us pension benefit guaranty corporation

“Wait a minute!” every taxpayer should demand, “aren't all these pension plans already guaranteed by an arm of the U.S. government?” Yes, they. Information about Federal guarantees for private pensions. Check the interactive Pension Search Directory to see if PBGC is holding your pension. Your. How did the Pension Benefit Guaranty Corporation, a government corporation created to insure the pensions of workers and retirees in bankrupt firms. us pension benefit guaranty corporation

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An Overview of the Pension Benefit Guaranty Corporation (PBGC).

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The US Department of Labor oversees an independent federally-chartered agency known as the Pension Benefit Guaranty Corporation. It was set up under the act of ERISA, i.e. Employee Retirement Income Security Act, 1974. It is a government body to make the payment of pension benefits if the firm cannot. The sole purpose of PBGC is to promote the maintenance and continuity of pension benefits plans as defined by the private sector. It ensures that the pension benefits must be paid on time and without any interrupts or delays. It strives to keep the premiums of pension insurance at a minimum.

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How the Pension Benefit Guaranty Corporation Works

Funding from the PBGC is not collected from general income taxes, rather the employers pay insurance premium funds following the insured pension plans, the accumulated interest on premiums, and the pension plans assets that PBGC takes over.With effect from 2018, the Pension Benefit Guaranty Corporation makes the insurance policy of retirement incomes for almost twenty-four thousand pre-defined benefit plans that covers almost forty million workers of the United States. It covers nearly thirty million workers via the single-employer program. It covers an extra ten million workers by the multi-employer program that many unrelated employers pay. Within a single industry, the collective bargaining process sets up and maintains the multiemployer program.PBGC covers basic benefits such as a pension for employees reaching the age of retirement, benefits of early retirement and annuities for plan participants survivors as well as disability benefits in some cases.PBGC guarantees the max pension benefit that is annually adjusted by law. 2017 record shows that the eligible participants who were going to retire at the age of 65 could get 5369 US dollars maximum benefit on a monthly basis. It becomes 64432 US dollars a year. This protection increases for the ones who retire after the age of 65 and decreases for the ones who get early retirement or at the time, PBGC is paying the survivors benefits.According to 2016 record, PBGC made payment of almost eight lac and forty thousand retired employees in above four thousand and seven hundred pension plans. It could not make payment of promised benefits. It was liable to pay present and future pension benefits around one and half million people.The employers have offered private pensions as a benefit to the workers of the United States since the late nineteenth century. Before 1975, there was lesser protection for such funds. The companies declared bankruptcy. They were not able to provide the promised benefits, thus the employees left without recourse. The case of the automaker Studebaker is famous in this regard. In 1963, it ended the employee pension program. As a result, four thousand workers could get no retirement benefits.New York Senator named Jacob Javits, in 1967, requested the federal legislation to provide protection of private pension plans. The United States Congress, in 1974, devised the act of ERISA (Employee Retirement Income Security Act). Gerald Ford was the President of America who signed this law. He set up the Pension Benefit Guaranty Corporation (PBGC) as an agency to guarantee the benefits of retirement for millions of employees.

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Academic Research on Pension Benefit Guaranty Corporation (PBGC)

  • The value of pension benefit guaranty corporation insurance, Pennacchi, G. G., & Lewis, C. M. (1994). Journal of Money, Credit and Banking26(3), 735-753. In this paper, the authors bring into consideration the cost, PBGC incurs on the insurance of workers as per defined plans of the single-employer pension benefit. For the liability of PBGC, they have derived a formula which clearly identifies the 2 important conditions implying on PBGC to bear a loss. 1st, the company providing the pension fund has to bankrupt and 2nd, this plan has to be underfunded. They value the liability of PBGC as a possible put option using the function of modified Bessel, finally, evaluate the statistical comparison.
  • What the pension benefit guaranty corporation can learn from the federal savings and loan insurance corporation, Bodie, Z. (1996). Journal of Financial Services Research10(1), 83-100. The FSLIC (Federal Savings & Loan Corporation) had to face losses due to many factors, including risk, liabilities and market risk mismatch. Its experience is an example for PBGC to learn. When a sponsor of pension plan makes an investment of pension assets in capitals, the actuarial current value cost to the Pension Benefit Guaranty Corporation (PBGC) of giving insurance for a shortfall becomes higher instead of reducing with the passage of time, even for present fully funded plans. 
  • Guaranteed trouble: the economic effects of the pension benefit guaranty corporationBrown, J. R. (2008). Journal of Economic Perspectives22(1), 177-198. This research focuses on the role of PBGC (Pension Benefit Guaranty Corporation) and the pressures it has to face. The author describes its 3 major mistakes; could not succeed in pricing insurance, thus encouraging risk-taking, could not succeed in promoting appropriate funding of pension benefits and could not succeed in promoting enough information disclosure to the market contributors. The authors suggest ways to reform this corporation by following fundamental economic principles.
  • Is Your Pension Safe-A Call for Reform of the Pension Benefit Guaranty Corporation and Protection of Pension Benefits, Wolfe, L. A. (1994). Sw. UL REv.24, 145. This paper presents detailed analysis of the pension benefits protection and explains your pension is safe under the reforms of Pension Benefit Guaranty Corporation (PBGC) or not.
  • Market reaction to firm inclusion on the pension benefit guaranty corporation underfunding list, Godwin, N., & Key, K. (1998). In this research, the authors discuss how the market reacts to a firm that includes its name in the list of Pension Benefit Guaranty Corporation (PBGC).
  • The optimal investment policy for the Pension Benefit Guaranty CorporationRomaniuk, K. (2011). This study presents a theoretical structure for introducing an optimal allocation of assets in a continuous-time. The authors, 1st, analyze the out seller nature of the PBGC and derive portfolio regulations going using the option hedging. Then, the author creates a model feature of an asset-liability manager who is responsible to make available the balance sheet of an institution. The author offers an application with the help of PBGC reports from 1995 to 2009. The results are that its asset allocation is different in the principles of liability hedging.
  • Can the Pension Benefit Guaranty Corporation Be Restored to Financial Health?, Ranade, N. K. (2004). Federal Publications, 11. The main source of income offsetting the claims of PBGC is premiums that the sponsors pay for pension plans. It gets no proper funds. Its single-employer program has been placed in the list of high-risk agencies by GAO (Government Accountability Office) due to the risk to its longer financial viability. Main systematic problems are funding requirements, access to the assets of the bankrupt company and premium structure.
  • A Guide to the Pension Benefit Guaranty CorporationElliott, D. J. (2009). Washington, DC: The Brookings Institution. Retrieved August18, 2015. This study contains a complete guide about the regulations, reforms and incentives of the Pension Benefit Guaranty Corporation (PBGC).
  • Estimating the funding gap of the Pension Benefit Guaranty CorporationEstrella, A., Hirtle, B., & Brehm, J. A. (1988). Quarterly Review, (Aut), 45-59. This article makes an approximate calculation of the funding gap of the PBGC (Pension Benefit Guaranty Corporation). Whether it is able to afford all the stated pension benefits or not and to what extent, its cause is practical.
  • The Pension Benefit Guaranty Corporation: Financial Condition, Potential Risks, and Policy Options, Holtz-Eakin, D. (2005). CBO Testimony before the US Senate Committee on the Budget15This paper evaluates the performance of PBGC (Pension Benefit Guaranty Corporation), what is its financial condition, what kind of potential risks are involved in its functioning and how far its policy options are effective.
  • Using Pension Benefit Guaranty Corporation Tables in the Valuation of Pension Benefits: A Clarification, Ciecka, J. E., Frigo, M. L., & Koretke, C. H. (1994). J. Legal Econ.4, 85. In this paper, the authors make a clarification of the actual use of tables held by PBGC (Pension Benefit Guaranty Corporation) in the context of its pension benefits valuation.
  • The Pension Benefit Guaranty Corporation: What Financial Advisers Should Know., Craig, C. K., & Craig, T. R. (2004). Journal of Financial Service Professionals58(2). This paper provides thorough information about the PBGC (Pension Benefit Guaranty Corporation) and the authors give their suggestions on what the financial advisers must know about the pension benefits offered by PBGC.

