Can You Have Multiple Pensions From Different Employers?

A pension plan is an employer-sponsored retirement benefit providing a predetermined income stream. These defined benefit plans base the amount received on factors like salary and years of service. A common question is whether individuals can accumulate multiple plans over a career.

Accruing Pensions from Different Employers

Individuals can accrue multiple pensions from different employers throughout their working lives. This occurs when someone transitions between companies, and each employer offers a separate defined benefit pension plan. Each pension benefit earned is distinct, based on the specific terms of that employer’s plan.

For example, if an individual works for one company for a decade, earning a pension, then moves to another company with a pension plan, benefits from the first employer’s plan remain separate. The terms of each plan, including calculation and payment, are specific to that plan.

Vesting and Benefit Qualification for Multiple Pensions

To qualify for a pension, individuals must satisfy specific conditions, including vesting requirements. Vesting refers to an employee gaining a non-forfeitable right to their accrued pension benefits, even if they leave the company before retirement. For private sector defined benefit plans, federal law mandates 100% vesting after five years of service or through a graded schedule.

Meeting vesting requirements for one employer’s pension plan is independent of meeting them for another. Each plan has its own rules regarding years of service and age requirements for benefit eligibility. For example, a plan might require five years of service and reaching age 65 to begin receiving full benefits. If an employee leaves a company before meeting its vesting requirements, they may forfeit employer contributions.

Receiving Payouts from Multiple Pensions

When eligible to retire, individuals can receive payouts from each accrued pension plan, with each plan operating independently. Benefits from different employers are administered and disbursed by separate entities or funds. Pension plans offer various payout options, such as a single life annuity for the retiree’s lifetime, or a joint and survivor annuity for a designated beneficiary. These choices are made for each individual pension benefit.

To initiate benefits, the retiree contacts former employers or plan administrators. The process involves reviewing the Summary Plan Document (SPD) for each plan, which outlines claiming procedures. While a lump-sum option may be available for some plans, many defined benefit plans primarily offer annuity payments.

Considering Other Retirement Savings Alongside Pensions

Beyond traditional defined benefit pensions, individuals accumulate other forms of retirement savings. Accounts such as 401(k)s, 403(b)s, and Individual Retirement Accounts (IRAs) are distinct retirement vehicles. Unlike pensions, which promise a specific benefit, these are defined contribution plans where retirement income depends on contributions and investment performance.

These personal retirement accounts are separate from any employer-sponsored pensions. For instance, a 401(k) or 403(b) allows employees to contribute a portion of their salary, often with employer matching contributions. IRAs are self-directed accounts established by individuals.

The rules governing contributions, investments, and distributions for these accounts differ significantly from those for pensions. They are managed independently, serving as additional components of an overall retirement financial strategy.