Can an employer terminate an employee just before the employee vests in his/her ERISA retirement plan in order to avoid paying extra benefits?
Get Legal Help Today
Secured with SHA-256 Encryption
UPDATED: Jul 14, 2021
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.
ERISA protections, which are mandated by federal law, specifically prohibit employers from terminating employees prior to the vesting of their retirement plans in order to avoid the payment of a pension or the issuance of other pension benefits to the employee. What this means is that underhanded tactics such as terminating an employee just prior to being vested in the ERISA-protected pension program can be actionable through the court system.
The Employee Retirement Investment Security Act, known as ERISA, is intended to prevent adverse actions against employee benefits programs, as well as to provide a stable platform for retirement plans so that employees can invest knowing that their money will be safe. Under ERISA, there are a host of rules regarding what employers can and cannot do with retirement accounts. These rules not only set limits on what retirement funds can be used for, they also mandate that the funds be managed with the employee’s best interest in mind, and they prohibit employers from interfering with or changing vested pension benefits in any way. Further, when an employee’s pension is close to vesting, ERISA prohibits any action on the part of the employer that is taken solely to prevent the vesting.
The ERISA program covers various types of legally protected retirement plans and insurance plans within the United States. Under ERISA, not only are pension benefits protected, but some sick pay and vacation plans may also be guaranteed.
It is the responsibility of both the employer and the employee to know their rights with regard to ERISA, as well as to know what rights the other party has, so that they can apprise themselves of whether or not everything is working as it should be under the law. If you have any concerns at all about your pension plan or about whether your employer has violated the protections available to you under ERISA, it is in your best interest to consult a lawyer.