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Источник: https://thebusinessprofessor.com/employment-law/pension-benefit-guarantee-corporation-definition

What Is the Pension Benefit Guaranty Corporation (PBGC)?

The Pension Benefit Guaranty Corporation (PBGC) is a government entity that pays pension benefits if a company cannot. It only covers defined benefit plans. 

The PBGC is primarily financed with premiums paid by the companies whose pensions it guarantees. It also makes some money from pension funds it takes over from bankrupt companies. Learn more about the PBGC, its history, and how it works.

What Is the Pension Benefit Guaranty Corporation (PBGC)?

Pension plans provide workers with guaranteed income during retirement. While not many private companies offer pension plans anymore, government entities do. Employers that offer pension plans are responsible for funding and managing them. If they make a mistake, it could affect the income for the retirees involved.

The Pension Benefit Guaranty Corporation guaranteed the pension incomes for 34 million workers in 25,000 pension plans in 2020. If the companies that offered these benefits can't provide them, the PBGC steps in and provides monthly benefits up to a statutory limit. The PBGC insures single-employer plans and multi-employer plans, using separate reserve funds for each type.

The PBGC  only guarantees basic pension benefits. In addition to retirement-age pension benefits, they include early retirement benefits, disability benefits, and annuity benefits for survivors.

The benefits depend on your particular plan, legal limits, your age, and plan assets. PBGC does not guarantee health benefits, severance pay, vacation pay, some life insurance death benefits, or other non-pension benefits. There are no cost-of-living adjustments.

How the PBGC Works

The PBGC is funded by insurance premiums it collects from employers who sponsor insured plans. It also collects funds from its investments and from the plans it takes over. It is not tax-supported.

When an employer terminates a pension plan and can't afford to pay out all the benefits as promised, the PBGC steps in and pays them out.

Participants receive the benefit they are owed up to the limit required by law. If they are owed more than the limit allows, they won't be able to collect it.

The PBGC operates a single-employer fund and a multi-employer fund. In 2020, the single-employer fund ran a surplus of $15.5 billion. However, the multi-employer fund ran a deficit of $63.7 billion, putting the program in an overall deficit of $48.2 billion.

The Government Accountability Office (GAO) rates the PBGC a high-risk institution due to collective risk of the underfunded plans that it ensures. More importantly, the risk that its multi-employer plan will not be able to fulfill its long-term obligations is nearly certain.

The GAO warns that changes are necessary to protect the solvency of these plans. Specifically, it recommends instituting reforms to strengthen funding requirements, diversify its governance, and develop a more robust, long-term strategy for stabilization.

History of the PBGC

The PBGC was created by Congress with the Employee Retirement Income Security Act (ERISA) of 1974. Before this, private pensions were, for the most part, unprotected. For example, when Studebaker terminated its pension plan in 1963, more than 4,000 of its auto workers lost part or even all of their benefits, and there wasn't anything they could do. ERISA spelled out accountability requirements for employer sponsors of pension plans and determined vesting and disclosure rules.

In 2006, President Bush signed the Pension Protection Act of 2006, which requires companies to more fully fund their plans. They had seven years to become 100% funded. They could take increased tax deductions for the contributions. Plans that weren't at least 80% funded could not provide additional benefits. Companies that trusteed their plans to the PBGC and then emerged from bankruptcy had to pay a penalty of $1,250 per participant for three years.

The Pension Protection Act also allowed businesses to automatically enroll employees in their 401(k) plans. Without it, workers were more likely to spend the money instead of saving for retirement. 

As of 2020, the PBGC paid the pension benefits of nearly a million workers in 4,600 plans whose companies were insolvent and could no longer afford to pay them the benefits they are owed.

Will the PBGC Last?

The PBGC faces many challenges. With the deficit in the multi-employer program, it's expected to run out of money by 2026 or even sooner. If that happens, the PBGC would be unable to continue paying out benefits at current levels, leaving pensioners with only a small portion of their expected monthly income.

And while the single-employer program began 2020 with a surplus, the COVID-19 pandemic brought unexpected and unprecedented financial challenges to its members. The CARES Act provided relief by deferring funding contributions until 2021. However, the pension obligations owed by many of these companies, combined with the PBGC's required premiums, has burdened many companies as they try to restore their financial health.

Key Takeaways

  • The Pension Benefit Guaranty Corporation insures millions of American workers and their pensions across thousands of pension plans.
  • When a company terminates its pension plan, the PBGC steps in to ensure that benefits are still paid out.
  • PBGC is funded by plan premiums, investments, and the assets of the plans it takes over.
  • While the PBGC's single-employer program is running a surplus, the COVID-19 pandemic has caused many member companies to take a financial hit, endangering their pension plans.
  • The PBGC's multi-employer program is expected to run out of funds by 2026. When that happens, benefits for those plans will be drastically reduced.
Источник: https://www.thebalance.com/pension-benefit-guaranty-corporation-3305994
Pension Benefit Guaranty Corporation (PBGC)

From a retiree’s perspective, the biggest risk with defined benefit retirement is that you are at the mercy of your former employer. That could put your retirement at risk if the employer or its pension fund runs into trouble. The solution: The Pension Benefit Guaranty Corporation (PBGC), which was founded in 1974 and protects retirees if a pension plan becomes insolvent. As of 2019, the PBGC covers more than 26,000 individual pension plans. In turn, around 40 million American workers have insurance protection for their pension earnings.

