What Happens to My Pension if My Company Files Bankruptcy?
November 6, 2008
With more and more companies facing bankruptcy, many employees are worried about their futures.
Beyond the question of finding a new job, Americans are concerned about hat will happen to their pensions if their company files for bankruptcy.
Once a company files for bankruptcy, pension payments may be suspended. This does not mean that they are no longer paying people that are drawing money from their pensions. It means that the company is no longer contributing to the pension fund for current employees.
Would an employee be able to draw out of the pension if they leave the job under normal circumstances? Will bankruptcy affect the funds already in the pension plan? Those are the primary concerns of many, and rightly so.
When a company files for bankruptcy, the value of its stock generally plummets. If you have a 401(k) that is partially invested in company stock then you will not be able to avoid taking some losses. Another thing to be wary of is the possibility that the company has illegally dipped into the pension or 401(k) funds to try and stave off financial hardships. This scenario is extremely rare.
If you find that your company is on the verge of bankruptcy and you’ve considered early retirement, you don’t need to worry about your pension funds. However, it is important to understand the fees and penalties that accompany early withdrawal. Make sure you have explored all of your options before moving forward.
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