This publication has been developed by the 

U.S. Department of Labor, Employee Benefi ts Security Administration. 

It is available on the Internet at: www.dol.gov/ebsa

For a complete list of EBSA publications, call 

toll-free: 1-866-444-3272

This material will be made available in 

alternate format upon request:

Voice phone: (202) 693-8664

TTY: (202) 501-3911

This booklet constitutes a small entity compliance guide for purposes of the Small 

Business Regulatory Enforcement Fairness Act of 1996.


INTRODUCTION................................................................................................. 

Chapter 1: TYPES OF RETIREMENT PLANS............................................................... 

Chapter 2: EARNING RETIREMENT BENEFITS...........................................................

Chapter 3: PLAN INFORMATION TO REVIEW...........................................................

Chapter 4: PAYMENT OF BENEFITS.........................................................................

Chapter 5: TAKING YOUR RETIREMENT BENEFIT WITH YOU.......................................

Chapter 6: FILING A CLAIM FOR BENEFITS............................................................... 

Chapter 7: RESPONSIBILITIES OF PLAN FIDUCIARIES................................................ 

Chapter 8: YOUR BENEFIT DURING A PLAN TERMINATION OR COMPANY MERGER......

Chapter 9: POTENTIAL CLAIMS AGAINST YOUR BENEFIT (DIVORCE)............................

Chapter 10: WHAT TO DO IF YOU HAVE A PROBLEM.................................................

GLOSSARY.......................................................................................................... 

TABLE OF CONTENTS

1

3

5

11

15

19

21

23

27

29

31

33

Your employer’s retirement savings plan is an essential part of your future fi nancial 

security. It is important to understand how your plan works and what benefi ts you will 

receive. Just as you would keep track of money that you put in a bank or other fi nancial 

institution, it is in your best interest to keep track of your retirement benefi ts. 

Those responsible for the management and oversight of your retirement plan must 

follow certain rules for operating the plan, handling the plan’s money and overseeing the 

fi rms that manage the money. You should also understand and monitor your retirement 

plan and your benefi ts. You will fi nd Action Items in each chapter to assist you in doing this. 

This booklet helps you understand your plan and explains what information you should 

review periodically and where to go for help with questions. It includes information on:

Different types of retirement plans; 

What information you can get about your plan; 

When and how you can receive retirement benefi ts;

What to do if you have a question or fi nd a mistake;

The responsibilities of those who manage the plan and its investments; 

Your responsibilities to understand and monitor your plan; and 

Specifi c circumstances such as how a divorce or change of employer ownership 

may affect your retirement benefi t.

Any terms you see that appear in blue in the text are explained in the Glossary.

RETIREMENT PLANS COVERED IN THIS BOOKLET

This booklet covers private retirement plans that are governed by Federal laws and 

guidelines in the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal 

Revenue Code. ERISA is a Federal statute that sets standards for most employer and union 

sponsored retirement plans in private industry and imposes responsibilities on those 

running the plan. Participants in these plans have certain rights as well as responsibilities. 

The rules discussed in this booklet do not apply to all retirement plans. For example, 

the information does not apply to:

State and local government plans, including plans covering public school 

teachers and school administrators; 

Most church plans; and

Plans for Federal government employees.

Also, if you are in a collectively bargained plan, the rules that apply under ERISA may 

be different in some cases. 

The information contained in the following pages answers the most common questions 

about retirement plans. Keep in mind, however, that this booklet is a simplifi ed summary 

of participant rights and responsibilities, not a legal interpretation of ERISA.

INTRODUCTION

1

The fi rst step to understanding your retirement benefi ts is to fi nd out what kind of 

retirement plan your employer has. There are two major types of plans, defi ned benefi t 

and defi ned contribution, which are described here and outlined in Table 1 on page 4. 

Keep in mind that your employer may have more than one type of plan, and may have 

different participation requirements for each.

A defi ned benefi t plan, funded by the employer, promises you a specifi c monthly 

benefi t at retirement. The plan may state this promised benefi t as an exact dollar amount, 

such as $100 per month at retirement. Or, more often, it may calculate your benefi t through 

a formula that includes factors such as your salary, your age, and the number of years you 

worked at the company. For example, your pension benefi t might be equal to 1 percent 

of your average salary for the last 5 years of employment times your total years of service. 

A defined contribution plan, on the other hand, does not promise you a specifi c 

benefit amount at retirement. Instead, you and/or your employer contribute money to your 

individual account in the plan. In many cases, you are responsible for choosing how these 

contributions are invested, and deciding how much to contribute from your paycheck 

through pretax deductions. Your employer may add to your account, in some cases by 

matching a certain percentage of your contributions. The value of your account depends 

on how much is contributed and how well the investments perform. At retirement, you 

receive the balance in your account, refl ecting the contributions, investment gains or 

losses, and any fees charged against your account. The 401(k) plan is a popular type of 

defined contribution plan. There are four types of 401(k) plans: traditional 401(k), safe 

harbor 401(k), SIMPLE 401(k), and automatic enrollment 401(k) plans. The SIMPLE IRA 

plan, SEP, employee stock ownership plan (ESOP), and profit sharing plan are other 

examples of defi ned contribution plans. (See explanations of the various types of plans 

in the Glossary at the end.)

NOTE

1. Employers can choose whether to offer a retirement plan to employees; 

Federal law does not require employers to offer or to continue to offer a plan. 

2. The Pension Benefi t Guaranty Corporation (PBGC) guarantees payment of 

certain retirement benefi ts for participants in most private defi ned benefi t 

plans if the plan is terminated without enough money to pay all of the 

promised benefi ts. The government does not guarantee benefi t payments 

for defi ned contribution plans. For more information, see the PBGC’s Web 

site at www.pbgc.gov.

3. Some hybrid plans – such as cash balance plans – contain features of both 

types of plans described above. See the Glossary for information on this 

type of plan.

ACTION ITEM

Ask your plan administrator, human resources offi ce or employer for information 

on what type of plan or plans you have at work. You can ask for a copy of the 

Summary Plan Description (the retirement plan booklet that you should receive 

when you enroll in the plan) and review the information about the plan. 

CHAPTER 1: TYPES OF RETIREMENT PLANS

3
Employer 

Contributions 

and/or Matching 

Contributions

Employee 

Contributions

Managing the 

Investment

Amount of 

Benefi ts Paid Upon 

Retirement

Type of Retirement 

Benefi t Payments

Guarantee of 

Benefi ts

Leaving the 

Company Before 

Retirement Age

Employer funded. Federal rules 

set amounts that employers 

must contribute to plans in an 

effort to ensure that plans have 

enough money to pay benefi ts 

when due. There are penalties 

for failing to meet these 

requirements. 

Generally, employees do not 

contribute to these plans.

Plan offi cials manage the 

investment and the employer 

is responsible for ensuring that 

the amount it has put in the 

plan plus investment earnings 

will be enough to pay the 

promised benefi t.

A promised benefi t is based 

on a formula in the plan, often 

using a combination of the 

employee’s age, years worked 

for the employer, and/or salary. 

Traditionally, these plans pay 

the retiree monthly annuity 

payments that continue for life. 

Plans may offer other payment 

options.

The Federal government, 

through the Pension Benefi t 

Guaranty Corporation (PBGC), 

guarantees some amount of 

benefi ts.

If an employee leaves after 

vesting in a benefi t but before 

the plan’s retirement age, the 

benefi t generally stays with the 

plan until the employee fi les a 

claim for it at retirement. Some 

defi ned benefi t plans offer 

early retirement options.

There is no requirement that the 

employer contribute, except in 

SIMPLE and Safe Harbor 401(k)s, 

money purchase plans, SIMPLE IRAs, 

and SEPs. The employer may have 

to contribute in certain automatic 

enrollment 401(k) plans. 

The employer may choose to 

match a portion of the employee’s 

contributions or to contribute 

without employee contributions. In 

some plans, employer contributions 

may be in the form of employer 

stock.

Many plans require the employee to 

contribute in order for an account 

to be established. 

The employee often is responsible 

for managing the investment of 

his or her account, choosing from 

investment options offered by the 

plan. In some plans, plan offi cials 

are responsible for investing all the 

plan’s assets. 

