How Do Pensions Work If The Company Is Acquired?

October 21, 2022 6:12 PM

Let's say a somewhat large Company A (with a pension plan for retired employees) is acquired by some other Company B -- is there any reason for Company B to continue to honor the pension plan? A quick search on the terms of the pension indicates Company A reserves the right to change the plan at any time for any reason. Does this basically guarantee that Company B will end the pension plan as soon as it gets around to it?

I've seen there's a government backed agency that apparently collects dead pension plans, but the pension plan I'm concerned about isn't "dead" yet. Is there any regulation that prevents a company from draining the funds and killing off the pension? I assume there is? (These companies are US-based, so answers in American, please.)

posted by mhh5 to Work & Money (2 answers total)

Best answer: They are protected by ERISA, Pension Protection Act and some other rules. The company’s right to terminate the plan means they can stop offering it as a benefit, but to do this they have to either pay everyone vested a lump sum or an insurance product that’s as good as the pension would’ve been. Then they can switch employees to a 401k, or whatever. They can’t steal the accrued funding or the promised pension payouts.
posted by michaelh at 6:24 PM on October 21, 2022 [8 favorites]

Response by poster: oh, I guess I could have asked my question here: https://www.dol.gov/agencies/ebsa/about-ebsa/ask-a-question/ask-ebsa
posted by mhh5 at 12:00 AM on October 22, 2022 [1 favorite]