What Is the Pension Benefit Guaranty Corporation (PBGC)?

When a defined benefit plan goes bankrupt, or when it is otherwise unable to continue making payments, the Pension Benefit Guaranty Corporation assumes its obligations. The PBGC makes payments in the pension plan’s stead, ensuring that the covered retirees won’t lose what is often their primary source of income. It’s a bit like the pension equivalent of the Federal Despot Insurance Corporation, which insures deposit accounts so that savers don’t have to worry about losing their money to a bank failure.

Employers who have retirement plans under PBGC coverage pay mandatory premiums that fund this insurance. The PBGC also collects whatever is left in any plans that it takes over. If a retirement plan still has some capital and investments, but not enough to make all of its payments, the PBGC will take over both its assets and its liabilities. As a result, taxpayers currently do not fund the PBGC whatsoever.

The PBGC was created by the federal government as part of the 1974 Employee Retirement Income Security Act (ERISA).

What Are The Limits of PBGC Insurance Coverage?

Pension Benefit Guaranty Corporation (PBGC)

Most private-sector pension plans fall under PBGC coverage. However, it does not apply to the following:

  • Government/military pensions

  • Private retirement accounts, like IRAs and 401(k)s

  • Religious institution pensions

  • Small professional practice pensions (companies with less than 25 employees)

  • Profit-sharing plans

  • Employee stock ownership plans (ESOPs)

  • Thrift savings plans

  • Money purchase plans

PBGC coverage is not an unlimited plan. It only replaces a defined benefit plan up to a maximum amount. In 2019, that amount is $5,607.95 per month, or $67,295.40 per year. Any retiree who would have earned more than that under their pension will unfortunately face some loss in benefits.

The PBGC has rarely had to reduce retiree benefits. The limits are there to keep its premiums low. Additionally, these limits prevent employers from offering outrageously high pensions with the knowledge that the government will cover them.

Distress Terminations vs. Standard Terminations

If a company is unable to pay off its pension benefits, it can file a distress termination with the PBGC. To receive this status, the plan provider must prove that it and any affiliated companies are fully unable to pay plan participants what they’re owed.

Should the PBGC grant the company a distress termination, it will become the pension plan’s new trustee. This will allow it to pay current and future retirees exactly what they are entitled to. The PBGC will use a combination of its own assets and existing assets within the plan to pay participants.

While the PBGC was created to protect retirees against insolvent companies and bad investments, a company can also hand over its pension plan voluntarily. This process is known as a standard termination.

To complete a standard termination, the company must demonstrate that it has enough money in its fund to meet all obligations. This typically involves either purchasing a lifetime annuity for each qualifying retiree or finding a way to deliver the total value of the retiree’s pension plan in a lump sum. The PBGC will oversee this process and intervene if necessary.

Problems With the PBGC

In 2009, policy experts believed that the PBGC might itself soon become insolvent. This was in very large part because of the looming bankruptcy of the American auto industry. Due to the industry’s historic unionization and prosperity, it has assumed vast pension benefits. In fact, at one point General Motors was infamously spending more on retiree benefits than on steel.

Widespread bankruptcy would have shifted those retirement payments onto the PBGC’s books. This lead observers like the Brookings Institute to report that the agency could run deficits of $100 billion or more under these circumstances.

Fortunately that didn’t happen, though this hasn’t saved the PBGC from financial problems altogether. As the number of employers who run defined benefit plans has declined, the PBGC has steadily lost premiums. Yet, even while its income is shrinking, its responsibilities are growing thanks to ongoing retirements, the 2008 financial crisis and more.

Bottom Line

Pension Benefit Guaranty Corporation (PBGC)

While the PBGC has had its share of financial issues, it’s still there to protect you if the pension you’re counting on runs into trouble. Still, even if you’ve got a pension coming your way, it’s a good idea to build a nest egg of retirement savings that you can tap in addition to that fixed income. You can use a retirement calculator to see if you’re on track for a secure retirement, and it’s also a good idea to work with a financial advisor who specializes in retirement planning.

Tips for Retirement Planning

  • Planning out your retirement income can be extremely difficult. You need to consider your income needs, including healthcare expenses; figure out how much money you’ll need to meet those needs; and then build an investing plan that gets you there. If you’d like some help, consider working with a financial advisor. SmartAsset’s free financial advisor matching tool consider your financial situation and goals to match you with up to three fiduciary advisors in your area.

  • Although it shouldn’t be your only source of retirement income, Social Security can be a big help. If you’re curious about what you’ll earn in Social Security, check out our Social Security calculator.

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The post What Is the Pension Benefit Guaranty Corporation (PBGC)? appeared first on SmartAsset Blog.

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Источник: https://www.yahoo.com/now/pension-benefit-guaranty-corporation-pbgc-194914312.html

Guaranteed Trouble: The Economic Effects of the Pension Benefit Guaranty Corporation

Abstract

How did the Pension Benefit Guaranty Corporation, a government corporation created to insure the pensions of workers and retirees in bankrupt firms, end up facing financial distress of its own? How did an organization designed to strengthen retirement security come to be seen as contributing to retirement insecurity? The superficial answer is that the PBGC's current funding problem arises from the decline in stock market prices in 2000, which reduced pension assets, and the fall in interest rates at about the same time, which boosted the present value of pension liabilities. But more fundamentally, much of the blame for the poor financial state of the PBGC, as well as the defined benefit system more generally, lies in some major design flaws of the PBGC pension insurance program. Specifically, the PBGC has: 1) failed to properly price insurance and thus encouraged excessive risk-taking by plan sponsors; 2) failed to promote adequate funding of pension obligations; and 3) failed to promote sufficient information disclosure to market participants. Together, these three flaws produced a system in which many firms fail to adequately fund their pension obligations, knowing that in financial distress, they can dump their pension liabilities onto the PBGC. Though the Pension Protection Act of 2006 made some progress in improving the PBGC program, it failed to correct these three major problems fully. Absent further reform, substantial problems will continue to plague the private defined benefit pension system in decades to come. To prevent this deterioration, this paper concludes that Congress should transfer much of the responsibility for defined benefit pension insurance to compulsory private markets.

Citation

Brown, Jeffrey, R. 2008."Guaranteed Trouble: The Economic Effects of the Pension Benefit Guaranty Corporation."Journal of Economic Perspectives, 22 (1): 177-198.DOI: 10.1257/jep.22.1.177

JEL Classification

  • G28 Financial Institutions and Services: Government Policy and Regulation
  • J32 Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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Источник: https://www.aeaweb.org/articles?id=10.1257/jep.22.1.177

Pension Benefit Guaranty Corporation (PBGC)

Looking for your old pension?