The benefi t depends on 

contributions made by the 

employee and/or the employer, 

performance of the account’s 

investments, and fees charged to 

the account.

The retiree may transfer the 

account balance into an individual 

retirement account (IRA) from 

which the retiree withdraws money, 

or may receive it as a lump sum 

payment. Some plans also offer 

monthly payments through an 

annuity. 

No Federal guarantee of benefi ts.

The employee may transfer the 

account balance to an individual 

retirement account (IRA) or, in 

some cases, another employer 

plan, where it can continue to grow 

based on investment earnings. 

The employee also may take the 

balance out of the plan, but will owe 

taxes and possibly penalties, thus 

reducing retirement income. Plans 

may cash out small accounts.

Defi ned 

Contribution Plan

Defi ned 

Benefi t Plan

4

Table 1: Characteristics of Defi ned Benefi t and Defi ned Contribution Plans
CHAPTER 2: EARNING RETIREMENT BENEFITS

Once you have learned what type of retirement plan your employer offers, you need to 

fi nd out when you can participate in the plan and begin to earn benefi ts. Plan rules can vary 

as long as they meet the requirements under Federal law. You need to check with your plan 

or review the plan booklet (called the Summary Plan Description) to learn your plan’s rules 

and requirements. Your plan may require you to work for the company for a period of time 

before you may participate in the plan. In addition, there typically is a time frame for when you 

begin to accumulate benefi ts and earn the right to them (sometimes referred to as “vesting”). 

WHO CAN PARTICIPATE IN YOUR EMPLOYER’S RETIREMENT PLAN?

Find out if you are within the group of employees covered by your employer’s retirement 

plan. Federal law allows employers to include certain groups of employees and exclude 

others from a retirement plan. For example, your employer may sponsor one plan for salaried 

employees and another for union employees. Part-time employees may be eligible if they work 

at least 1,000 hours per year, which is about 20 hours per week. So if you work part-time, fi nd 

out if you are covered.

WHEN CAN YOUR PARTICIPATION BEGIN?

Once you know you are covered, you need to fi nd out when you can begin to participate 

in the plan. You can fi nd this information in your plan’s Summary Plan Description. Federal 

law sets minimum requirements, but a plan may be more generous. Generally, a plan may 

require an employee to be at least 21 years old and to have a year of service with the company 

before the employee can participate in a plan. However, plans may allow employees to begin 

participation before reaching age 21 or completing one year of service. For administrative 

reasons, your participation may be delayed up to 6 months after you meet these age and 

service criteria, or until the start of the next plan year, whichever is sooner. The plan year 

is the calendar year, or an alternative 12-month period, that a retirement plan uses for plan 

administration. Because the rules can vary, it is important that you learn the rules for your plan.

Employers have some fl exibility to require additional years of service in some circumstances. 

For example, if your plan allows you to vest (discussed in detail later in this chapter) immediately 

upon participating in the plan, it may require that you work for the company for two years 

before you may participate in the plan. 

Federal law also imposes other participation rules for certain circumstances. For example, 

if you were an older worker when you were hired, you cannot be excluded from participating 

in the plan just because you are close to retirement age. 

Some 401(k) plans and SIMPLE IRA plans enroll employees automatically. This means that 

you will automatically become a participant in the plan unless you choose to opt out. The 

plan will deduct a set contribution level from your paycheck and put it into a predetermined 

investment. If your employer has an automatic enrollment plan, you should receive a 

notice describing the automatic contribution process, when your participation begins, your 

opportunity to opt out of the plan or change your contribution level and where your automatic 

contributions are invested. If you are in a 401(k), the notice will also describe your right to 

change investments, or if you are in a SIMPLE IRA plan, your right to change the fi nancial 

institution where your contributions are invested. 

5
WHEN DO YOU BEGIN TO ACCUMULATE BENEFITS?

Once you begin to participate in a retirement plan, you need to understand how you accrue 

or earn benefi ts. Your accrued benefi t is the amount of retirement benefi ts that you have 

accumulated or that have been allocated to you under the plan at any particular point in time. 

Defi ned benefi t plans often count your years of service in order to determine whether you 

have earned a benefi t and also to calculate how much you will receive in benefi ts at retirement. 

Employees in the plan who work part-time, but who work 1,000 hours or more each year, must 

be credited with a portion of the benefi t in proportion to what they would have earned if they 

were employed full time. In a defined contribution plan, your benefi t accrual is the amount 

of contributions and earnings that have accumulated in your 401(k) or other retirement plan 

account, minus any fees charged to your account by your plan. 

Special rules for when you begin to accumulate benefi ts may apply to certain types of 

retirement plans. For example, in a Simplified Employee Pension Plan (SEP), all participants 

who earn at least $550 a year from their employers are entitled to receive a contribution. 

CAN A PLAN REDUCE PROMISED BENEFITS?

Defi ned benefi t plans may change the rate at which you earn future benefi ts but cannot 

reduce the amount of benefi ts you have already accumulated. For example, a plan that accrues 

benefi ts at the rate of $5 a month for years of service through 2010 may be amended to provide 

that for years of service beginning in 2011 benefi ts will be credited at the rate of $4 per month. 

Plans that make a signifi cant reduction in the rate at which benefi ts accumulate must provide 

you with written notice generally at least 45 days before the change goes into effect. 

Also, in most situations, if a company terminates a defi ned benefi t plan that does not have 

enough funding to pay all of the promised benefi ts, the Pension Benefi t Guaranty Corporation 

(PBGC) will pay plan participants and benefi ciaries some retirement benefi ts, but possibly less 

than the level of benefi ts promised. (For more information, see the PBGC’s Web site at www.

pbgc.gov.)

In a defined contribution plan, the employer may change the amount of employer 

contributions in the future. Depending on the plan terms, the employer may also be able to 

stop making contributions for a few years or indefi nitely.

An employer may terminate a defi ned benefi t or a defi ned contribution plan, but may not 

reduce the benefi t you have already accrued in the plan.

HOW SOON DO YOU HAVE A RIGHT TO YOUR ACCUMULATED BENEFITS?

You immediately vest in your own contributions and the earnings on them. This means you 

have earned the right to these amounts without the risk of forfeiting them. But note – there 

are restrictions on actually taking them out of the plan. See the discussion on the rules for 

distributions later in this booklet. 

However, you do not necessarily have an immediate right to any contributions made by 

your employer. Federal law provides a maximum number of years a company may require 

employees to work to earn the vested right to all or some of these benefi ts. (See tables on 

pages 8-9 showing the vesting rules.)

In a defi ned benefi t plan, an employer can require that employees have 5 years of service 

in order to become 100 percent vested in the employer funded benefi ts (called cliff vesting). 

Employers also can choose a graduated vesting schedule, which requires an employee to work 

7 years in order to be 100 percent vested, but provides at least 20 percent vesting after 3 years, 

40 percent after 4 years, 60 percent after 5 years, and 80 percent after 6 years of service. The 

permitted vesting schedules for current defi ned benefi t plans are shown in Table 3 on page 

6
7

9. Plans may provide a different schedule as long as it is more generous than these vesting 

schedules. (Unlike most defi ned benefi t plans, in a cash balance plan, employees vest in 

employer contributions after 3 years.)

In a defi ned contribution plan such as a 401(k) plan, you are always 100 percent vested in 

your own contributions to a plan, and in any subsequent earnings from your contributions. 

However, in most defi ned contribution plans you may have to work several years before you 

are vested in the employer’s matching contributions. (There are exceptions, such as the SIMPLE 

401(k) and safe harbor 401(k), in which you are immediately vested in all required employer 

contributions. You also vest immediately in the SIMPLE IRA and the SEP.)

Currently, employers have a choice of two different vesting schedules for employer matching 

401(k) contributions, which are shown in Table 2 on page 8. Your employer may use a schedule 

in which employees are 100 percent vested in employer contributions after 3 years of service 

(cliff vesting). Under graduated vesting, an employee must be at least 20 percent vested after 2 

years, 40 percent after 3 years, 60 percent after 4 years, 80 percent after 5 years, and 100 percent 

after 6 years. If your automatic enrollment 401(k) plan requires employer contributions, you vest 

in those contributions after 2 years. Automatic enrollment 401(k) plans with optional matching 

contributions follow one of the vesting schedules noted above. 

