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Imagine a person who has worked for a big corporation for thirty years. He wants to work another five years before retiring and drawing a pension. However, if he chose to quit today, he would still get a monthly check, albeit smaller than if he waited.

But he suddenly gets fired. Is the company required to pay him the same pension they would have paid him if he had voluntarily quit?

EDIT

I forgot to state a location: Washington State, U.S.

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    Where in the world is this happening? For example, Australian employers contribute to a superannuation fund nominated by the worker which is completely independent of their employer.
    – Dale M
    May 22 '18 at 3:58
  • I edited my question to include a location: the U.S., specifically Washington State. May 22 '18 at 4:04
  • Is this about Andrew McCabe? May 22 '18 at 7:51
  • No, it isn't about anyone in particular. May 22 '18 at 8:31
  • @FreeRadical: The question is specifically about the private sector ("big corporation"). Andrew McCabe was fired from the FBI, which last I checked has not (yet) been privatized .
    – sleske
    May 22 '18 at 9:10
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tl;dr: In general no (but possible in special cases).


The answer to this question depends on the pension scheme (retirement plan) that applies to the employee. It may also depend on which part of the pension is based on contributions by the employee as opposed to the employer.

In general, the pension claim that an employee has is their property, and once earned ("accrued"), cannot be taken back - just as an employer cannot usually take back the wages they paid.

Strictly speaking, an employer could probably include a clause in their retirement plan that allows them to reduce the pension in case of firing, but this is very unusual, and would run afoul of some rules. For example, specifically, in the USA, to gain certain tax advantages (which are very desirable), a retirement plan must meet some minimum standards, and one of them is that the "accrued benefit" must be "noforfeitable". For example:

(a) General rule - A trust shall not constitute a qualified trust under section 401(a) unless the plan of which such trust is a part provides that an employee’s right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age (as defined in paragraph (8)) and in addition satisfies [...]

(1) Employee contributions

A plan satisfies the requirements of this paragraph if an employee’s rights in his accrued benefit derived from his own contributions are nonforfeitable.

[...]

26 U.S. Code § 411 - Minimum vesting standards

So generally, once you earned your pension, it's yours.

In the USA, most of this is regulated in the Employee Retirement Income Security Act of 1974 (ERISA), including the rules about forfeiture of contributions. Thanks to ohwilleke for mentioning this.


One notable exception is the public sector (which the question did not ask about): In many US states public sector employees or politicians forfeit their pension if they commit a felony relating to official duties. There is no such rule for pensions in the private sector, neither in the USA nor in most other countries I know of.

See e.g. State Pension Forfeiture Laws for an overview.

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  • There is no such rule in the private sector. The relevant law that protects private sector pensions is called ERISA. Of course, if a pension's investments had bad investment performance, everyone could have their pensions reduced from the amount promised in a defined benefit plan, and the equivalent of FDIC for pensions only partially covers that loss. The rule is different somewhat for "non-qualified deferred compensation", a perk similar to a pension that is normally limited to key employees of very profitable, usually closely held, businesses.
    – ohwilleke
    May 22 '18 at 17:17
  • @ohwilleke: Thanks for mentioning this; I added it to my answer.
    – sleske
    May 22 '18 at 17:26

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