About once a month, we receive a call from a former printing industry worker looking for the administrator of their old pension plan. Typically in these situations the company has moved, changed names, or possibly gone out of business. If you were unionized it is possible the union has moved or changes names as well. However, you must realize that all of these plans have "vesting requirements" that you must have satisfied during employment in order to receive benefits.

Tips for Searches

If you think you might be eligible for a company-sponsored traditional "defined-benefit" pension plans (not a 401(k) plan), you need to determine if the company is still in business and where the corporate office is. Due to merger and acquisition activity in recent years, this can be a challenge. Newspaper archives at local public libraries are often your best resource to determine the current name of the company and their location. Internet searches may also help as well.

If the company went out of business it is possible that the federal government took over the pension plan and is still holding benefits for you. See http://www.pbgc.gov/.

If you were a union member, it is possible that there is a union pension plan that is still holding benefits for you. The union pension plan could have been a national or local plan. In the printing industry, there are five national union pension plans that exist today. They are the following:

GCC/IBT National Pension Fund
Formerly Supplemental Retirement and Disability Fund (SRDF) and unofficially called the "Litho Fund"
455 Kehoe Blvd., Suite 101
Carol Stream, IL 60188
Phone: (630) 871-7733
Fax: (630) 871-0666
E-mail: info [at] gccibt-npf.org
Website: http://gccibtnpf.homestead.com/

GCIU Employer Retirement Fund
Formerly IP&GCU Employer Retirement Fund) unofficially called the "West Coast Fund"
13191 Crossroads Parkway N., #205
City of Industry, CA 91746-3434
Phone: (800) 322-1489
Fax: (562) 463-5993

GCIU Inter-Local Pension Fund
455 Kehoe Blvd., Suite 100
Carol Stream, IL 60188
Phone: (630) 752-8400
Fax: (630) 752-8490
E-mail: info [at] ilpfgciu.org
Website: http://www.ilpfgciu.org

Graphic Arts Industry Joint Pension Trust
Unofficially called the "Bookbinders Fund"
25 Louisiana Ave NW
Washington DC 20001
Phone: (202) 508-6670
Fax:  (202) 508-6671
E-mail: jpt [at] gciu.org
Website: https://gaijpt.org/

CWA/ITU Negotiated Pension Plan
1323 Aeroplaza Drive
Colorado Springs, CO 80916
Phone: (719) 473-3862
Fax (719) 473-3134
Email: cwaitu [at] aol.com
Website: https://www.cwaitunpp.org/

If you believe that your pension fund was a local plan and part of the former GCIU - Graphic Communications International Union, GAIU - Graphic Arts International Union, or the IPGCU - International Printing and Graphic Communications Union, you should contact the Graphic Communications Conference (GCC) of the International Brotherhood of Teamsters at (202) 624-6800 for help to determine which local you belonged to. Note that some locals have merged over the years and your old local number may not be used anymore. For the International Typographers Union (ITU), which is now the Printing, Publishing, and Media Sector Workers of the Communications Workers of America (PPMSW/CWA), call 202-434-1238.

Источник: https://www.printing.org/programs/human-resources/pension-benefit-guaranty-corporation-pbgc
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News and Events on Pension Benefit Guaranty Corporation

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Источник: https://digital.gov/topics/pension-benefit-guaranty-corporation/
Table S-3", Pension Benefit Guaranty Corporation, July 18, 2018.
  • ^"PBGC Expands Missing Participants Program to Terminated 401(k) and Other Plans ", Pension Benefit Guaranty Corporation, December 21, 2017.
  • ^"Expanded Missing Participants Program", Pension Benefit Guaranty Corporation, February 15, 2018
  • ^https://www.pbgc.gov/about/pg/contact/contact-unclaimed
  • ^"Premium Rates, Pension Benefit Guaranty Corporation.
  • ^"What PBGC Guarantees". Pension Benefit Guaranty Corporation. Retrieved August 5, 2012.
  • ^"Trump's pick to run Labor's pension agency: Mitch McConnell's brother-in-law", May 18, 2018, Washington Post
  • ^"Senate Finance Committee approves PBGC director nominee", November 15, 2018, Pensions & Investments Online
  • ^Brill, Emily (January 9, 2019). "McConnell's In-Law Sees Time Run Out on PBGC Nomination". Law360.com. Retrieved January 13, 2019.
  • ^Bradford, Hazel (April 30, 2019). "Senate confirms new PBGC director". Pensions & Investments. Retrieved May 2, 2019.
  • ^Katz, Michael (May 3, 2019). "Senate Confirms Gordon Hartogensis as Director of PBGC". Chief Investment Officer. Retrieved May 12, 2019.
  • ^Brannick, Nicholas (2004). "At the Crossroads of Three Codes: How Employers Are Using ERISA, the Tax Code, and Bankruptcy to Evade Their Pension Obligations". Ohio State Law Journal. 65 (6): 1606. hdl:1811/70993. Retrieved December 2, 2018.
  • ^"Trends and Statistics on Plans", Pension Benefit Guaranty Corporation, February 25, 2011.
  • ^"Fact Sheet: The Pension Protection Act of 2006: Ensuring Greater Retirement Security for American Workers". The White House. August 17, 2006. Retrieved December 16, 2007.
  • ^ abNachman Corp. v. Pension Benefit Guaranty Corporation446 U.S.359 (1980).
  • Further reading[edit]

    • Andrew Douglass and Bradley Kafka, "Legal Trends — Progress for Multiemployer Pension Plans," HRMagazine, Vol. 60, No. 2, 2015, pg. 71; OCLC 5826024469, ISSN 1047-3149
    • Employee Benefit Research Institute, "Basics of the Pension Benefit Guaranty Corporation (PBGC)", November 2013
    • Mary Williams Walsh, "Whoops! There Goes Another Pension Plan", New York Times, September 18, 2005

    External links[edit]

    Источник: https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation

    Connolly v. PBGC, 475 U.S. 211 (1986)

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    Justia Annotations is a forum for attorneys to summarize, comment on, and analyze case law published on our site. Justia makes no guarantees or warranties that the annotations are accurate or reflect the current state of law, and no annotation is intended to be, nor should it be construed as, legal advice. Contacting Justia or any attorney through this site, via web form, email, or otherwise, does not create an attorney-client relationship.