Employers making other contributions to defi ned contribution plans, such as a 401(k) plan, 

also can choose between two vesting schedules. For those contributions made since 2007, they 

can choose between the graduated and cliff vesting schedules in Table 2. For contributions 

made prior to 2007, they can choose between the schedules provided in Table 3. 

You may lose some of the employer-provided benefi ts you have earned if you leave your 

job before you have worked long enough to be vested. However, once vested, you have the 

right to receive the vested portion of your benefi ts even if you leave your job before retirement. 

But even though you have the right to certain benefi ts, your defi ned contribution plan account 

value could decrease after you leave your job as a result of investment performance.

NOTE

If you leave your company and return, you may be able to count your earlier period of 

employment towards the years of service needed for vesting in the employer-provided benefi ts. 

Unless your break in service with the company was 5 years or a time equal to the length of 

your pre-break employment, whichever is greater, you likely can count that time prior to your 

break. Because these rules are very specifi c, you should read your plan document carefully if 

you are contemplating a short-term break from your employer, and then discuss it with your 

plan administrator. If you left employment prior to January 1, 1985, different rules apply. For 

more information, contact the Department of Labor toll free at 1-866-444-3272.

For Reserve and National Guard units called to active duty, the Uniformed Services 

Employment and Reemployment Rights Act (USERRA) requires that the period of military duty 

be counted as covered service with the employer for eligibility, vesting, and benefi t accrual 

purposes. Returning service members are treated as if they had been continuously employed 

regardless of the type of retirement plan the employer has adopted. However, a person who is 

reemployed is entitled to accrued benefi ts resulting from employee contributions only to the 

extent that he or she actually makes the contributions to the plan.
8

Generally, an employer must count your years of service for vesting credit starting with your 

date of employment. Two exceptions provide that your employer may start counting your 

years of service with the fi rst plan year following (1) your 18th birthday if you were under 18 

years of age when you started working there, and (2) the date you start contributing to a 401(k) 

plan if you elected not to contribute when you fi rst were eligible. 

Plans can allow employees the right to employer-provided benefi ts sooner than indicated in 

the following tables.

Vesting Rules

MINIMUM VESTING REQUIREMENTS UNDER ERISA

EMPLOYER CONTRIBUTIONS

(USE TABLE IN EFFECT ON DATE YOU LEFT EMPLOYER)

TABLE 2: Effective Date 1/01/02 - Present — 

for 401(k) Matching Contributions

Effective Date 1/01/07 – Present — 

for Other Defi ned Contribution 

Employer Contributions

GRADUATED VESTING

Years of Service Non-forfeitable Percentage 

2

3

4

5

6

20%

40%

60%

80%

100%

Cliff Vesting

Less than 3 years of service - 0% Vested

At least 3 years of service - 100% Vested

Table 2 below shows the current vesting schedules, as of 2002, for employer matching 401(k) 

plan contributions, and for other employer contributions to a defi ned contribution plan as of 

2007.

Table 3 is for employees in a defi ned benefi t plan. It is also for employees receiving other 

employer contributions to a defi ned contribution plan before 2007*, employer matching 401(k) 

contributions prior to 2002, and employees in a defi ned contribution plan who left an employer 

after December 31, 1988. 

* If your plan is top heavy, Table 2 applies.
9

Rule of 45

If employee’s age and years of service total 45, and the employee 

has at least 5 years of service, then 50% of the benefi ts must be vested, 

with at least 10% vesting for each year thereafter.

TABLE 4: Effective Date 1974 - 12/31/88** — 

for all Defi ned Benefi t and Defi ned Contribution 

Employer Contributions 

GRADUATED VESTING

Years of Service Non-forfeitable Percentage 

5

6

7

8

9

10

11

12

13

14

15

25%

30%

35%

40%

45%

50%

60%

70%

80%

90%

100%

Cliff Vesting

Less than 10 years of service - 0% Vested

At least 10 years of service - 100% Vested

Table 4 is for employees who left before 1989.

TABLE 3: Effective Date 1/01/89 – Present* — 

for Defi ned Benefi t Employer Contributions 

Effective Date 1/01/89 – 2007 — 

for Other Defi ned Contribution Employer Contributions 

Effective Date 1/01/89 – 2002 — 

401(k) Matching Employer Contributions

GRADUATED VESTING

Years of Service Non-forfeitable Percentage 

3

4

5

6

7

20%

40%

60%

80%

100%

Cliff Vesting

Less than 5 years of service - 0% Vested

At least 5 years of service - 100% Vested
NOTE

For plans subject to collective bargaining agreements, the effective date is the earlier 

of the date on which the last of the collective bargaining agreements under which 

the plan is maintained terminates or — 

**01/01/99.

**01/01/89.

ACTION ITEMS

Find out if you are covered by an employer plan.

Find out how soon you can start participating in and/or contributing to your 

retirement plan after you start working for a company.

Get a Summary Plan Description.

Review your plan document or Summary Plan Description to understand how you 

earn benefi ts in your plan.

Find your plan’s vesting schedule to check when you are fully vested. If you are 

thinking of changing jobs, check your plan to see if working longer will allow you 

to vest more fully in your employer’s contributions.

10
If you have a question about your retirement plan, you can start by looking for an 

answer in the information that the plan provides. You can request this information from 

your plan administrator, the person who is in charge of running the plan. Your employer 

can tell you how to contact your plan administrator.

INFORMATION PROVIDED BY THE RETIREMENT PLAN

Each retirement plan is required to have a formal, written plan document that details 

how it operates and its requirements. As noted previously, there is also a booklet that 

describes the key plan rules, called the Summary Plan Description (SPD), which should 

be much easier to read and understand. The SPD also should include a summary of any 

material changes to the plan or to the information required to be in the SPD. In many cases, 

you can start with the SPD and then look at the plan document if you still have questions. 

In addition, plans must provide you with a number of notices. Some of the key notices 

are described in Table 5 on page 12.

For example, defined contribution plans, such as 401(k) plans, generally are required 

to provide advance notice to employees when a “blackout period” occurs. A blackout 

period is when a participant’s right to direct investments, take loans, or obtain distributions 

is suspended for a period of at least three consecutive business days. Blackout periods 

can often occur when plans change recordkeepers or investment options.

Some plan information, such as the Summary Plan Description, must be provided 

to you automatically and without charge at the time periods indicated below. You may 

request a Summary Plan Description at other times, but your employer might charge you 

a copying fee. You must ask the plan if you want other information, such as a copy of the 

written plan document or the plan’s Form 5500 annual fi nancial report, and you may have 

to pay a copying fee. See Table 5 on page 12 and Table 6 on page 13. Many employers 

provide benefi t information on a Web site.

In some cases, plans provide information more frequently than required by Federal 

law. For instance, some plans allow participants to check their statements online or by 

telephone.

The plan’s annual fi nancial report (Form 5500) is also available (there is a copying fee 

if over 100 pages) by contacting the U.S. Department of Labor, EBSA Public Disclosure 

Facility, Room N-1513, 200 Constitution Avenue, NW, Washington, D.C. 20210, telephone: 

(202) 693-8673. For annual reports for 2009 and later years, you can also fi nd the report 

online at www.efast.dol.gov. In addition, if your plan administrator does not provide you, 

as a participant covered under the plan, with a copy of the Summary Plan Description 

automatically or after you request it, you may contact the Department of Labor toll free 

at 1-866-444-3272 for help.

CHAPTER 3: PLAN INFORMATION TO REVIEW

11
12

Summary Plan 

Description (SPD)

Automatic 

Enrollment Notice

Individual Benefi t 

Statement

Annual Funding 

Notice

Summary 

of Material 

Modifi cations 

A summary version of the plan 

document and other important 

plan information, in easier-tounderstand language.

For plans with automatic 

enrollment, a description of 

the automatic enrollment 

process, the percentage of 

salary being deferred, the 

default investment used for 

automatic contributions, your 

right to opt out of the plan, 

your right to change deferral 

percentage and investments, 

and how to fi nd information 

about the plan’s other 

investments. 

