An employer may terminate a pension plan. When this action is taken it is often in response to extreme financial pressures, in order to compete with other companies who do not offer a pension plan, or in response to employee desires to establish a defined contribution (401k) plan.

Why would a company terminate pension plan?

Employers may terminate pension plans for a variety of reasons: voluntarily, when filing for bankruptcy or when the company is sold to someone else or through a merger. Mergers may allow the company to convert its pension plan to different retirement plan.

What does it mean when a pension plan is terminated?

Termination: When a pension plan terminates, it stops operating. Employees participating in a pension when it is terminated are generally offered a monthly annuity payment during retirement or a lump sum payment to be made at the time of the termination of the plan.