How pensions work in the United States : A Practical Guide to the Legal Profession in some English-speaking countries and Ukraine - С.М. Воронин и др : Книги по праву, правоведение

How pensions work in the United States

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retirement (pension) plan – пенсійний план / пенсионный план

disabled person – непрацездатна людина / нетрудоспособный человек

benefit – допомога / пособие

retirement benefit – пенсія, вихідна допомога / пенсия, выходное пособие

income – зарплата, доход / зарплата, доход

contributory pension plan – пенсійний фонд, який складається з внесків роботодавців та службовців / пенсионный фонд, составленный из взносов нанимателя и служащих

defined – contributory pension plan – пенсійний фонд, який визначає внески, але не платежі / пенсионный фонд, в котором определены взносы, но не выплаты

defined pension plan – пенсійний фонд з фіксованими платежами / пенсионный фонд с фиксированными выплатами

non-contributory pension plan – пенсійний фонд, внески в який здійснює тільки роботодавець / пенсионный фонд, взносы в который осуществляет только наниматель

disposition – зд. розпорядження / зд. распоряжение

claim n – вимагання, право вимагання / требование, право требования, заявление права

What is a pension?

A pension is an income payable after a worker retires, usually at the age of 60 or above.

It depends on the provisions of the particular retirement plan. Pension can also be paid out earlier if a worker becomes disabled, or to the survivors of a worker who dies.

What are the forms of modern retirement plans?

Modern retirement plans come in two general forms. In a defined-benefit plan the amount of the pension is specified by some formula recognizing the worker’s length of service and earning history. Then the contributions from employer and employee (needed to provide the pension) are determined. A defined-contribution plan indicates how the contributions are to be determined on behalf of each employee and accumulates these contributions in a special fund. Then, at retirement age, the accumulated fund is applied, to provide whatever it will.

Which of them is the most common?

The vast majority of present-day pension schemes are what are known as “final-salary” or “defined-benefit” schemes. In this type of scheme, the pension is linked to the salary of the pensioner before retirement (perhaps the average of the last five years, three years or, more commonly now, the salary in the final year).

Final-salary schemes have the merit of at least making sure that the pension, when first paid, has taken account of inflationary movements in salaries up to the point of retirement. Such a link is an important factor in the type of investment policy.

While final-salary schemes are now the most common, the defined-contribution schemes cannot be totally ignored.

What are the main features of a pension plan?

A typical pension plan of either type, is a written document of some complexity. Among the detailed provisions that will be found are:

The rules that determine which workers are eligible to become plan members;

The age or ages at which workers can retire, and the form of the retirement income;

The details of the pension formula (if a defined-contribution plan);

The rules with respect to the disposition of a worker’s pension if he or she leaves employment before retirement age or dies;

The arrangements by which the employer and employee contribute to the cost of the benefits provided.

What is difference between public and private pension?

Retirement plans can be classified into public and private. When the sponsoring agency is some part of government, the plan is considered to be in the public sector. When the plan is sponsored by an employer, when it arises out of the collective-bargaining process, or when it is arranged on an individual basis by the worker, it is the private sector.

Does the law require employers to provide pensions?

No, but if an employer offers a pension plan, the federal Employee Retirement Income Security Act (ERISA) regulates it. The tax laws provide important advantages to companies whose plans correspond to the act. So ERISA protects workers who participate in pension plans. It also sets legal minimums that a pension plan must provide. However, an employer may provide more liberal terms in its pension plan. This federal law preempts almost all state laws covering pensions.

And if a plan participant gets divorced, is the ex-spouse entitled to a share of the pension?

This depends on state law. Most states consider a pension to belong jointly to a participant and the participant’s spouse. If a state court decree orders that part of a participant’s vested benefits be paid to an ex-spouse or child, ERISA requires the plan administrator to honor the court decree.

Shall a person file a claim for benefits?

Each pension plan specifies the claims procedure. Generally, a participant is eligible for payments from a pension fund when he or she reaches the age of sixty-five (or the retirement age specified in the plan) or upon leaving the company. Most pension plans require the participant to file a written claim in order for payments to begin. Within ninety days, the plan administrators must either begin payment to the participant or notify the participant in writing that the claim is denied.

And if a claim is denied?

If a claim is denied, the participant is entitled to request a review of the decision. If, upon review, the claim is still denied, the participant can appeal that decision. Some plans provide for arbitration as a means of appeal.