Statement providing 

information about your 

account balance and vested 

benefi ts. Depending on the 

type of plan you have, the 

statement may also include 

the value of the investments in 

the account and information 

describing your right to direct 

investments.

Basic information about the 

funding status and fi nancial 

condition of the defi ned 

benefi t pension plan, including 

the plan’s funding percentage; 

assets and liabilities; and a 

description of the benefi ts 

guaranteed by the PBGC.

A summary of signifi cant plan 

changes or changes in the 

information required to be in 

the SPD.

Within 90 days of becoming a 

participant in the plan; and 

An updated copy every 10 

years (5 years if the plan has 

been amended).

Generally, at least 30 days 

before you are eligible to 

participate; and 

At least 30 days before the 

beginning of each subsequent 

plan year. 

At least quarterly for 

participant-directed defi ned 

contribution plans; 

At least annually for nonparticipant-directed defi ned 

contribution plans; or 

At least every 3 years for 

defi ned benefi t plans.

Within 120 days of the end of 

the plan year.

Within 7 months of the end of the 

plan year in which the changes were 

made.

TABLE 5: Key Information Your Plan Administrator Must Provide Automatically

What Description When
13

What Description When

TABLE 5 cont.: Key Information Your Plan Administrator Must Provide Automatically

Plan Documents 

Annual Report 

(Form 5500) – most 

recent report

Documents that provide the 

terms of the plan, including 

collective bargaining 

agreements and trust 

agreements.

Financial information about 

the plan that most plans 

are required to fi le with the 

government within 7 months 

of the end of the plan year.

Reasonable copying charge

Reasonable copying charge

What Description Cost

TABLE 6: Key Information Your Plan Administrator Must Provide Upon Written Request

Summary Annual 

Report

Notice of 

Signifi cant 

Reduction in Future 

Benefi t Accruals

Blackout notice

Notice to 

Participants of 

Underfunded Plan

A summary of fi nancial 

information fi led by the plan 

on its Form 5500 Annual 

Return/Report. If your plan is 

required to provide an annual 

funding notice, your plan is 

not required to provide this 

report.

Notice of any signifi cant 

reduction in the rate of 

future benefi t accruals, 

or the elimination of or 

signifi cant reduction in an 

early retirement benefi t or 

retirement-type subsidy. 

Applies to defi ned benefi t 

plans and certain defi ned 

contribution plans.

Notice of a period of 

more than 3 consecutive 

business days when there 

is a temporary suspension, 

limitation or restriction on 

directing or diversifying 

plan assets, obtaining loans, 

or obtaining distributions. 

Applies to most 401(k) or other 

individual account plans.

For defi ned benefi t plans that 

are less than 80% funded, the 

notice of the funding level of 

the plan and information on 

PBGC guarantees.

Within 9 months after the end of 

the plan year or 2 months after the 

annual report fi ling deadline.

At least 45 days before the effective 

date of the plan amendment.

Generally, at least 30 days before the 

blackout date.

Within 2 months after the due date 

for fi ling the annual report.
14

WHAT PLAN INFORMATION SHOULD YOU REVIEW REGULARLY?

If you are in a defi ned benefi t plan, you will receive an individual benefi t statement once 

every 3 years. Review its description of the total benefi ts you have earned and whether you are 

vested in those benefi ts. Also check to make sure your date of birth, date of hire, and the other 

information included is correct. You will also receive an annual notice of the plan’s funding status.

Defi ned contribution plans, including 401(k) plans, also must send participants individual 

benefi t statements either quarterly, if participants direct the investments of their accounts, 

or annually, if they do not. When you receive a statement, check it to make sure all of the 

information is accurate. This information may include:

Salary level

Amounts that you and your employer have contributed

Years of service with the employer

Home address

Social Security Number

Benefi ciary designation

Marital status

The performance of your investments (defi ned contribution plan participants)

Fees paid by the plan and/or charged to participants. (For more information, see the 

Department of Labor brochure “A Look at 401(k) Plan Fees” at www.dol.gov/ebsa or 

call the Department of Labor toll free at 1-866-444-3272.) Check with your plan to see 

if this information is included in materials on your investment options, the benefi t 

statement, the Summary Plan Description or the plan’s Annual Report (Form 5500). 

See Chapter 7 for more information on the fees that your employer can charge to 

your account.

ACTION ITEMS

Make sure you have received the plan’s Summary Plan Description and read it for 

information on how your plan works.

Read other documents you receive from your plan to make sure that you keep up 

with any plan changes, and check that the information on your benefi t statement 

is accurate.

If you are in a defi ned contribution plan, ask for information on the investment 

choices available in the plan, and fi nd out when and how you can change your plan 

account investments.

If you suspect errors in your plan information, contact your plan administrator or 

the human resources department. 

If there have been changes in your personal information, such as a marriage, divorce 

or change of address, contact your plan administrator or the human resources 

department. 

Keep your plan documents in a safe place in case questions arise in the future.
Under Federal law, your plan must allow you to begin receiving benefi ts*

the later of -

Reaching age 65 or the age your plan considers to 

be normal retirement age (if earlier)

Once you understand what type of plan you have, how you earn benefi ts, and how 

much your benefi ts will be, it is important to learn when and how you can receive them.

WHEN CAN YOU BEGIN TO RECEIVE RETIREMENT BENEFITS?

There are several points to keep in mind in determining when you can receive benefi ts: 

1. Federal law provides guidelines, shown in Table 7 below, for when plans 

must start paying retirement benefi ts.

2. Plans can choose to start paying benefits sooner. The plan documents will 

state when you may begin receiving payments from your plan. 

3. You must fi le a claim for benefi ts for your payments to begin. This takes 

some time for administrative reasons. (See Chapter 6.)

*For administrative reasons, benefi ts do not begin immediately after meeting these 

conditions. At a minimum, your plan must provide that you will start receiving benefi ts 

within 60 days after the end of the plan year in which you satisfy the conditions. Also, you 

need to fi le a claim under your plan’s procedures. (See Chapter 6.)

Under certain circumstances, your benefi t payments may be suspended if you continue 

to work beyond normal retirement age. The plan must notify you of the suspension during 

the fi rst calendar month or payroll period in which payments are withheld. This information 

should also be included in the Summary Plan Description. A plan also must advise you 

of its procedures for requesting an advance determination of whether a particular type 

of reemployment would result in a suspension of benefi t payments. If you are a retiree 

and are considering taking a job, you may wish to write your plan administrator and ask 

if your benefi ts would be suspended. 

Table 7 shows the general requirements for when payments begin. Listed below are 

some permitted variations:

Although defi ned benefi t plans and money purchase plans generally allow you 

to receive benefi ts only when you reach the plan’s retirement age, some have 

provisions for early retirement.

CHAPTER 4: PAYMENT OF BENEFITS

15

Or -

Terminating your 

service with the 

employer 

Or -

10 years of 

service 

TABLE 7: Requirements Under Federal Law for Payment of Retirement Benefi ts
401(k) plans often allow you to receive your account balance when you leave your job. 

401(k) plans may allow for distributions while still employed if you have reached age 

591⁄2 or if you suffer a hardship.

Profit sharing plans may permit you to receive your vested benefi t after a specifi c 

number of years or whenever you leave your job.

A phased retirement option allows employees at or near retirement age to reduce 

their work hours to part time, receive benefi ts, and continue to earn additional funds. 

ESOPs do not have to pay out any benefi ts until 1 year after the plan year in which 

you retire, or as many as 6 years if you leave for reasons other than retirement, death, 

or disability. 

WARNING

1. You may owe current income taxes – and possibly tax penalties — on your 

distribution if you take money out before age 591⁄2, unless you transfer it to an 

IRA or another tax-qualifi ed retirement plan.

2. Taking all or a portion of your funds out of your account before retirement age 

will mean you have less in retirement benefi ts.

WHEN IS THE LATEST YOU MAY BEGIN TO TAKE PAYMENT OF YOUR BENEFITS?

Federal law sets a mandatory date by which you must start receiving your retirement benefi ts, 

even if you would like to wait longer. This mandatory start date generally is set to begin on April 

1 following the calendar year in which you turn 701⁄2 or, if later, when you retire. However, your 

plan may require you to begin receiving distributions even if you have not retired by age 701⁄2.

