How to secure your nest egg against layoffs
October 2, 2009 · Tagged with Retirement
The plan may just send you a check for the balance. In that case, you have 60 days to deposit the money into an IRA. If you don’t meet the deadline, the IRS will treat the money as taxable income.
If you have an outstanding loan from your 401(k) account, it becomes due when your plan closes or, typically, if you’re laid off.
You’ll have 60 days to come up with the money and repay yourself by putting it into an IRA. Otherwise, it’s taxable income.
Certain rules apply to traditional pension plans too. For one, a layoff should not interfere with your ability to collect benefits that are due.
If your employer folds? Most private companies have so-called qualified plans. That means if your employer and its plan close, the Pension Benefit Guaranty Corp. takes control of the plan.
The PBGC will pay you up to $54,000 in yearly benefits.
“The PBGC bases payments on benefits you’ve earned,” said Bob McBride, vice president of Diversified Investment Advisors, based in Purchase, N.Y. “It won’t pay you for benefits you haven’t earned yet if, for example, you’re laid off before earning full benefits.”
The most important precaution you can take is to make sure your current or former employer’s human resources department has your correct address and identification information, such as Social Security number.
“Your plan may have been with a company that was taken over. And maybe that company was also later taken over,” said Ethan Kra, worldwide partner and chief actuary, retirement, of consulting firm Mercer.
If you don’t receive annual reports from your plan, contact it.
Matching Calculations
While keeping in touch, check to make sure the company’s calculation of benefits matches yours.
If you think there is no successor plan, contact the PBGC. Make sure the agency has your contact information.
If you do get laid off, get the most recent plan statement. In addition to showing what benefits you’re entitled to, it will have the plan’s name, address and identification number.
“That will make it easier to track down your benefits if you need to make contact with it or the PBGC years later,” Kra said.