Research Into PBGC Rules Provides Understanding Of
Pension Benefit Issues
To clear up confusion that some retirees have
encountered, an LRO member has researched what the Pension Benefit Guaranty
Corporation's (PBGC) maximum guarantees are and under what circumstances
This information might
relieve the minds of some LRO members about PBGC pension benefits and might
at least help others estimate more clearly just what their risks might be
and for how long yet they might expect to be potentially impacted.
In a nutshell, the PBGC
guarantee comes into play only in the event of the distress or involuntary
termination of a pension plan. A distress termination is initiated by the
company, typically although not exclusively under conditions of bankruptcy.
An involuntary termination is initiated by the PBGC in order to limit
eventual demands on its own assets when it sees that a company is no longer
able to meet minimum funding requirements.
Nearly everyone has heard that there is a maximum beyond which the PBGC will
not guarantee individual pensions and that it has something to do with
retirement age. What one of the PBGC documents makes clear, is that
retirement age applies only to those who have not yet retired at the time of
a plan's distress or involuntary termination. For those who have already
retired at the time of a distress or involuntary termination, what matters
is their ages at the time of the termination. Thus, for a plan terminating
in 2008, the maximum guarantee for a retiree who is 65 would be $51,750.00,
but the maximum guarantee for a retiree who is 70 would be $85,905.00.
What this means is that any
retiree who is already old enough to have his ERISA pension fully guaranteed
by the PBGC no longer has to be concerned about safety of the pension
itself. With the data from the
www.pbgc.gov website, retirees who are younger will at least be able to
become knowledgeable about what benefits they would be entitled to receive.
none of this has anything to do with non-pension benefits or pension
supplements paid from sources other than the pension fund itself.
for the PBGC's Termination Fact Sheet.
for the PBGC's Maximum Insurance Benefit for 2008.