IN WHAT FORM WILL YOUR BENEFITS BE PAID?

If you are in a defi ned benefi t or money purchase plan, the plan must offer you a benefi t 

in the form of a life annuity, which means that you will receive equal, periodic payments, often 

as a monthly benefi t, which will continue for the rest of your life. Defi ned benefi t and money 

purchase plans may also offer other payment options, so check with the plan. If you are in a 

defi ned contribution plan (other than a money purchase plan), the plan may pay your benefi ts 

in a single lump-sum payment as well as offer other options, including payments over a set 

period of time (such as 5 or 10 years) or an annuity with monthly lifetime payments. 

If you are leaving your employer before retirement age, see the next chapter.

CAN A BENEFIT CONTINUE FOR YOUR SPOUSE SHOULD YOU DIE FIRST?

In a defi ned benefi t or money purchase plan, unless you and your spouse choose otherwise, 

the form of payment will include a survivor’s benefi t. This survivor’s benefi t, called a qualifi ed 

joint and survivor annuity (QJSA), will provide payments over your lifetime and your spouse’s 

lifetime. The benefi t payment that your surviving spouse receives must be at least half of the 

benefi t payment you received during your joint lives. If you choose not to receive the survivor’s 

benefi t, both you and your spouse must receive a written explanation of the QJSA and, within 

certain time limits, you must make a written waiver and your spouse must sign a written consent 

to the alternative payment form without a survivor’s benefi t. Your spouse’s signature must be 

witnessed by a notary or plan representative. 

16
17

In most 401(k) plans and other defi ned contribution plans, the plan is written so different 

protections apply for surviving spouses. In general, in most defi ned contribution plans, if you 

should die before you receive your benefi ts, your surviving spouse will automatically receive 

them. If you wish to select a different benefi ciary, your spouse must consent by signing a waiver, 

witnessed by a notary or plan representative.

If you were single when you enrolled in the plan and subsequently married, it is important 

that you notify your employer and/or plan administrator and change your status under the plan. 

If you do not have a spouse, it is important to name a benefi ciary.

If you or your spouse left employment prior to January 1, 1985, different rules apply. For 

more information on these rules, contact the Department of Labor toll free at 1-866-444-3272. 

CAN YOU BORROW FROM YOUR 401(K) PLAN ACCOUNT?

401(k) plans are permitted to – but not required to – offer loans to participants. The loans 

must charge a reasonable rate of interest and be adequately secured. The plan must include 

a procedure for applying for the loans and the plan’s policy for granting them. Loan amounts 

are limited to the lesser of 50 percent of your account balance or $50,000 and must be repaid 

within 5 years (unless the loan is used to purchase a principal residence). 

CAN YOU GET A DISTRIBUTION FROM YOUR PLAN IF YOU ARE NOT YET 65 OR YOUR PLAN’S

NORMAL RETIREMENT AGE BUT ARE FACING A SIGNIFICANT FINANCIAL HARDSHIP?

Again, defined contribution plans are permitted to – but not required to – provide 

distributions in case of hardship. Check your plan booklet to see if it does permit them and 

what circumstances are included as hardships. 

ACTION ITEMS

Find out when and in what form you can receive your benefi ts at retirement.

Fill out the necessary forms to update information with your retirement plan.

Notify the retirement plan of any change of address or marital status.

Keep all documents for your records, including Summary Plan Descriptions, company 

memos, and individual benefi t statements.

For tax information, look at Internal Revenue Service Publication 575 (Pension and 

Annuity Income) by visiting www.irs.gov/ and clicking on “Publications”.

CHAPTER 5: TAKING YOUR RETIREMENT BENEFIT WITH YOU

If you leave an employer before you reach retirement age, whether or not you can take 

your benefi ts out and/or roll them into another tax-qualifi ed plan or account will depend 

on what type of plan you are in.

IF YOU LEAVE BEFORE RETIREMENT, CAN YOU TAKE YOUR RETIREMENT BENEFIT WITH

YOU?

If you are in a defi ned benefi t plan (other than a cash balance plan), you most likely 

will be required to leave the benefi ts with the retirement plan until you become eligible to 

receive them. As a result, it is very important that you update your personal information 

with the plan administrator regularly and keep current on any changes in your former 

employer’s ownership or address. 

If you are in a cash balance plan, you probably will have the option of transferring at 

least a portion of your account balance to an individual retirement account or to a new 

employer’s plan. 

If you leave your employer before retirement age and you are in a defi ned contribution 

plan (such as a 401(k) plan), in most cases you will be able to transfer your account balance 

out of your employer’s plan. 

WHAT CHOICES DO YOU HAVE FOR TAKING YOUR DEFINED CONTRIBUTION BENEFITS?

A lump sum – you can choose to receive your benefi ts as a single payment from 

your plan, effectively cashing out your account. You may need to pay income 

taxes on the amount you receive, and possibly a penalty.

A rollover to another retirement plan – you can ask your employer to transfer 

your account balance directly to your new employer’s plan if it accepts such 

transfers. 

A rollover to an IRA – you can ask your employer to transfer your account 

balance directly to an individual retirement account (IRA). 

If your account balance is less than $5,000 when you leave the employer, 

the plan can make an immediate distribution without your consent. If this 

distribution is more than $1,000, the plan must automatically roll the funds into 

an IRA it selects, unless you elect to receive a lump sum payment or to roll it 

over into an IRA you choose. The plan must fi rst send you a notice allowing 

you to make other arrangements, and it must follow rules regarding what type 

of IRA can be used (i.e., it cannot combine the distribution with savings you 

have deposited directly in an IRA). Rollovers must be made to an entity that is 

qualifi ed to offer individual retirement plans. Also, the rollover IRA must have 

investments designed to preserve principal. The IRA provider may not charge 

more in fees and expenses for such plans than it would to its other individual 

retirement plan customers. 

Please note: If you elect a lump sum payment and do not transfer the money to 

another retirement account (employer plan or IRA other than a Roth IRA), you will owe 

a tax penalty if you are under age 591⁄2 and do not meet certain exceptions. In addition, 

you may have less to live on during your retirement. Transferring your retirement plan 

account balance to another plan or an IRA when you leave your job will protect the tax 

advantages of your account and preserve the benefi ts for retirement. 

19
WHAT HAPPENS IF YOU LEAVE A JOB AND LATER RETURN?

If you leave an employer for whom you have worked for several years and later return, you 

may be able to count those earlier years toward vesting. Generally, a plan must preserve the 

service credit you have accumulated if you leave your employer and then return within fi ve 

years. Service credit refers to the years of service that count towards vesting. Because these 

rules are very specifi c, you should read your plan document carefully if you are contemplating 

a short-term break from your employer, and then discuss it with your plan administrator. If you 

left employment prior to January 1, 1985, different rules apply.

If you retire and later go back to work for a former employer, you must be allowed to continue 

to accrue additional benefi ts, subject to a plan limit on the total years of service credited under 

the plan. 

ACTION ITEMS

If you are leaving an employer before retirement, fi nd out whether you can roll your 

benefi ts into a new plan or into an IRA.

If you are leaving your benefi ts in your former employer’s plan, be sure to keep 

your contact information up to date with the former employer, and keep track of 

the employer’s contact information.

If you are considering taking your benefi ts out as a lump sum, fi nd out what taxes 

and penalties you will owe, and make a plan on how you will replace that income 

in retirement.

20
Federal retirement law requires all plans to have a reasonable written procedure for 

processing your benefi ts claim and appeal if your claim is denied. The Summary Plan 

Description (SPD) should include your plan’s claims procedures. Usually, you fill out the 

required paperwork and submit it to the plan administrator, who then can tell you what 

your benefi ts will be and when they will start.

FILING A CLAIM AND FILING AN APPEAL

If there is a problem or a dispute about whether you qualify for benefi ts or what 

amount you should receive, check your plan’s claims procedure. Federal law outlines the 

following claims procedures requirements:

Once your claim is fi led, the plan can take up to 90 days to reach a decision, or 

180 days if it notifi es you that it needs an extension. 

If your claim is denied, you must receive a written notice, including specifi c 

information about why your claim was denied and how to fi le an appeal. 

