Retirement benefits refer to a financial security setup intended to support a person once they have left the workforce. Upon retirement, the employee’s retirement benefits can become their main source of income.
There are two types of retirement benefits:
- Social Security is the government program that provides financial support to retired and disabled people. Social Security benefits make up a large part of most people’s retirement plans
- In addition to Social Security benefits, retirement plans and packages may also be worked out and finalized as part of the employment contract. Most often these plans are not actively negotiated – the employer outlines them in an employee manual and for the employee, it’s a take-it-or-leave-it situation. However, the benefits may have been negotiated through a union
How Does the Government Regulate Retirement Benefits?
The government regulates retirement benefits via the rules the Social Security Administration has developed for obtaining and getting paid Social Security benefits. These include (1 rules concerning whether an individual is eligible for Social Security benefits; and (2) rules concerning how much an individual will get paid.
Based on the law concerning Social Security retirement benefits, one of the key requirements for eligibility for benefits is that you have to have worked for a significant period of time. The way that this is measured is that you need to have a minimum number of “credits.” A person can earn up to 4 credits working each year. In order to obtain benefits, you need to have at least 40 credits.
Thus, it takes a minimum of 10 years of work history to become eligible for Social Security retirement benefits.
The factors that the Social Security Administration considers to determine eligibility are:
- How many years you have worked
- The age you are when you apply for benefits (you must be at least 62)
- Whether you have received Social Security benefits before
- The number of marriages you have had
- Their marital status at the time of filing and your spouse’s income
- Your record of payment of U.S. Social Security taxes (this is tracked through the credits program)
- Whether you are a current or former government employee
- Your citizenship status, i.e., U.S. citizen, non-citizen lawfully admitted to the U.S., or other
- The state in which you reside and the type of your residence, e.g., nursing home, jail, or other correctional facility
Your eligibility for benefits and the amount you will receive does not depend on how much money you need to live on (i.e., your financial need). Instead, it is principally based on the amount of income that you have earned over your lifetime and the number of years that you have worked.
The amount of your Social Security retirement benefit is based on your average income over your working years, the number of years you have worked, your spouse’s average income, and the age at which you claim your benefits.
How much money a person may expect to receive monthly from Social Security when they retire is based primarily on the following two factors:
- Earnings: The Social Security Administration averages a person’s earnings over the course of their career in order to determine what they will be entitled to. The size of their retirement benefits depends on how much they earned while working
- Age: The earliest age at which a person may begin receiving monthly retirement benefits is 62. The longer a person waits to claim their benefits, the higher amount of money they will receive. For example, someone who requests that their benefits begin when they are 62 years old might get $1500 per month. If they wait to seek benefits until they are 67, they may receive $1800 per month
What Are Some Common Retirement Benefit Disputes?
It is unlikely that you will have a dispute or claim to file against the Social Security Administration, because all of their calculations are straightforward and mathematical. They run the numbers, and you will be paid what every single person in a situation similar to yours is paid.
On the other hand, legal issues and disputes can arise in connection with employment retirement benefits. Some common retirement benefit disputes include:
- Premature or forced retirement: To avoid having to pay retirement benefits, some employers terminate employees early, just before their benefits vest (“vest” means become owned by the employee). This could affect their eligibility for benefits, or the amount they are entitled to receive
- Issues involving illegal discrimination against people who are in legally protected classes, such as people of color, people of a certain sex, women who are pregnant, people of a certain religion, people who are disabled, etc.
- Allocation of retirement benefits if the employee and their spouse get a divorce. How much of the employee’s benefits is the ex-spouse entitled to receive?
- Disputes over the calculation of how much money the employee should receive
How Are Retirement Benefit Disputes Resolved?
Some retirement benefit disputes may be resolved through an investigation by a government agency, such as the EEOC (Equal Employment Opportunity Commission). Whether the EEOC can get involved depends on the type of legal issue involved. For instance, if the retirement benefit dispute is due to discrimination, the EEOC will likely get involved.
Some cases are resolved through a law known as ERISA. The Employee Retirement Income Security Act, or “ERISA,” is a federal law which sets standards and regulations of protection for people that participate in company retirement plans. ERISA provides protections for eligibility guidelines, management of funds, and wrongful termination.
Additionally, ERISA guarantees the payment of certain benefits through the Pension Benefit Guaranty Corporation (PBGC) should an employee’s benefit program be terminated (e.g., if the business goes bankrupt). Normally, termination of the payment of retirement benefits would result in employees not receiving the benefits they are owed from their program. The PBGC can resolve that problem
ERISA protects workers in another way. ERISA requires that companies with retirement programs provide all employees with accurate plan information and important facts regarding:
- Plan features and funding
- Minimum standards for participation
- Vesting
- Benefit accrual
- Management and control features
- Claims and appeals process for participants
- Right to sue for breach of benefits
Finally, some retirement disputes may require a lawsuit in order to resolve the legal and monetary issues. Retirement benefit lawsuits typically end up with a damages award to compensate the plaintiff for losses, such as lost retirement payments.
Do I Need a Lawyer for Help with Retirement Benefits?
Retirement benefits may be your most important source of income when you retire. You may want to hire an employment lawyer if you need help obtaining benefits, or if you need help negotiating or disputing an issue.
Your attorney can provide you with the legal advice that is needed to succeed on your claim. Also, if you need to attend a court hearing or a Social Security hearing, your attorney can represent you for those processes.
