Home > Frequently Asked Questions >
About PBGC
- What is the Pension Benefit Guaranty Corporation?
- What types of plans are insured by PBGC?
- How can I find out if my pension plan is insured by PBGC?
How a plan terminates
- When can an employer end a pension plan?
- When does PBGC terminate a pension plan?
- How can I find out if my pension plan is underfunded?
- How will I know if my pension plan is ending? What other information should I receive?
- Can I earn additional benefits after my plan ends?
Pension estimates
- What happens when PBGC takes over my plan?
- What happens if PBGC's estimate is too high or too low?
Guaranteed benefits / other payments by PBGC
- What is the maximum amount that PBGC can guarantee?
- How does the maximum benefit guarantee apply to the benefits of disabled workers?
- What benefits does PBGC guarantee?
- Are there other limits on PBGC's guarantee?
- I am now a participant in a plan that may terminate. However, I am already receiving a benefit from PBGC for a plan that I participated in earlier. Is there a limit on how much I can receive under both plans?
- Is it ever possible to receive more than the amount guaranteed by PBGC?
Survivor benefits and benefit forms
- Does PBGC pay survivor benefits?
- I am receiving a benefit from my plan now. If my pension plan ends, will PBGC continue to pay my benefit in the same form that I chose when I retired?
- If my pension plan ends before I retire, what benefit choices are available from PBGC?
- Can I receive my benefit from PBGC in a lump sum?
Working while receiving your pension
- I am now eligible for early retirement. If my pension plan ends and I continue to work for my company can I collect my pension from PBGC?
- I am now eligible for early retirement. If my company, A, sells its operating assets to company B and I go to work for company B, will I be able to collect my company A pension from PBGC?
Health insurance
- What is the health coverage tax credit?
How to contact PBGC
- If you want information about how to contact PBGC, please click the following link: http://pbgc.gov/contacts/default.htm
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1. What is the Pension Benefit Guaranty Corporation (PBGC)?
PBGC is a federal agency created by the Employee Retirement Income Security Act of 1974 (ERISA) to protect pension benefits in private-sector traditional pension plans known as defined benefit plans. If your plan ends without sufficient money to pay all benefits, PBGC's insurance program will pay you the benefit provided by your pension plan up to the limits set by law. (Most people receive the full benefit they had earned before the plan ended.) Your plan is insured even if your employer fails to pay the required premiums. Our financing comes from insurance premiums paid by companies whose plans we protect, from our investments, and from the assets of pension plans that we take over, but not from taxes.
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2. What types of plans are insured by PBGC?
PBGC insures defined benefit plans, the type that promise to pay a specific monthly benefit at retirement. PBGC does not insure retirement plans that do not promise specific benefit amounts ("defined contribution pension plans"), such as profit-sharing or 401(k) plans.
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3. How can I find out if my pension plan is insured by PBGC?
The easiest way is to ask your employer or plan administrator for a copy of the “Summary Plan Description,” or SPD. The SPD will state whether your plan is covered by the PBGC program. Although PBGC insures most defined benefit plans, some are not covered. For example, plans offered by “professional service employers” (such as doctors and lawyers) with fewer than 26 employees, by church groups or by federal, state or local governments usually are not insured.
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4. When can an employer end a pension plan?
Employers can end a pension plan through a process called “plan termination.” There are two ways an employer can terminate its pension plan.
The employer can end the plan in a standard termination but only after showing PBGC that the plan has enough money to pay all benefits owed to participants. The plan must either purchase an annuity from an insurance company (which will provide you with lifetime benefits when you retire) or, if your plan allows, issue one lump-sum payment that covers your entire benefit. Before purchasing your annuity, your plan administrator must give you an advance notice that identifies the insurance company (or companies) that your employer may select to provide the annuity. PBGC’s guarantee ends when your employer purchases your annuity or gives you the lump-sum payment.
If the plan is not fully funded, the employer may apply for a distress termination if the employer is in financial distress. To do so, however, the employer must prove to a bankruptcy court or to PBGC that the employer cannot remain in business unless the plan is terminated. If the application is granted, PBGC will take over the plan as trustee and pay plan benefits, up to the legal limits, using plan assets and PBGC guarantee funds.
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5, When does PBGC terminate a pension plan?
Under certain circumstances, PBGC may take action on its own to end a pension plan. Most terminations initiated by PBGC occur when PBGC determines that plan termination is needed to protect the interests of plan participants or of the PBGC insurance program. PBGC can do so if, for example, a plan does not have enough money to pay benefits currently due.