You have 60 days to request a full and fair review of your denied claim, using 

your plan’s appeals procedure. 

The plan can take up to 60 days to review your appeal, as well as an additional 

60 days if it notifi es you of the need for an extension. The plan must then send 

a written notice telling you whether the appeal was granted or denied. 

If the appeal is denied, the written notice must tell you the reason, describe 

any additional appeal levels, and give you a statement regarding your rights to 

seek judicial review of the plan’s decision.

If you believe the plan failed to follow ERISA’s requirements, you may decide to seek 

legal advice if the plan denies your appeal. You also can contact the Department of Labor 

concerning your rights under ERISA by calling toll free 1-866-444-3272. 

For more information on claims procedures, see the Department of Labor publication 

“Filing a Claim for Your Retirement Benefi ts,” at www.dol.gov/ebsa or call toll free 1-866-

444-3272.

ACTION ITEMS

Contact your plan administrator to get the paperwork that you need to fi le a 

claim to start receiving retirement benefi ts.

Contact the Department of Labor (EBSA) by calling toll free 1-866-444-3272 if 

you have questions about your plan or your rights under ERISA. 

CHAPTER 6: FILING A CLAIM FOR BENEFITS

21

In every retirement plan, there are individuals or groups of people who use their 

own judgment or discretion in administering and managing the plan or who have the 

power to or actually control the plan’s assets. These individuals or groups are called plan 

fi duciaries. Fiduciary status is based on the functions that the person performs for the 

plan, not just the person’s title.

DOES YOUR PLAN HAVE TO IDENTIFY THOSE RESPONSIBLE FOR OPERATING THE PLAN?

A plan must name at least one fi duciary in the written plan document, or through a 

process described in the plan, as having control over the plan’s operations. This fi duciary 

can be identifi ed by offi ce or by name. For some plans, it may be an administrative 

committee or the company’s board of directors. Usually, a plan’s fi duciaries will include 

the trustee, investment managers, and the plan administrator. The plan administrator is 

usually the best starting point for questions you might have about the plan. 

WHAT ARE THE RESPONSIBILITIES OF PLAN FIDUCIARIES?

Fiduciaries have important responsibilities and are subject to certain standards of 

conduct because they act on behalf of the participants in the plan. These responsibilities 

include:

Acting solely in the interest of plan participants and their benefi ciaries, with 

the exclusive purpose of providing benefi ts to them;

Carrying out their duties with skill, prudence, and diligence;

Following the plan documents (unless inconsistent with ERISA);

Diversifying plan investments;

Paying only reasonable expenses of administering the plan and investing its 

assets; and

Avoiding confl icts of interest.

The fi duciary also is responsible for selecting the investment providers and the 

investment options, and for monitoring their performance. Some plans, such as most 401(k)

or profit sharing plans, can be set up to permit participants to choose the investments 

in their accounts (within certain investment options provided by the plan). If the plan is 

properly set up to give participants control over their investments, then the fi duciary is not 

liable for losses resulting from the participant’s investment decisions. Department of Labor 

rules provide guidance designed to make sure participants have suffi cient information 

on the specifi cs of their investment options so they can make informed decisions. This 

information includes: 

A description of each investment option, including the investment goals, risk, 

and return characteristics; 

Information about any designated investment managers;

An explanation of when and how to request changes in investments, plus any 

restrictions on when you can change investments;

CHAPTER 7: RESPONSIBILITIES OF PLAN FIDUCIARIES

23
A statement of the fees that may be charged to your account when you change 

investment options or buy and sell investments; and

The name, address, and telephone number of the plan fi duciary or other person 

designated to provide certain additional information on request. 

A statement that the plan is intended to follow the Department of Labor rules and that the 

fi duciaries may be relieved of liability for losses that are the direct and necessary result of a 

participant’s investment instructions also must be included.

For an automatic enrollment plan, such as a 401(k) plan, the plan fi duciary selects the 

investments for employees’ automatic contributions if the employees do not provide direction. 

If the plan is properly set up, using certain default investments that generally minimize the 

risk of large losses and provide long term growth, and providing notice of the plan’s automatic 

enrollment process, then the fi duciary may be relieved of liability for losses resulting from 

investing in these default alternatives for participants. The plan also must provide a broad range 

of investments for participants to choose from and information on the plan’s investments so 

participants can make informed decisions. Department of Labor rules provide guidance on the 

default investment alternatives that can be used and the notice and information to be provided 

to participants. 

WHAT IF A PLAN FIDUCIARY FAILS TO CARRY OUT ITS RESPONSIBILITIES?

Fiduciaries that do not follow the required standards of conduct may be personally liable. 

If the plan lost money because of a breach of their duties, fi duciaries would have to restore 

those losses, or any profi ts received through their improper actions. For example, if an employer 

did not forward participants’ 401(k) contributions to the plan, they would have to pay back the 

contributions to the plan as well as any lost earnings, and return any profi ts they improperly 

received. Fiduciaries also can be removed from their positions as fi duciaries if they fail to follow 

the standards of conduct. 

WHEN DOES THE EMPLOYER NEED TO DEPOSIT EMPLOYEE CONTRIBUTIONS IN THE PLAN? 

If you contribute to your retirement plan through deductions from your paycheck, then 

the employer must follow certain rules to make sure that it deposits the contributions in a 

timely manner. The law says that the employer must deposit participant contributions as soon 

as it is reasonably possible to separate them from the company’s assets, but no later than the 

15th business day of the month following the payday. For small plans (those with fewer than 

100 participants), salary reduction contributions deposited with the plan no later than the 

7th business day following withholding by the employer will be considered contributed in 

compliance with the law. In the Annual Report (Form 5500), the plan administrator is required 

to include information on whether deposits of contributions were made on a timely basis. 

For more information, see the Department of Labor’s “Ten Warnings Signs That Your 401(k) 

Contributions Are Being Misused,” at www.dol.gov/ebsa for indicators of possible delays in 

depositing contributions.

WHAT ARE THE PLAN FIDUCIARIES’ OBLIGATIONS REGARDING THE FEES AND EXPENSES PAID BY

THE PLAN? CAN THE PLAN CHARGE MY DEFINED CONTRIBUTION PLAN ACCOUNT FOR FEES?

Plan fi duciaries have a specifi c obligation to consider the fees and expenses paid by your 

plan for its operations. ERISA’s fi duciary standards, discussed above, mean that fi duciaries must 

24
25

establish a prudent process for selecting investment alternatives and service providers to the 

plan; ensure that fees paid to service providers and other expenses of the plan are reasonable 

in light of the level and quality of services provided; select investment alternatives that are 

prudent and adequately diversifi ed; and monitor investment alternatives and service providers 

once selected to see that they continue to be appropriate choices.

The plan may deduct fees from your defined contribution plan account. Plan administration 

fees and investment fees can be deducted from your account either as a direct charge or 

indirectly as a reduction of your account’s investment returns. Fees for individual services, such 

as for processing a loan from the plan or a Qualifi ed Domestic Relations Order (see Chapter 

9), also may be charged to your account. 

For more information, see the Department of Labor brochure “A Look at 401(k) Plan Fees” 

at www.dol.gov/ebsa or call the Department of Labor toll free at 1-866-444-3272.

ACTION ITEM

If you have any questions about the management of the plan and its assets, contact 

your plan administrator. 

As noted at the beginning of this booklet, employers are not required to offer a 

retirement plan and plans can be modifi ed and/or terminated.

WHAT HAPPENS WHEN A PLAN IS TERMINATED?

Federal law provides some measures to protect employees who participated in plans 

that are terminated, both defi ned benefi t and defi ned contribution. When a plan is 

terminated, the current employees must become 100 percent vested in their accrued 

benefits. This means you have a right to all the benefi ts that you have earned at the time 

of the plan termination, even benefi ts in which you were not vested and would have lost 

if you had left the employer. If there is a partial termination of a plan (for example, if your 

employer closes a particular plant or division that results in the end of employment of a 

substantial percentage of plan participants) the affected employees must be immediately 

100 percent vested to the extent the plan is funded.

WHAT IF YOUR TERMINATED DEFINED BENEFIT PLAN DOES NOT HAVE ENOUGH MONEY

TO PAY THE BENEFITS? 

