Although women have made large strides toward closing the salary gap with men, the fact remains that we typically have lower earnings, experience higher job turnover, and are employed in industries with low or no pension coverage. Since employers are not required to have a pension plan, you need to do a little investigating to see what kind of pension (if any) your employer has in place for you.
Understanding Pensions
Some pensions fall under a traditional plan that promises specified pension benefits at retirement—usually based on the years you worked and your salary. A defined contribution plan, such as a 401(k) plan, maintains separate accounts for each person and retirement benefits are based on the amount in your account.
Take some time each year to assess your pension. The summary plan description should tell you how your benefits will be calculated. Your employer may give you a summary, but if not, request an individual benefits statement showing the value of your pension benefits. Look for the benefits you have actually earned to date and a projection of your benefits at retirement.
Factors Affecting Coverage
Working Part-Time
Pension plans do not have to include every worker. Some jobs may be excluded from the plan and part-time workers may not be covered. Check with your plan administrator, personnel office, or union representative to make sure that you can participate.
Employment Duration and Benefits
Usually you must work five years under a plan to qualify for benefits, although some types of plans still require ten years of work to earn a benefit. Other plans require less than five years. Ask the person running your plan for a summary plan description detailing the plan and its requirements.
Retiring Early
If your traditional plan allows you to collect pension benefits before "normal" retirement age (65 in many plans) your benefit may be reduced since you will be getting benefits for a longer period of time.
Changing Jobs
If you have not worked long enough to qualify for benefits, you will lose your pension. If you qualify for benefits, some plans will keep your pension until you reach retirement age. Others will allow you to take your money out in a lump sum. If you take the money, you will have to pay a tax penalty unless you roll the money over into another pension plan or IRA.
Survivor Benefits
In a traditional private pension plan, you may be entitled to receive a benefit from your spouse's plan when he dies. This "survivor" benefit is automatic unless both spouses agree, in writing, to give it up. If you are in a government plan or a defined contribution plan the rules may be different.
Separate Pensions
If you earned a pension at a previous job, contact the plan to get information on your benefits. Also, when you apply for Social Security, you can find out what private sector pension benefits you may have earned. Finally, contact Pension Benefit Guarantee Corporation at (202) 326-4000 or online at www.pbgc.gov for help in locating your benefits from a private sector plan that no longer exists. Be sure to keep all employment and pension-related records with other important papers.
Divorce and Pension
As part of a divorce or legal separation, you may be able to obtain rights to a portion of your spouse's pension benefits (or he may be able to obtain a portion of yours). In a private plan, this is done using a "qualified domestic relations order" (QDRO) issued by the court. You or your attorney should consult with the administrator of your spouse's plan to determine what requirements the QDRO needs to meet.
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