Once you have learned what type of retirement plan your employer offers, you need to find out when you can participate in the plan and begin to earn benefits.

Summary Plan Description

Summary Plan Description is a document provided by the plan administrator that includes a plain language description of important features of the plan, e.g., when employees begin to participate in the plan, how service and benefits are calculated, when payment is received and in what form, and how to file a claim for benefits. In addition, there typically is a time frame for when you begin to accumulate benefits and earn the right to them (sometimes referred to as "vesting").We highly recommend you review your Summary Plan Description to learn your plan’s rules and requirements.

We recommend you ask your human resources office or employer for a copy of Summary Plan Description. It is very important to review this document thoroughly especially when revised Summary Plan Description or Summary of Material Medications are sent to you.

Your plan administrator is required under Federal laws to inform you of important changes through a document called Revised Summary Plan Description or in a separate document called a Summary of Material Modifications.

When Can You Start Participating In Your Plan?

Federal law sets minimum requirements, but a plan may be more generous. Generally, a plan may require an employee to be at least 21 years old and to have a year of service with the company before the employee can participate in a plan. However, plans may allow employees to begin participation before reaching age 21 or completing one year of service. For administrative reasons, your participation may be delayed up to 6 months after you meet these age and service criteria, or until the start of the next plan year, whichever is sooner. The plan year is the calendar year, or an alternative 12-month period, that a retirement plan uses for plan administration. Because the rules can vary, it is important that you learn the rules for your plan, which can be found in Summary Plan Description.

Federal law also imposes other participation rules for certain circumstances. For example, if you were an emeritus worker when you were hired, you cannot be excluded from participating in the plan just because you are close to retirement age.

Employers have some flexibility to require additional years of service in some circumstances. For example, if your plan allows you to vest (discussed in detail later in this chapter) immediately upon participating in the plan, it may require that you work for the company for two years before you may participate in the plan.

Some 401(k) plans and SIMPLE IRA plans enroll employees automatically. This means that you will automatically become a participant in the plan unless you choose to opt out. The plan will deduct a set contribution level from your paycheck and put it into a predetermined investment.If your employer has an automatic enrollment plan, you should receive a notice describing the automatic contribution process, when your participation begins, your opportunity to opt out of the plan or change your contribution level, and where your automatic contributions are invested.

When Can You Earn Benefits?

Once you begin to participate in a retirement plan, you need to understand how you accrue or earn benefits. Your accrued benefit is the amount of retirement benefits that you have accumulated or that have been allocated to you under the plan at any particular point in time.

Defined benefit plans often count your years of service in order to determine whether you have earned a benefit and also to calculate how much you will receive in benefits at retirement. Employees in the plan who work part-time, but who work 1,000 hours or more each year, must be credited with a portion of the benefit in proportion to what they would have earned if they were employed full time. In a defined contribution plan, your benefit accrual is the amount of contributions and earnings that have accumulated in your 401(k) or other retirement plan account, minus any fees charged to your account by your plan.

Special rules for when you begin to accumulate benefits may apply to certain types of retirement plans.

Can A Plan Reduce Promised Benefits?

Defined benefit plans may change the rate at which you earn future benefits but cannot reduce the amount of benefits you have already accumulated.

For example, a plan that accrues benefits at the rate of $5 a month for years of service through 2011 may be amended to provide that for years of service beginning in 2012 benefits will be credited at the rate of $4 per month. Plans that make a significant reduction in the rate at which benefits accumulate must provide you with written notice generally at least 45 days before the change goes into effect.

In a defined contribution plan, the employer may change the amount of employer contributions in the future. Depending on the plan terms, the employer may also be able to stop making contributions for a few years or indefinitely.

An employer may terminate a defined benefit or a defined contribution plan, but may not reduce the benefit you have already accrued in the plan.

How Soon Do You Have a Right To Your Accumulated Benefits?

You immediately vest in your own contributions and the earnings on them. This means you have earned the right to these amounts without the risk of forfeiting them. However, note – there are restrictions on actually taking them out of the plan.

However, you do not necessarily have an immediate right to any contributions made by your employer. Federal law provides a maximum number of years a company may require employees to work to earn the vested right to all or some of these benefits.

You may lose some of the employer-provided benefits you have earned if you leave your job before you have worked long enough to be vested. However, once vested, you have the right to receive the vested portion of your benefits even if you leave your job before retirement. However, even though you have the right to certain benefits, your defined contribution plan account value could decrease after you leave your job because of investment performance.

Few Things to Consider

If you leave your company and return, you may be able to count your earlier period of employment towards the years of service needed for vesting in the employer-provided benefits. Unless your break in service with the company was 5 years or a time equal to the length of your pre-break employment, whichever is greater, you likely can count that time prior to your break. Because these rules are very specific, you should read your plan document carefully if you are contemplating a short-term break from your employer, and then discuss it with your plan administrator.

For more information, contact the Department of Labor electronically by visiting the website at www.dol.gov/ebsa and clicking on "Request Assistance" or by calling toll free at 1.866.444.3272.