    Источник: https://supreme.justia.com/cases/federal/us/475/211/
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    The US Department of Labor oversees an independent federally-chartered agency known as the Pension Benefit Guaranty Corporation. It was set up under the act of ERISA, i.e. Employee Retirement Income Security Act, 1974. It is a government body to make the payment of pension benefits if the firm cannot. The sole purpose of PBGC is to promote the maintenance and continuity of pension benefits plans as defined by the private sector. It ensures that the pension benefits must be paid on time and without any interrupts or delays. It strives to keep the premiums of pension insurance at a minimum.

    Back To: HUMAN RESOURCES, EMPLOYMENT, & LABOR

    How the Pension Benefit Guaranty Corporation Works

    Funding from the PBGC is not collected from general income taxes, rather the employers pay insurance premium funds following the insured pension plans, the accumulated interest on premiums, and the pension plans assets that PBGC takes over.With effect from 2018, the Pension Benefit Guaranty Corporation makes the insurance policy of retirement incomes for almost twenty-four thousand pre-defined benefit plans that covers almost forty million workers of the United States. It covers nearly thirty million workers via the single-employer program. It covers an extra ten million workers by the multi-employer program that many unrelated employers pay. Within a single industry, the collective bargaining process sets up and maintains the multiemployer program.PBGC covers basic benefits such as a pension for employees reaching the age of retirement, benefits of early retirement and annuities for plan participants survivors as well as disability benefits in some cases.PBGC guarantees the max pension dare county nc building codes that is annually adjusted by law. 2017 record shows that the eligible participants who were going to retire at the age of 65 could get 5369 US dollars maximum benefit on a monthly basis. It becomes 64432 US dollars a year. This protection increases for the ones who retire after the age of 65 and decreases for the ones who get early retirement or at the time, PBGC is paying the survivors benefits.According to 2016 record, PBGC made payment of almost eight lac and forty thousand retired employees in above four thousand and seven hundred pension plans. It could not make payment of promised benefits. It was liable to pay present and future pension benefits around one and half million people.The employers have offered private pensions as a benefit to the workers of the North central bronx hospital dental department States since the late nineteenth century. Before 1975, there was lesser protection for such funds. The companies declared bankruptcy. They were not able to provide the promised benefits, thus the employees left without recourse. The case of the automaker Studebaker is famous in this regard. In 1963, it ended the employee pension program. As a result, four thousand workers could get no retirement benefits.New York Senator named Jacob Javits, in 1967, requested the federal legislation to provide protection of private pension plans. The United States Congress, in 1974, devised the act of ERISA (Employee Retirement Income Security Act). Gerald Ford was the President of America who signed this law. He set up the Pension Benefit Guaranty Corporation (PBGC) as an agency to guarantee the benefits of retirement for millions of employees.

    Related Topics

    Academic Research on Pension Benefit Guaranty Corporation (PBGC)

    • The value of pension benefit guaranty corporation insurance, Pennacchi, G. G., & Lewis, C. M. (1994). Journal of Money, Credit and Banking26(3), 735-753. In this paper, the authors bring into consideration the cost, PBGC incurs on the insurance of workers as per defined plans of the single-employer pension benefit. For the liability of PBGC, they have derived a formula which clearly identifies the 2 important conditions implying on PBGC to bear a loss. 1st, the company providing the pension fund has to bankrupt and 2nd, this plan has to be underfunded. They value the liability of PBGC as a possible put option using the function of modified Bessel, finally, evaluate the statistical comparison.
    • What the pension benefit guaranty corporation can learn from the federal savings and loan insurance corporation, Bodie, Z. (1996). Journal of Financial Services Research10(1), 83-100. The FSLIC (Federal Savings & Loan Corporation) had to face losses due to many factors, including risk, liabilities and market risk mismatch. Its experience is an example for PBGC to learn. When a sponsor of pension plan makes an investment of pension assets in capitals, the actuarial current value cost to the Pension Benefit Guaranty Corporation (PBGC) of giving insurance for a shortfall becomes higher instead of reducing with the passage of time, even for present fully funded plans. 
    • Guaranteed trouble: the economic effects of the pension benefit guaranty corporationBrown, J. R. (2008). Journal of Economic Perspectives22(1), 177-198. This research focuses on the role of PBGC (Pension Benefit Guaranty Corporation) and the pressures it has to face. The author describes its 3 major mistakes; could not succeed in pricing insurance, thus encouraging risk-taking, could not succeed in promoting appropriate funding of pension benefits and could not succeed in promoting enough information disclosure to the market contributors. The authors suggest ways to reform this corporation by following fundamental economic principles.
    • Is Your Pension Safe-A Call for Reform of the Pension Benefit Guaranty Corporation and Protection of Pension Benefits, Wolfe, L. A. (1994). Sw. UL REv.24, 145. This paper presents detailed analysis of the pension benefits protection and explains your pension is safe under the reforms of Pension Benefit Guaranty Corporation (PBGC) or not.
    • Market reaction to firm inclusion on the pension benefit guaranty corporation underfunding list, Godwin, N., & Key, K. (1998). In this research, the authors discuss how the market reacts to a firm that includes its name in the list of Pension Benefit Guaranty Corporation (PBGC).
    • The optimal investment policy for the Pension Benefit Guaranty CorporationRomaniuk, K. (2011). This study presents a theoretical structure for introducing an optimal allocation of assets in a continuous-time. The authors, 1st, analyze the out seller nature of the PBGC and derive portfolio regulations going using the option hedging. Then, the author creates a model feature of an asset-liability manager who is responsible to make available the balance sheet of an institution. The author offers an application with the help of PBGC reports from 1995 to 2009. The results are that its asset allocation is different in the principles of liability hedging.
    • Can the Pension Benefit Guaranty Corporation Be Restored to Financial Health?, Ranade, N. K. (2004). Federal Publications, 11. The main source of income offsetting the claims of PBGC is premiums that the sponsors pay for pension plans. It gets no proper funds. Its single-employer program has been placed in the list of high-risk agencies by GAO (Government Accountability Office) due to the risk to its longer financial viability. Main systematic problems are funding requirements, access to the assets of the bankrupt company and premium structure.
    • A Guide to the Pension Benefit Guaranty CorporationElliott, D. J. (2009). Washington, DC: The Brookings Institution. Retrieved August18, 2015. This study contains a complete guide about the regulations, reforms and incentives of the Pension Benefit Guaranty Corporation (PBGC).
    • Estimating the funding gap of the Pension Benefit Guaranty CorporationEstrella, A., Hirtle, B., & Brehm, J. A. (1988). Quarterly Review, (Aut), 45-59. This article makes an approximate calculation of the funding gap of the PBGC (Pension Benefit Guaranty Corporation). Whether it is able to afford all the stated pension benefits or not and to what extent, its cause is practical.
    • The Pension Benefit Guaranty Corporation: Financial Condition, Potential Risks, and Policy Options, Holtz-Eakin, D. (2005). CBO Testimony before the US Senate Committee on the Budget15This paper evaluates the performance of PBGC (Pension Benefit Guaranty Corporation), what is its financial condition, what kind of potential risks are involved in its functioning and how far its policy options are effective.
    • Using Pension Benefit Guaranty Corporation Tables in the Valuation of Pension Benefits: A Clarification, Ciecka, J. E., Frigo, M. L., & Koretke, C. H. (1994). J. Legal Econ.4, 85. In this paper, the authors make a clarification of the actual use of tables held by PBGC (Pension Benefit Guaranty Corporation) in the context of its pension benefits valuation.
    • The Pension Benefit Guaranty Corporation: What Financial Advisers Should Know., Craig, C. K., & Craig, T. R. (2004). Journal of Financial Service Professionals58(2). This paper provides thorough information about the PBGC (Pension Benefit Guaranty Corporation) and the authors give their suggestions on what the financial advisers must know about the pension benefits offered by PBGC.