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6. How can I find out if my pension plan is underfunded?
If you are in a single-employer plan insured by PBGC that has been less than 80% funded for the past year or two and less than 90% funded for several years, your plan administrator is required to give you an annual written notice of the plan’s funded percentage and the limitations on PBGC’s insurance guarantees. You also have a legal right to obtain information about your plan’s funding by requesting the information in writing from your plan administrator.
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7. How will I know if my pension plan is ending? / What other information should I receive?
If your employer wants to end the plan, your plan administrator must notify you in writing that your plan is ending. You must get this notice, called the Notice of Intent to Terminate, at least 60 days before the "termination" date. If PBGC is terminating the plan, we notify the plan administrator and often publish a notice about our action in local and national newspapers.
In a standard termination, you should receive a second letter describing the benefits you will receive, called the Notice of Plan Benefits, generally no later than six months after the date proposed for your plan’s termination.
In a distress termination, or a termination initiated by PBGC, our communication with you begins when we take over your plan as trustee. Initially we will provide you with general information about the pension insurance program and our guarantees. We will be able to provide more specific information about your benefits after we have had an opportunity to review the plan’s records, assets, benefit liabilities, and your participation in the plan.
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8. Can I earn additional benefits after my plan ends?
No. After the plan ends, you cannot earn additional benefits.
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9. What happens when PBGC takes over my plan?
PBGC reviews your plan's records to determine what benefits each person will receive. To ensure PBGC has the correct information, we will ask you to complete an Information Form.
If you are already receiving a pension, we will continue paying you without interruption during our review. These payments will be an estimate of the benefits that PBGC can pay under the insurance program, and they may be less than you were receiving from your plan.
If you have not yet retired, we will pay you an estimated benefit when you become eligible and apply to PBGC to begin payments. About four months before you are ready for your benefits to begin, contact PBGC by calling the Customer Contact Center toll-free at 1-800-400-7242 (for TDD/TTY users call toll-free at 1-800-877-8339) or by visiting our Web site at www.pbgc.gov.
We pay most benefits by Electronic Direct Deposit, sending your monthly payments directly to your financial institution. If you do not want to use direct deposit, you may still receive your benefit by check.
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10. What happens if PBGC's estimate is too high or too low?
If PBGC underpaid your benefit, we will make it up in a single payment with interest when we have completed our calculations. If we overpaid you, we will reduce future payments until the overpayment has been repaid. The reduction is usually no more than 10 percent of each payment.
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11. What is the maximum amount that PBGC can guarantee?
PBGC's maximum benefit guarantee is set each year under provisions of ERISA. For pension plans ending in 2004, the maximum guaranteed amount is $3,698.86 per month ($44,386.32 per year) for workers who retire at age 65. This guarantee amount is lower if you begin receiving payments from PBGC before age 65 or if your pension includes benefits for a survivor or other beneficiary. The guarantee amount may be higher if you retire after age 65 or if you are over age 65 and receiving benefits when the plan ends. The table in the link below shows PBGC's maximum guarantee for retirement at various ages. For certain disability benefits, special rules apply (see the following question). Other guarantee limitations that may apply are described in the questions and answers that follow.
View the complete maximum monthly guarantee table
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12. How does the maximum benefit guarantee apply to the benefits of disabled workers?
If you met your plan's requirements for a disability benefit before your plan ended (whether or not you applied for the benefit), and you have a Social Security disability award for that disability, PBGC will not reduce the maximum benefit guarantee if you begin receiving payments from PBGC before age 65. For pension plans ending in 2004, the maximum guaranteed amount of disability benefit is $3,698.86 per month ($44,386.32 per year) for workers who retire at age 65 or any younger age. Other adjustments to the maximum guarantee are the same as for non-disabled workers: the maximum is increased if you begin receiving payments from PBGC after age 65 and it is reduced if your pension includes benefits for a surviving spouse or other beneficiary.
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13. What benefits does PBGC guarantee?
PBGC guarantees "basic benefits" earned before your plan ended, which include (1) pension benefits at normal retirement age, (2) most early retirement benefits, (3) disability benefits for disabilities that occurred before the plan was terminated, and (4) certain benefits for survivors of plan participants. PBGC does not guarantee health care, vacation pay, or severance pay.
The pension benefit PBGC pays depends on (1) provisions of your plan, (2) legal limits, (3) the form of your benefit, (4) your age, and (5) amounts PBGC recovers from employers for plan underfunding.
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14. Are there other limits on PBGC's guarantee?
