Whether or not you receive your pension depends directly on the health of your pension plan, and not directly on the health of the company. By investing in stocks, bonds, and other financial instruments that involve some level of risk, your pension plan creates your future assets. Therefore, if not managed correctly, your investments could be underfunded, thus affecting your pension. It is your legal right to know if your pension plan has ample funding. You have the right to ask for a copy of your plan’s annual report. Read the U.S. Department of Labor’s guide, “10 Warning Signs that Pension Contributions are Being Misused,” available at www.dol.gov/ebsa/publications/10warningsigns.html.

One way to tell if the pension plan is underfunded is to look at the funding ratio. This is the ratio of assets to liabilities. The higher the ratio, the more fully funded the plan is.

Once earned, a defined benefit has partial protection under the Employee Retirement Income Security Act (ERISA) of the U.S. Department of Labor. The exception to this act occurs if the plan becomes insolvent. Then, the plan has partial protection by the Pension Benefit Guaranty Corporation (PBGC).  However, this is only partial protection, because the PBGC is itself insolvent. The PBGC does not cover all pension plans, so it is important to ask your employer if yours is covered.

When a bankruptcy does occur, the assets in your pension plan should not be at risk. The law requires your employer to keep the pension adequately funded and separate from business assets. Your benefits only have a guarantee up to a certain point. Your protection might differ, depending on the type of plan you have. The pension assets are untouchable by the creditors.