In: Finance
What Is the Pension Benefit Guaranty Corporation?
Pension Benefit Guaranty Corporation (PBGC) is a non-profit corporation that guarantees continued payment of pension benefits for private-sector defined-benefit plans that have ended due to insufficient funds
Understanding the Pension Benefit Guaranty Corporation (PBGC)
Pension Benefit Guaranty Corporation (PBGC) is an independent federal agency overseen by the Department of Labor. Established by the Employee Retirement Income Security Act of 1974, PBGC was formed to encourage the continuation and maintenance of private-sector defined-benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at a minimum
As of December 2019, PBGC insures retirement incomes for nearly 25,000 defined-benefit plans, covering nearly 35 million U.S. workers and retirees. Roughly 24.7 million workers are covered through the single-employer program, while an additional 10.8 million are covered through the multi-employer program, which is paid into by multiple unrelated employers and is often established and maintained by a collective bargaining process with multiple employers within a single industry
Benefits Covered (HOW MUCH EMPLOYERS PAY ANNUALY)
The basic benefits covered by PBGC include early retirement benefits and a pension for workers reaching retirement age, as well as annuities for survivors of plan participants and, in some circumstances, disability benefits.4
The maximum pension benefit guaranteed by PBGC is adjusted yearly by law. In 2020, eligible participants retiring at age 65 could receive a maximum benefit of $5,812.50 per month, or $69,750 yearly. This cap is increased for those retiring after age 65, and it is lower for those who retire earlier or when survivors' benefits are being paid.
In 2019, PBGC paid more than $6 billion in benefits to 887,100 retirees in the single-employer program. This compares to the $5.79 billion in payments made to 861,400 retirees in 2018. The PBGC was responsible for 4,965 single employer plans in 2019, up from 4,919 the year before.