The Federal government, through the Pension Benefi t Guaranty Corporation (PBGC), 

insures most private defi ned benefi t plans. For terminated defi ned benefi t plans with 

insuffi cient money to pay all of the benefi ts, the PBGC will guarantee the payment of 

your vested pension benefi ts up to the limits set by law. For further information on plan 

termination guarantees, contact the Pension Benefi t Guaranty Corporation toll free at 

1-800-400-7242, or visit the Web site at www.pbgc.gov.

WHAT HAPPENS IF A DEFINED CONTRIBUTION PLAN IS TERMINATED?

The PBGC does not guarantee benefi ts for defi ned contribution plans. If you are in 

a defi ned contribution plan that is in the process of terminating, the plan fi duciaries and 

trustees should take actions to maintain the plan until they terminate it and pay out the 

assets. 

IS YOUR ACCRUED BENEFIT PROTECTED IF YOUR PLAN MERGES WITH ANOTHER PLAN?

Your plan rules and investment choices are likely to change if your company merges 

with another. Your employer may choose to merge your plan with another plan. If your 

plan is terminated as a result of the merger, the benefi ts that you have accrued cannot be 

reduced. You must receive a benefi t that is at least equal to the benefi t you were entitled 

to before the merger. In a defi ned contribution plan, the value of your account may still 

fl uctuate after the merger based on the performance of the investments.

Special rules apply to mergers of multiemployer defi ned benefi t plans, which generally 

are under the jurisdiction of the PBGC. Contact the PBGC for further information.

WHAT IF YOUR EMPLOYER GOES BANKRUPT?

Generally, your retirement assets should not be at risk if your employer declares 

bankruptcy. Federal law requires that retirement plans fund promised benefi ts adequately 

and keep plan assets separate from the employer’s business assets. The funds must be 

CHAPTER 8: YOUR BENEFIT DURING A PLAN TERMINATION

OR COMPANY MERGER

27
held in trust or invested in an insurance contract. The employers’ creditors cannot make a claim 

on retirement plan funds. However, it is a good idea to confi rm that any contributions your 

employer deducts from your paycheck are forwarded to the plan’s trust or insurance contract 

in a timely manner.

Signifi cant business events such as bankruptcies, mergers, and acquisitions can result in 

employers abandoning their individual account plans (e.g., 401(k) plans), leaving no plan fi duciary 

to manage it. In this situation, participants often have great diffi culty in accessing the benefi ts they 

have earned and have no one to contact with questions. Custodians such as banks, insurers, and 

mutual fund companies are left holding the assets of these plans but do not have the authority 

to terminate the plans and distribute the assets. In response, the Department of Labor issued 

rules to create a voluntary process for the custodian to wind up the plan’s business so that benefi t 

distributions can be made and the plan terminated. Information about this program can be 

found on the Department of Labor’s Web site at www.dol.gov/ebsa. 

ACTION ITEMS

If your former employer has gone out of business, arrangements should have been 

made so a plan offi cial remains responsible for the payment of benefi ts and other 

plan business. If you are entitled to benefi ts and are unable to contact the plan 

administrator, contact EBSA by calling toll free 1-866-444-3272 or electronically at 

www.askebsa.dol.gov.

Keep a fi le with information on your plan and company. If the company no longer 

exists under its former name, you might fi nd some information on the Internet by 

entering the former name in a search engine. If your plan is abandoned, use the 

search function on the EBSA Web site, at www.dol.gov/ebsa, to fi nd out if the plan’s 

custodian is terminating the plan and the custodian’s contact information.

If your plan merges, make sure you read the communications about changes in your 

plan, including changes in benefi ts and investment choices.

If your retirement benefi t remains with a former employer, keep current on any 

changes your former employer makes, including changes of address, mergers, or 

employer name. 

If you move, give the plan your new contact information.

28
In general, your retirement plan is safe from claims by other people. Creditors to 

whom you owe money cannot make a claim against funds that you have in a retirement 

plan. For example, if you leave your employer and transfer your 401(k) account into an 

individual retirement account (IRA), creditors generally cannot get access to those IRA 

funds even if you declare bankruptcy. 

Federal law does make an exception for family support and the division of property 

at divorce. A state court can award part or all of a participant’s retirement benefi t to the 

spouse, former spouse, child, or other dependent. The recipient named in the order 

is called the alternate payee. The court issues a specifi c court order, called a domestic 

relations order, which can be in the form of a state court judgment, decree or order, or 

court approval of a property settlement agreement. The order must relate to child support, 

alimony, or marital property rights, and must be made under state domestic relations law.  

The plan administrator determines if the order is a qualifi ed domestic relations order 

(QDRO) under the plan’s procedures and then notifi es the participant and the alternate 

payee. If the participant is still employed, a QDRO can require payment to the alternate 

payee to begin on or after the participant’s earliest possible retirement age available under 

the plan. These rules apply to both defi ned benefi t and defined contribution plans. For 

additional information, see EBSA’s publication, “QDROs – The Division of Retirement 

Benefi ts Through Qualifi ed Domestic Relations Orders” available by calling toll free 1-866-

444-3272 or on the Web site at www.dol.gov/ebsa. 

ACTION ITEMS

If you are involved in a divorce, you should discuss these issues with your plan 

administrator and your attorney.

CHAPTER 9: POTENTIAL CLAIMS AGAINST YOUR BENEFIT

(DIVORCE)

29

Sometimes, retirement plan administrators, managers, and others involved with the 

plan make mistakes. Some examples include:

Your 401(k) or individual account statement is consistently late or comes at 

irregular intervals; 

Your account balance does not appear to be accurate; 

Your employer fails to transmit your contribution to the plan on a timely basis; 

Your plan administrator does not give or send you a copy of the Summary Plan 

Description; or

Your benefi t is calculated incorrectly.

It is important for you to know that you can follow up on any possible mistakes without 

fear of retribution. Employers are prohibited by law from fi ring or disciplining employees 

to avoid paying a benefi t, as a reprisal for exercising any of the rights provided under a plan 

or Federal retirement law (ERISA), or for giving information or testimony in any inquiry 

or proceeding related to ERISA.

START WITH YOUR EMPLOYER AND/OR PLAN ADMINISTRATOR

If you fi nd an error or have a question, in most cases, you can start by looking for 

information in your Summary Plan Description. In addition, you can contact your employer 

and/or the plan administrator and ask them to explain what has happened and/or make 

a correction. 

IS IT POSSIBLE TO SUE UNDER ERISA? 

Yes, you have a right to sue your plan and its fi duciaries to enforce or clarify your 

rights under ERISA and your plan in the following situations:

To appeal a denied claim for benefi ts after exhausting your plan’s claims review 

process; 

To recover benefi ts due you; 

To clarify your right to future benefi ts;

To obtain plan documents that you previously requested in writing but did 

not receive;

To address a breach of a plan fi duciary’s duties; or

To stop the plan from continuing any act or practice that violates the terms of 

the plan or ERISA. 

WHAT IS THE ROLE OF THE LABOR DEPARTMENT?

The U.S. Department of Labor’s Employee Benefi ts Security Administration (EBSA) is 

the agency responsible for enforcing the provisions of ERISA that govern the conduct of 

plan fi duciaries, the investment and protection of plan assets, the reporting and disclosure 

of plan information, and participants’ benefi t rights and responsibilities. 

However, not all retirement plans are covered by ERISA. For example, Federal, state, 

or local government plans and some church plans are not covered.

CHAPTER 10: WHAT TO DO IF YOU HAVE A PROBLEM

31
The Department of Labor enforces the law by informally resolving benefi t disputes, 

conducting investigations, and seeking correction of violations of the law, including bringing 

lawsuits when necessary. 

The Department has benefits advisors committed to providing individual assistance 

to participants and benefi ciaries. Participants will receive information on their rights and 

responsibilities under the law and help in obtaining benefi ts to which they are entitled. 

Contact a benefi ts advisor by calling toll free 1-866-444-3272 or electronically at www.

askebsa.dol.gov. 

