The Pension Benefit Guaranty Corporation (PBGC)

If you have a pension, the Pension Benefit Guaranty Corporation most likely plays a role in protecting your retirement money. The Pension Benefit Guaranty Corporation has a number of different duties when it comes to looking out for those with pensions. Here are the basics of the PBGC.

Pension Benefit Guaranty Corporation

The PBGC is a company that was established by the federal government in 1974. The Employee Retirement Income Security Act was the legislation that first started the PBGC. This company works with other companies across the country that have defined benefit plans.

Funding

Although this organization was started by the federal government, it is not funded with tax dollars. It is a completely self-sufficient business that generates its own income. It charges a certain amount of money in insurance premiums to the companies that it works with. It then takes this money and uses it to invest, just as a traditional insurance company would. When a company that it ensures goes bankrupt, it will also take the funds that are left over in the pension fund for the company.

What It Does

The main thing that the PBGC does is insure pensions. Companies pay a regular premium for each of their employees to the PBGC. If a company with a pension plan goes bankrupt, the PBGC steps in to take over the pension plan. With this company, employees can rest assured that their retirement benefits are intact regardless of the strength of the company that they work for. The PBGC will then start making payments to employees that have reached the age of retirement.

Types of Programs

The PBGC offers insurance coverage on two different types of pension plans. They offer a single employer plan for companies that want to work specifically with PBGC. They also operate a multi-employer plan that allows multiple companies to come together and negotiate with PBGC collectively. For example, if several companies within the steel industry wanted to work with the PBGC, they could set up a multi-employer pension plan agreement.

Maximum Benefit

When you are a retiree with this type of pension plan, you will have a maximum annual benefit that you can receive from the PBGC. This maximum benefit is determined by the government, and it cannot be exceeded unless the government changes the law. For example, in 2009, you could receive a maximum of $54,000 per year from the PBGC.

Age

You are eligible to start receiving full retirement benefits from the PBGC once you reach the age of 65. If you decide to retire before the age of 65, you will receive a prorated pension payment depending on how old you are.

Plan Termination

The PBGC can decide to terminate a pension plan at their discretion. Typically, this is done when they believe it would be in the best interest of the employees of a company. This will help ensure that everyone in the plan has enough money to receive for retirement.

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