defined Contribution Plans (401(k), 403(b), profit sharing, and employee stock ownership plans)
Defined contribution plans include 401(k), 403(b), profit sharing, and employee stock ownership plans. These plans are generally funded by employee contributions, which are generally made in the form of pretax payroll deductions. In addition to the employee’s contributions, many employers offer matching contributions up to a certain limit. (For example, let’s say you earn a salary of $50,000 and your employer offers a 50% match up to 5% of your salary. If you contribute $2,500 (5% of your annual salary), your employer would contribute an additional $1,250.) Unlike defined benefit plans, the employer is not responsible for electing investment. Rather, this responsibility falls to the employee. Also unlike defined benefit plans, these plans do not guarantee a specific amount of income upon retirement. Instead, upon retirement, the employee will receive the balance in their account, which is based on contributions and the market’s gains or losses.Common Legal Issues in Employer-Sponsored Retirement Plans
After years of dedicated service to your employer, you should be able to count on the retirement benefits promised to you. Yet, when it comes to collecting these benefits, it is all too common for employees to encounter glitches. Hawks Quindel’s employee benefits attorneys assist clients with a variety of legal issues in connection with employer-sponsored retirement plans, including situations in which:- your pension benefit amount is different than what you had expected
- certain years of service have not been counted for your pension benefit
- you are being told you are not “vested” or never qualified for coverage under a pension plan
- your employer is failing to make its promised contributions
- your employer is deducting your contributions from your paycheck but not actually contributing these amounts to your 401(k) account.
- you are seeking a hardship withdrawal from your 401(k) account
Employee Benefit Attorneys Advocate for Your Pension & Retirement Benefits
Hawks Quindel’s employee benefits attorneys are committed to advocating for your rights under your employer-sponsored retirement plans. This means holding employers accountable for complying with ERISA regulations and the plan’s terms. Congress passed ERISA to protect employees’ rights to their pension benefits. Employers must comply with ERISA’s minimum standards. For instance, employers are required to allow participants access to information, such as the plan documents, financial statements, and annual reports. They must adhere to the standards for participation, vesting, and funding. The fiduciaries who administer the plan must do so in the participants’ best interest, and they must act prudently in their investment choices. Further, employers must obey all of the plan terms so long as those terms are consistent with ERISA.Contact Us for a Consultation
If you have questions about your pension, 401(k), or other employer-sponsored retirement benefits, Hawks Quindel can help. The employee benefits attorneys will provide a thorough review of your eligibility for benefits, and take all steps necessary to secure the retirement benefits wrongfully denied to you. Contact us today to discuss your rights.Please call a Madison employee benefits attorney directly at (608) 257-0040 or a Milwaukee employee benefits attorney at (414) 271-8650, or email us via our Contact Page.