ACTION ITEMS

Contact the Department of Labor’s EBSA for questions about ERISA, help in obtaining a 

benefi t, or:

If you believe your claim to benefi ts has been unjustly denied or that your benefi t 

was calculated incorrectly;

If you have information that plan assets are being mismanaged or misused; 

If you think the plan fi duciaries are acting improperly; or

If you think your employer has been late in depositing your contributions (see 

Chapter 7).

WHAT OTHER FEDERAL AGENCIES CAN ASSIST PARTICIPANTS AND BENEFICIARIES?

The Pension Benefi t Guaranty Corporation (PBGC) is a federally created corporation that 

guarantees payment of certain pension benefi ts under most private defi ned benefi t plans when 

they are terminated with insuffi cient money to pay benefi ts. 

You may contact the PBGC at:

Pension Benefi t Guaranty Corporation

1200 K Street, NW

Washington, DC 20005-4026

Tel (202) 326-4000

Toll free 1-800-400-PBGC (7242)

www.pbgc.gov

The Treasury Department’s Internal Revenue Service is responsible for the rules that allow 

tax benefits for both employees and employers related to retirement plans, including vesting 

and distribution requirements.  The IRS maintains a taxpayer assistance line for retirement plans 

at 1-877-829-5500 (toll-free number). The call center is open Monday through Friday. 

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401(k) Plan – In this type of defi ned contribution plan, the employee can make contributions 

from his or her paycheck before taxes are taken out. The contributions go into a 401(k) 

account, with the employee often choosing the investments based on options provided 

under the plan. In some plans, the employer also makes contributions, matching the 

employee’s contributions up to a certain percentage. SIMPLE and safe harbor 401(k) plans 

have additional employer contribution and vesting requirements. 

Automatic Enrollment – Employers can automatically enroll employees in a plan, such as a 

401(k) or SIMPLE IRA plan, and place contributions deducted from employees’ paychecks into 

certain predetermined investments, unless the employees decide otherwise. Participants 

have the opportunity to opt out of participation and periodic opportunities to change 

their investments (or in a SIMPLE IRA, the fi nancial institution where the contributions are 

invested).

Benefi t Accrual – The amount of benefi ts accumulated under the plan. 

Cash Balance Plan – A type of defi ned benefi t plan that includes some elements that are 

similar to a defi ned contribution plan because the benefi t amount is computed based on 

a formula using contribution and earning credits, and each participant has a hypothetical 

account. Cash balance plans are more likely than traditional defi ned benefi t plans to make 

lump sum distributions. (For more information, see “Frequently Asked Questions about Cash 

Balance Pension Plans” on the Department of Labor’s Web site, at www.dol.gov/ebsa/faqs/.) 

Defi ned Benefi t Plan – This type of plan, also known as the traditional pension plan, 

promises the participant a specifi ed monthly benefi t at retirement. Often, the benefi t is 

based on factors such as your salary, your age, and the number of years you worked for the 

employer. 

Defi ned Contribution Plan – In a defi ned contribution plan, the employee and/or the 

employer contribute to the employee’s individual account under the plan. The employee 

often decides how his or her account is invested. The amount in the account at distribution 

includes the contributions and investment gains or losses, minus any investment and 

administrative fees. The contributions and earnings are not taxed until distribution. The 

value of the account will change based on the value and performance of the investments. 

Employee Retirement Income Security Act of 1974 (ERISA) – A Federal law that sets 

standards of protection for individuals in most voluntarily established, private-sector 

retirement plans. ERISA requires plans to provide participants with plan information, 

including important facts about plan features and funding; sets minimum standards for 

participation, vesting, benefi t accrual, and funding; provides fi duciary responsibilities for 

those who manage and control plan assets; requires plans to establish a claims and appeals 

process for participants to get benefi ts from their plans; gives participants the right to sue 

for benefi ts and breaches of fi duciary duty; and, if a defi ned benefi t plan is terminated, 

guarantees payment of certain benefi ts through a Federally chartered corporation, known 

as the Pension Benefi t Guaranty Corporation (PBGC). 

GLOSSARY

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Employee Stock Ownership Plan (ESOP) – A type of defi ned contribution plan that is invested 

primarily in employer stock.

Individual Benefi t Statement – An individual benefi t statement provides information about 

a participant’s retirement benefi ts, such as the total plan benefi ts earned and vested benefi ts, 

on a periodic basis. Additional information may be included depending upon the type of plan, 

such as how a participant’s 401(k) plan account is invested and the value of these invesments. 

Individual Retirement Account (IRA) – An individual account set up with a fi nancial institution, 

such as a bank or a mutual fund company. Under Federal law, individuals may set aside personal 

savings up to a certain amount, and the investments grow, tax deferred. In addition, defi ned 

contribution plan participants can transfer money from an employer retirement plan to an IRA 

when leaving an employer. IRAs also can be part of an employer plan.

Money Purchase Plan – A money purchase plan requires set annual contributions from the 

employer to individual accounts and is subject to other rules.

Multiemployer Plan – A retirement plan sponsored by several employers under collective 

bargaining agreements that meets certain other requirements. A participant who changes jobs 

from one sponsoring employer to another stays within the same plan.

Plan Administrator – The person who is identifi ed in the plan document as having responsibility 

for running the plan. It could be the employer, a committee of employees, a company executive, 

or someone hired for that purpose.

Plan Document – A written instrument under which the plan is established and operated. 

Plan Fiduciary – Anyone who exercises discretionary authority or discretionary control over 

management or administration of the plan, exercises any authority or control over management 

or disposition of plan assets, or gives investment advice for a fee or other compensation with 

respect to assets of the plan.

Plan Trustee – Someone who has the exclusive authority and discretion to manage and control 

the assets of the plan. The trustee can be subject to the direction of a named fi duciary and the 

named fi duciary can appoint one or more investment managers for the plan’s assets. 

Plan Year – A 12-month period designated by a retirement plan for calculating vesting and 

distribution, among other things. The plan year can be the calendar year or an alternative 

period, e.g., July 1 to June 30.

Profi t Sharing Plan – A profi t sharing plan allows the employer each year to determine how 

much to contribute to the plan (out of profi ts or otherwise) in cash or employer stock. The plan 

contains a formula for allocating the annual contribution among the participants. 

 

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Rollover – A rollover occurs when a participant leaves an employer and directs the defi ned 

contribution plan to transfer the money in his or her account to a new plan or individual 

retirement account. This preserves the benefi ts and does not trigger any tax consequences if 

done in a timely manner. 

Safe Harbor 401(k) – A safe harbor 401(k) is similar to a traditional 401(k) plan, but the 

employer is required to make contributions for each employee. The employer contributions 

in safe harbor 401(k) plans are immediately 100 percent vested. The safe harbor 401(k) eases 

administrative burdens on employers by eliminating some of the complex tax rules ordinarily 

applied to traditional 401(k) plans. 

Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) – A plan in which 

a small business with 100 or fewer employees can offer retirement benefi ts through employee 

salary reductions and matching contributions (similar to those found in a 401(k) plan). It can be 

either a SIMPLE IRA or a SIMPLE 401(k). SIMPLE IRA plans impose few administrative burdens 

on employers because IRAs are owned by the employees and the bank or fi nancial institution 

receiving the funds does most of the paperwork. While each has some different features, 

including contribution limits and the availability of loans, required employer contributions are 

immediately 100 percent vested in both. 

Simplifi ed Employee Pension Plan (SEP) – A plan in which the employer makes contributions 

on a tax-favored basis to individual retirement accounts (IRAs) owned by the employees. 

If certain conditions are met, the employer is not subject to the reporting and disclosure 

requirements of most retirement plans. Under a SEP, an IRA is set up by or for an employee to 

accept the employer’s contributions. 

Summary Plan Description – A document provided by the plan administrator that includes 

a plain language description of important features of the plan, e.g., when employees begin to 

participate in the plan, how service and benefi ts are calculated, when benefi ts become vested, 

when payment is received and in what form, and how to fi le a claim for benefi ts. Participants 

must be informed of material changes either through a revised Summary Plan Description or 

in a separate document called a Summary of Material Modifi cations.

Vested Benefi ts – Those benefi ts that the individual has earned a right to receive and that 

cannot be forfeited. 

Years of Service – The time an individual has worked in a job covered by the plan. It is used 

to determine when an individual can participate and vest and how they can accrue benefi ts in 

the plan.

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