Not everyone has a pension plan to rely on when they retire. Even those individuals who do have some type of pension plan in the works might not be protected should their employer declare bankruptcy. However, for some retirees, the PBGC or Pension Benefit Guaranty Corporation deals with defined-benefit plans to ensure that the benefits will be paid to the retirees even if the pension plan has been terminated without sufficient money to pay the benefits to its retirees. It acts as a safety net for participants holding plans in the private sector. The laws regarding this area have changed in recent years and employers are now required by law to fund their pension plans fully.



What Is The PBGC or Pension Benefit Guaranty Corporation?

The PBGC or Pension Benefit Guaranty Corporation is a non-profit corporation. It operates under the guidance of the Department of Labor, one of the offices within the federal government. Its primary goal is to make sure that those individuals who have defined-benefit pension plans will receive their money or the basic benefits that they are entitled to even if the plan fails and funds are short. The Pension Benefit Guaranty Corporation dates back to 1974 when it was established by ERISA or the Employee Retirement Income Security Act.

How Is the PBGC or Pension Benefit Guaranty Corporation Funded?

Even though the PBGC is considered a federal agency, it does not receive its funding from federal tax dollars. There are four individual strategies that are used to fund the PBGC including:

· Earnings from assets that have been invested.

· Assets from defined-benefit plans that the PBGC acts as a trustee for.

· Recoveries from the bankruptcies of former sponsors.

· The premiums that have been collected from sponsors of defined-benefit plans.

When Does the PBGC or Pension Benefit Guaranty Corporation Assume Control?

In general, the PBGC will take control when a distress termination occurs. This type of termination is one in which sufficient assets do not exist to pay benefits to the retirees under the plan. It can also take over when it determines that a pension plan will not be able to meet its obligations. When this happens, the goal is to make the plan viable.

What Benefits Are Protected by the PBGC?

The provisions of the PBGC protect the following benefits:

· A pension upon retirement.

· Annuities for the survivors of the pension plan participant.

· Early retirement benefits.

· Disability payments that began prior to the plan's termination.

Certain benefits are not protected under this agency including death and supplemental benefits. Plus, special situations such as amended pension plans might bring into play special guidelines on how they are dealt with.

What Type of Pension Plans Can Participate with the PBGC?

Both single-employer pension plans and multiple-employer pension plans can participate. Each plan is self-explanatory in that a single-employer pension plan has only one employer contributing to the plan and multiple-employer pension plans have more than one employer contributing to the plan.

How Can You Determine Whether Your Pension Plan Is Covered Under the PBGC?

In order to determine whether your pension plan is covered under the PBGC, you can ask your employer. If you prefer not to speak to him about this, you can check the “Summary Plan Description” that is included with your pension plan. If the plan is funded below a specific level, a notice is required to be sent to each employee who is covered under the plan.