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    Pension Benefit Guaranty Corporation wells fargo custom credit card A Primer

    Pension Benefit Guaranty Corporation

    The Pension Benefit Guaranty Corporation (PBGC) is a federal agency established by the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406). It was created to protect the pensions of participants and beneficiaries covered by private sector defined benefit (DB) plans. These pension plans provide a specified monthly benefit at retirement, usually either a percentage of salary or a flat dollar amount multiplied by years of service. Defined contribution (DC) plans, such as 401(k) plans, are not insured.1

    PBGC runs two distinct insurance programs: one for single-employer pension plans and a second for multiemployer plans. Single-employer pension plans are sponsored by one employer and cover eligible workers employed by the plan sponsor. Multiemployer plans are collectively bargained plans to which more than one company makes contributions. PBGC maintains separate reserve funds for each program.

    In FY2018, PBGC insured about 25,000 DB pension plans covering about 37 million people. It paid or owed benefits to 1.4 million people.2 PBGC is the trustee of 4,919 single-employer plans. PBGC provided first source federal credit union careers assistance to 78 multiemployer pensions. PBGC pays a maximum benefit to plan participants.3 Most workers in single-employer plans taken over by PBGC and multiemployer plans that receive financial assistance from PBGC receive the full pension benefit that they earned.4 However, among participants in multiemployer plans that were terminated and likely to need financial assistance in the future, 49% have a benefit below the PBGC maximum guarantee and 51% have a benefit larger than the PBGC maximum guarantee.

    PBGC Administration

    PBGC is a government-owned corporation. A three-member board of directors, chaired by the Secretary of Labor, administers the corporation. The Secretary of Commerce and the Secretary of the Treasury are the other members of the board of directors. The Director of PBGC is appointed by the President with the advice and consent of the Senate. ERISA also provides for a seven-member Advisory Committee, appointed by the President, for staggered three-year terms. The Advisory Committee advises PBGC on issues, such as investment of funds, plan liquidations, and other matters.

    The Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141) altered some of the governance structures of PBGC. Some of these changes include setting the term of the PBGC Director at five years, unless removed by the President or by the board of directors; requiring that the Board of Directors meet at least four times each year; and establishing a Participant and Plan Sponsor Advocate within PBGC to act as a liaison between PBGC, participants in plans trusteed by PBGC, and the sponsors of pension plans insured by PBGC.

    PBGC Financing

    PBGC is required by ERISA to be self-supporting and receives no appropriations from general revenue. ERISA states that the "United States is not liable for any obligation or liability incurred by the corporation,"5 and some Members of Congress have expressed a reluctance to consider providing financial assistance to PBGC.6 The most reliable source of PBGC revenue is the premiums set by Congress and paid by the private-sector employers that sponsor DB pension plans. Other sources of income are assets from terminated plans taken over by PBGC, investment income, and recoveries collected from companies when they end underfunded pension plans. The Multiemployer Pension Plan Amendments Act of 1980 (P.L. 96-364) requires that PBGC's receipts and disbursements be included in federal budget totals.

    Premiums

    The sponsors of private-sector pension plans pay a variety of premiums to PBGC. The sponsors of single-employer and multiemployer pension plans pay a flat-rate, per-participant premium. The sponsors of underfunded single-employer pension plans pay an additional premium that is based on the amount of plan underfunding. In addition, pension plans that are terminated in certain situations pay a per-participant premium per year for three years after termination.

    The premiums for 2019 are as follows:

    • Single-employer flat-rate premium: The sponsors of single-employer DB pension plans pay an annual premium of $80 for each participant in the plan.
    • Single-employer variable-rate premium: In addition to the flat-rate premium, the sponsors of underfunded single-employer DB pension plans pay an additional annual premium of $43 for each $1,000 of unfunded vested benefits.7 There is a per-participant limit of $541 for this premium.
    • Single-employer termination premium: The sponsors of single-employer DB pension plans that end in certain situations8 pay an annual premium of $1,250 per participant per year for three years following plan termination.9
    • Multiemployer flat-rate premium: The sponsors of multiemployer DB pension plans pay an annual premium of $29 for each participant in the plan in 2019.

    In the Appendix, Table A-1 and Table A-2 provide a history of PBGC premium rates.

    Table 1 details the amounts of premium income in FY2017 and FY2018.

    Table 1. Pension Benefit Guaranty Corporation Premium Income

    (FY2017 and FY2018 by type of premium in millions of dollars)

    FY2017

    FY2018

    Single-Employer

    Flat-Rate Premium

    Variable-Rate Premium

    Termination Premium

    Multiemployer

    Flat-Rate Premium

    Source:PBGC FY2018 Annual Report, Note 11: Premiums.

    Requirements for PBGC Coverage

    PBGC covers only those DB plans that meet the qualification requirements of Section 401 of the Internal Revenue Code (IRC).10 DC plans (such as 401(k) and 403(b) plans) are not insured by PBGC. Plans must meet these requirements to receive the tax benefits available to qualified pension plans. If a plan meets the requirements of IRC Section 401, the employer's contributions to the plan are treated as a tax-deductible business expense, and neither the employer's contributions to the plan nor the investment earnings of the plan are treated as taxable income to the participants. When a pension plan participant begins to receive income from the plan, it is taxed as ordinary income.

    In general, to be qualified under the IRC, a pension plan must be established with the intent of being a permanent and continuing arrangement; must provide definitely determinable benefits;11 may not discriminate in favor of highly compensated employees with respect to coverage, contributions, or benefits; and must cover a minimum number or percentage of employees.

