Your Company Is in Trouble—What Actually Happens to Your Pension?

Let’s talk pension protection during a company bankruptcy.

Your retirement benefits may still be protected if your employer goes bankrupt—but it depends on the plan. Andrey_Popov/Shutterstock

If your employer goes bankrupt, the fate of your pension depends entirely on what type you have—and most workers don’t know.

Defined benefit pension holders have federal insurance protection through the Pension Benefit Guaranty Corporation (PBGC), but that protection has limits. Workers with 401(k)s are in a structurally unique position. And laid-off workers with unvested benefits face the biggest risk of all.

Step One: Figure Out Which Type of Pension You Have

Everything flows from your pension type. There are two fundamentally different employer retirement plans, and they operate under completely different rules in a bankruptcy.