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 they apply.


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 website, retirees who are younger will at least be able to become knowledgeable about what benefits they would be entitled to receive.


Obviously, none of this has anything to do with non-pension benefits or pension supplements paid from sources other than the pension fund itself.  Click here for the PBGC's Termination Fact Sheet.   Click here for the PBGC's Maximum Insurance Benefit for 2008.