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Can an employer terminate an employee just before the employee vests in his/her ERISA retirement plan in order to avoid paying extra benefits?

UPDATED: February 12, 2020

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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.

Understanding ERISA

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.

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