    Pension plans specifically excluded by law from being insured by PBGC include governmental plans, church plans, plans of fraternal societies financed entirely by member contributions, plans maintained by certain professionals (such as physicians, attorneys, and artists) with 25 or fewer participants, and plans established and maintained exclusively for substantial owners of businesses.12

    Pension Benefit Guaranty

    PBGC's single-employer and multiemployer insurance programs operate differently and PBGC maintains separate reserve funds for each program. Funds from the reserve of one program may not be used for the other program.

    In the single-employer program, PBGC becomes the trustee of the terminated, underfunded single-employer DB pension plans. The assets of the terminated plan are placed in a trust fund operated by PBGC. The participants in the trusteed plans receive their benefits from PBGC.

    In the multiemployer program, New orleans garden district homes for sale does not become the trustee of plans. PBGC makes loans to multiemployer DB pension plans when the plans become insolvent. An insolvent multiemployer plan has insufficient assets available from which to pay participant benefits.

    Single-Employer Insurance Program

    An employer can voluntarily terminate a single-employer plan in either a standard or distress termination.13 The participants and PBGC must be notified of the termination. PBGC may involuntarily terminate an underfunded plan if the sponsor is unable to fund its pension obligations.

    Standard Terminations

    A company may voluntarily end its pension plan if the plan's assets are sufficient to cover benefit liabilities. In such cases, PBGC does not pay any benefits to plan participants. Its role is to confirm that the requirements for termination have been met by the plan. Generally, benefit liabilities equal all benefits earned to date by plan participants, including vested and nonvested benefits (which automatically become vested at the time of termination), plus certain early retirement supplements and subsidies. Benefit liabilities also may include certain contingent benefits.14 If assets are sufficient to cover benefit liabilities (and other termination requirements, such as notice to employees, have not been violated), the plan distributes benefits to participants. The plan provides for the benefit payments it owes by purchasing annuity contracts from an insurance company, or otherwise providing for the payment of benefits, for example, by providing the benefits in lump-sum distributions.

    Assets in excess of the amounts necessary to cover benefit liabilities may be recovered by the employer in an asset reversion.15 The asset reversion is included in the employer's gross income and is subject to a nondeductible excise tax. The excise tax is 20% of the amount of the reversion if the employer establishes a qualified replacement plan or provides certain benefit increases in connection with the termination. Otherwise, the excise tax is 50% of the reversion amount.

    PBGC Trusteeship

    When an underfunded plan terminates in a distress or involuntary termination, the plan goes into PBGC receivership. PBGC becomes the trustee of the plan, takes control of any plan assets, and assumes responsibility for liabilities under the plan. PBGC makes payments for benefit liabilities promised under the plan with assets received from two sources: (1) assets in the plan before termination and (2) assets recovered from employers. The balance, if any, of guaranteed benefits owed to beneficiaries is paid from PBGC's revolving funds.

    Distress Terminations

    If assets in the plan are not sufficient to cover benefit liabilities, the employer may not terminate the plan unless the employer meets one of four criteria necessary for a "distress" termination:

    • 1. The plan sponsor, and every member of the controlled group (companies with the same ownership) of which the sponsor is a member, has filed or had filed against it a petition seeking liquidation in bankruptcy or any similar federal law or other similar state insolvency proceedings;
    • 2. The plan sponsor, and every member of the sponsor's controlled group, has filed or had filed against it a petition to reorganize in bankruptcy or similar state proceedings. This criterion is also met if the bankruptcy court (or other appropriate court) determines that, unless the plan is terminated, the employer will be unable to continue in business outside the reorganization process and approves the plan termination;
    • 3. PBGC determines that termination is necessary to allow the employer to pay its debts when due; or
    • 4. PBGC determines that termination is necessary to avoid unreasonably burdensome pension costs caused solely by a decline in the employer's work force.

    These requirements were added by the Single Employer Pension Plan Amendments Act of 1986 (SEPPAA; P.L. 99-272) and modified by the Omnibus Budget Reconciliation Act of 1987 (P.L. 100-203) and the Retirement Protection Act of 1994 (RPA; P.L. 103-465). They are designed to ensure that the liabilities of an underfunded plan remain the responsibility of the employer, rather than PBGC, unless the employer meets strict standards of financial need indicating genuine inability to continue funding the plan.

    Involuntary Terminations

    PBGC may terminate a plan involuntarily, either by agreement with the plan sponsor or pursuant to a federal court order. PBGC may institute such proceedings only if

    • the plan in question has not met the minimum funding standards,
    • the plan will be unable to pay benefits when due,
    • the plan has a substantial owner who has received a distribution greater than $10,000 (other than by reason of death) and the plan has unfunded vested benefits, or
    • the long-run loss to PBGC with respect to the plan is expected to increase unreasonably if the plan is not terminated.

    PBGC must terminate a plan if the plan is unable to pay benefits that are currently due. A federal court may order termination of the plan to protect the interests of participants, to avoid unreasonable deterioration of the plan's financial condition, or to avoid an unreasonable increase in PBGC's liability under the plan.

    Table 2provides information on the number of terminations since 1974 by single-employer DB pension plans and the number of these terminations that resulted in PBGC becoming trustee of the pension plan. From FY1974 through FY2016, PBGC became the trustee of 4,769 single-employer DB pension plans. The number of single-employer plan terminations that result in claims against PBGC is a relatively small fraction of all plan terminations. Most pension plan terminations are standard terminations.

    Table 2. Number of Standard and Trusteed Pension Plan Terminations

    Fiscal Year

    Number of Standard Termination Filings

    Trusteed Terminations

    1974-1979

    7,955

    586

    1980-1984

    28,025

    622

    1985-1989

    42,599

    537

    1990-1994

    24,171

    694

    1995-1999

    15,089

    444

    2000-2004

    7,493

    714

    2005

    1,108

    129

    2006

    1,247

    89

    2007

    1,233

    78

    2008

    1,405

    83

    2009

    1,294

    191

    2010

    1,308

    156

    2011

    1,400

    100

    2012

    1,332

    117

    2013

    1,481

    92

    2014

    1,373

    61

    2015

    1,197

    41

    2016

    1,225

    36

    Total

    140,935

    4,769

    Source: Table S-3 Pension Benefit Guaranty Corporation Pension Insurance Data Book, 2016.

    Notes: In a standard termination, a pension plan has sufficient assets from which to pay 100% of the participants' promised benefits. In a trusteed termination, PBGC becomes trustee of the plan and participants receive their benefits, up to a statutory maximum amount, from PBGC. Data for terminations in FY2017 and FY2018 are not yet available.

