ABA Family Legal Guide

Law and the Workplace

Leaving a Job

Pension Plans

Does an employer have the right to terminate a pension plan?

If an employee's union negotiated for the inclusion of a pension plan in the collective bargaining agreement, then the employer cannot terminate the plan without bargaining with the union over the issue. Employee Retirement Income Security Act (ERISA) itself does not prohibit an employer from terminating a pension plan.

ERISA does, however, provide some protection if a plan is eliminated, by establishing the Pension Benefit Guaranty Corporation (PBGC). ERISA requires defined benefit pension plans to pay insurance to the PBGC. In return, the PBGC guarantees the vested benefits of participants in the fund, up to a certain limit.

The PBGC provides this protection only for certain benefits in specific types of plans. Thus, the PBGC may not protect your benefits if you do not participate in a qualified defined benefit plan, if your benefits have not vested, or if your plan provides medical and disability benefits.