For those who are unaware of it, ERISA is the Employee Retirement Income Security Act. It was implemented in 1974 to protect the assets of Americans, so the funds they put into their retirement accounts would still be there when they were old enough to benefit from them.
ERISA is a federal law, and it sets minimum standards for the retirement plans in private industry. Here are some crucial facts about ERISA every American worker should be aware of leading into retirement.
When Can You Start to Receive Retirement Benefits Under ERISA?
The federal law dealing with ERISA has stipulations regarding you can start to withdraw that money. In some cases you must be 65 years old. Depending on your company, you might become eligible earlier. Alternatively, you can start to receive those benefits after ten years of service with the company.
The only other way that you can receive benefits earlier is if you voluntarily resign from the company. Filing a claim for benefits will be necessary in any of these cases, and it may take a few days or a couple of weeks for administrative reasons.
You Can Be Penalized for Early Withdrawal
Most retirement plans stipulate that you will be penalized if you attempt to withdraw any of the money before the age of 59 ½. However, certain programs will allow you to remove a portion of the funds for particular things. A down payment on a house is often an exception that allows for early removal of funds.
Each plan will have its own rules when it comes to exceptions. It’s sometimes possible to transfer all your ERISA funds to an IRA if you choose to do so. If you take a portion of the funds out before you retire, or all of them, then you will have reduced retirement benefits.
How Will the Benefits Be Paid?
If your retirement plan is in the form of a money or a defined benefit structure, you will receive annuity payments when the time comes. These are equal, periodic payments, normally monthly. They will continue for as long as you live.
However, other payment options are sometimes available with these plans, so you will need to check on the details of your specific one. If you have a defined contribution plan, you will typically see the payout in the form of a single lump payment. You can also usually divide it up into payments over a 5 or 10 year period if you’d like.
Make Sure You Understand the Details of Your Plan
It’s fortunate that ERISA is in place to protect the money that you’re putting away toward retirement. For a person who has been working for the majority or all of their adult lives, it is a comfort to know the money will be there when you need it.
Don’t forget, no two plans are exactly alike, so you’ll need to read the fine print of yours carefully. If there’s anything you don’t understand, there are lawyers and financial planning experts that can help you with the details.