What happens to my 401(k) and pension if my company shuts down?

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Q. I lived in N.J. all my life and worked for the same company for 35 years. What happens to my 401(k) and pension if the company gets shut down?
— Concerned

A. We can understand your concern about the future of your retirement.

But there are safeguards for you.

Your 401(k) money is protected even if your company closes, said Jody D’Agostini, a certified financial planner with Equitable Advisors/The Falcon Financial Group in Morristown.

“Legally, your employer isn’t allowed to comingle these funds in the company’s general account, but rather, they need to be held separately,” she said. “It is protected from use by your employer and any creditor that might approach the firm for outstanding debts. Your money is safe and secure.”

Depending upon the vesting schedule, some of the employer contributions might be at risk, but none of your own salary deferral contributions are, D’Agostini said.

“These are yours by law and 401(k) plans are governed by ERISA. If your company makes matching or profit-sharing contributions, these may not all belong to you,” she said.

There are also protections for your pension.

If your company goes bankrupt and the assets are liquidated, the pension will automatically be terminated, but the company is required to set aside funds to pay the pension for the participants so your pension should be secure, she said.

“If they have not met this obligation, the Pension Benefit Guaranty Corporation, or PBGC, provides pension insurance which will protect your pension up to a certain amount,” she said.

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This story was originally published on July 25, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.