Yes. For example, if your plan was created or amended to increase benefits within five years before it ended, your benefit may not be fully guaranteed. PBGC guarantees the larger of 20% of the benefit or $20 per month for each full year the benefit was in effect. If you own more than 10% of the business, stricter limits apply. Also, if your plan provides supplemental benefits, such as temporary payments, they may not be fully guaranteed. Generally, PBGC does not guarantee any monthly pension amount that is greater than the monthly benefit your plan would have provided if you had retired at your normal retirement age.
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15. I am now a participant in a plan that may terminate. However, I am already receiving a benefit from PBGC for a plan that I participated in earlier. Is there a limit on how much I can receive under both plans?
Yes. The limit is called the aggregate limit and it applies in addition to the other guarantee limits. You cannot receive, in total from PBGC guarantee funds, more than the maximum guaranteed benefit determined as of the year that the later plan terminated.
Say, for example, you are receiving benefits from two plans taken over by PBGC, plan A that terminated in 1990 and plan B that terminated in 2004. The aggregate limit will not reduce your benefit in plan A, but it may reduce your benefit in plan B. The total benefit you receive from PBGC guarantee funds from both plans cannot be more than the maximum guaranteed benefit for 2004. Note that this limit applies only to the amounts "from PBGC guarantee funds." This means that the aggregate limit does not apply to benefit amounts that are covered by plan assets. So if plan A had enough assets to fully provide your guaranteed benefit from that plan, then there would not be a reduction for the aggregate limit in plan B.
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16. Is it ever possible to receive more than the amount guaranteed by PBGC?
Yes. If your plan has enough assets, you may receive more than the amount guaranteed by PBGC. When PBGC takes over a pension plan, we pay the greater of the amount that we guarantee and the amount that was covered by your plan's assets when it terminated.
To determine the amount of benefits covered by plan assets, PBGC must follow an order of "priority categories" established by law. PBGC first allocates plan assets to benefits derived from employee contributions, and then to certain benefits payable to participants who retired or were eligible to retire more than three years before the plan terminated. Next, PBGC allocates plan assets to guaranteed benefits. Finally, the last two priority categories cover the remaining nonguaranteed benefits under the plan.
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17. Does PBGC pay survivor benefits?
PBGC pays survivor benefits if the benefit form you elected (or elect in the future from PBGC) provides for survivor benefits. PBGC will allow all future retirees, whether or not married, to elect a benefit form that provides survivor benefits.
If you are married and die before electing a benefit form, we will pay your surviving spouse a survivor benefit beginning at the earliest date your plan states you can retire.
If you are entitled to or are receiving a survivor benefit when your plan ends, PBGC will continue to pay your survivor benefit for the period provided by your plan.
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18. I am receiving a benefit from my plan now. If my pension plan ends, will PBGC continue to pay my benefit in the same form that I chose when I retired?
Yes, PBGC will continue to pay your annuity in the form that you are receiving from your plan. For example, if you are chose your plan's automatic annuity form with a 50% survivor benefit payable to your spouse, PBGC will continue to pay your benefit with the same survivor protection.
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20. Can I receive my benefit from PBGC in a lump sum?
Normally, we pay benefits in monthly payments for life rather than as a lump sum. However, if the total value of your benefit is $5,000 or less, you can receive a lump-sum payment.
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21. I am now eligible for early retirement. If my pension plan ends and I continue to work for my company can I collect my pension from PBGC?
No, PBGC does not pay benefits to employees while they are still working for their company. If you wish to start drawing your benefit you must terminate your employment with the company to do so. However, there is an exception to this rule once you reach your normal retirement date. When you reach your normal retirement date, you may start drawing a pension even if you are still working for the company.
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22. I am now eligible for early retirement. If my company, A, sells its operating assets to company B and I go to work for company B, will I be able to collect my company A pension from PBGC?
Yes, unless your pension plan prohibits it.
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23. What is the health coverage tax credit?
Certain PBGC benefit recipients who are age 55 or over and are covered by qualified health insurance are eligible for the Health Coverage Tax Credit (HCTC) administered by the Internal Revenue Service.
The credit is not available to everyone. For example, a PBGC benefit recipient receiving certain specified health coverage, such as Medicare, will be ineligible to use the HCTC program. For more information about this program and about what is considered qualified health insurance, you may call the HCTC Program Customer Contact Center's toll-free telephone number at 1-866-628-4282 (for TTY/TDD users, call 1-866-626-4282). You can find more information about the HCTC program by visiting the IRS Web site at www.irs.gov/individuals/index.html and selecting Health Coverage Tax Credit (HCTC) or here at PBGC's Web site.
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