Expert: Ed McFarland - 9/1/2004

Question
Hello and thank you in advance for your time and expertise.
I have what is most likely a simple question. My husbands company was bought out last year and they are switching the 401K option with a pension plan. How will this affect the money he has in his 401K account? Will we be allowed to withdraw it or will it just roll over into the pension fund? Also, can you explain the difference, as far as the rules go, between 401K's and a pension plan?
Thank you again,
Lisa Shaner

Answer
You should get a package from the benefits area of the human resources department explaining ho the plan works. If you haven't or got it and didnt look at it (Not uncommon, most people can't fathom it either.) ask for it, they have to give it to you and explain it, its the law.

Your options will be explained in those papers.

A 401k is a defined contribution plan, you save and hope that it grows a big enough nest egg to retire on.

A pension is a defined benefit plan, after you retire there is a retirement monthly benefit that you accrue based on factors such as salary and years of service.

Good luck