    Employer Liability to PBGC

    Following a distress or involuntary termination, the plan's sponsor and every member of that sponsor's controlled group are liable to PBGC for the plan's shortfall. The shortfall is measured free food for military today the value of the plan's liabilities as of the date of the plan's termination minus the fair market value of the plan's assets on the date of termination. The liability is joint and several, meaning that each member of the controlled group can be held responsible for the entire liability. Generally, the obligation is payable in cash or negotiable securities to PBGC on the date of termination. Failure to pay this amount upon demand by PBGC may trigger a lien on the property of the contributing employer's controlled group. Often, however, a plan undergoing a distress termination is sponsored by a company that is in bankruptcy proceedings, in which case PBGC does not have legal authority to create (or perfect) a lien against the plan sponsor. In such instances, PBGC has the same legal standing as other creditors of the plan sponsor, and its ability to recover assets is limited.

    Benefit Payments

    When an underfunded plan terminates, the benefits PBGC will pay depend on the statutory limit on guaranteed benefits, the amount of the terminated plan's assets, and recoveries by PBGC from the employer that sponsored the terminated plan.

    Guaranteed Benefits

    Within limits set by Congress, PBGC guarantees any retirement benefit that was nonforfeitable (vested) on the date of plan termination other than benefits that vest solely on account of the termination, and any death, survivor, or disability benefit that was owed or was in payment status at the date of plan termination. Generally, only that part of the retirement benefit that is payable in monthly installments (rather than, for example, lump-sum benefits payable to encourage early retirement) is guaranteed. Retirement benefits that commence before the plan's normal age of retirement are guaranteed, provided they meet the other conditions of guarantee. Contingent benefits (for example, early retirement benefits provided only if a plant shuts down) are guaranteed only if the triggering event occurs before plan termination. Following enactment of the Pension Protection Act walmart mankato mn 2006 (PPA; P.L. 109-280), PBGC guarantee for such benefits is phased in over a five-year period commencing when the event occurs.16

    Maximum Benefits for Participants in Single-Employer Pension Plans

    ERISA sets a maximum on the individual benefit amount that PBGC can guarantee.17

    The ceiling for single-employer plans is adjusted annually for national wage growth. The maximum pension guarantee is $67,295 a year for workers aged 65 in plans that terminate in 2019. This amount is adjusted annually and is decreased if a participant begins bok financial correspondent mortgage services the benefit before the age of 65 (reflecting the fact that they will receive more monthly pension checks over their expected lifetime) or if the pension plan provides benefits in some form other than equal monthly payments for the life of the retiree.18 The benefit is increased if a participant begins receiving the benefit after the age of 65 (reflecting the fact that they will receive fewer monthly pension checks over their expected lifetime). Table 3 contains examples of PBGC's annual maximum benefit for individuals who begin receiving benefits at the ages of 60, 65, or 70 and who receive either a straight-life annuity or a joint and 50% survivor annuity.

    Table 3. Examples of PBGC Annual Maximum Benefits for Plans
    that Terminate in 2019

    Benefit Begins at Age

    60

    65

    70

    Straight-Life Annuity

    $43,742

    $67,295

    $111,710

    Joint and 50% Survivor Annuity, Assuming Both Spouses Are the Same Age

    $39,368

    $60,566

    $100,539

    The reduction in the maximum guarantee for benefits paid before the age of 65 is 7% for each of the first 5 years under age 65, 4% for each of the next 5 years, and 2% for each of the next 10 years.19 The reduction in the maximum guarantee for benefits paid in a form other than a straight-life annuity depends on the type of benefit, and if there is a survivor's benefit, the percentage of the benefit continuing to the surviving spouse and the age difference between the participant and spouse.20

    Only "basic benefits" are guaranteed. These include benefits beginning at normal retirement age (usually 65), certain early retirement and disability benefits, and benefits for survivors of deceased plan participants. Only vested benefits are insured. The average monthly benefit received by retirees in FY2015 was $606.21 In a study released in 2008, PBGC indicated that more than 80% of PBGC amazon store card login payment synchrony in single-employer plans trusteed by PBGC received their full benefits.22 Among participants whose benefits were reduced, the average reduction was 28%.

    Assets of a terminated plan are allocated to pay benefits according to a priority schedule established by statute. Under this schedule, some nonguaranteed benefits are payable from plan assets before certain guaranteed benefits. For example, benefits of participants who have been receiving pension payments for more than three years have priority over guaranteed benefits of participants not yet receiving payments.

    PBGC also is required to pay participants a portion of their unfunded, nonguaranteed benefits based on a ratio of assets recovered from the employer to the amount of PBGC's claim on employer assets (called Section 4022(c) benefits).

    Multiemployer Pension Insurance Program

    In the case of multiemployer plans, PBGC insures plan insolvency, rather than plan termination. Accordingly, a multiemployer plan need not be terminated to qualify for PBGC financial assistance. A plan is insolvent when its available resources are not sufficient to pay the plan benefits for the plan year in question, or when the sponsor of a plan in reorganization reasonably determines, taking into account the plan's recent and anticipated financial experience, that the plan's available resources will not be sufficient to pay benefits that come due in the next plan year.

    If it appears that available resources will not support the payment of benefits at the guaranteed level, PBGC will provide the additional resources needed as a loan, which Citibank government travel card sign in indicates are rarely repaid.23 PBGC may provide loans to the plan year after year. If the plan recovers from insolvency, it must begin repaying loans on reasonable terms in accordance with regulations. Only one multiemployer plan has repaid any of its financial assistance.24

    Benefits for Participants in Multiemployer Us pension benefit guaranty corporation Plans

    PBGC guarantees benefits to multiemployer plans as it does for single-employer plans, although a different guarantee ceiling applies. Multiemployer plans determine benefits by multiplying a flat dollar rate by years of service, so the benefit guarantee ceiling is tied to this formula. The benefit guarantee limit for participants in multiemployer plans equals a participant's years of service multiplied by the sum of (1) 100% of the first $11 of the monthly benefit rate and (2) 75% of the next $33 of the benefit rate.25 For a participant with 30 years of service, the guaranteed limit is $12,870.26 This benefit formula is not adjusted for increases in the national wage index. PBGC estimated in 2015 that 79% of participants in multiemployer plans that receive financial assistance received their full benefit. However, in plans that may need financial assistance in the future, only 49% of participants would receive their full benefit payment.27 Among ongoing plans (neither receiving PBGC financial assistance nor terminated and expected to receive financial assistance), how to contact stubhub customer service average benefit is almost twice as large as the average benefit in terminated plans. This suggests that a larger percentage of participants in plans that receive PBGC financial assistance in the future are likely to see benefit reductions as a result of the PBGC maximum guarantee level.28

    Current Financial Status

    The most commonly used measure of PBGC's financial status is its net financial position, which is the difference between PBGC's assets and its liabilities. At the end of FY2018, PBGC's assets were $112.3 billion, PBGC liabilities were $163.7 billion, and its net financial position was -$51.4 billion.29

    PBGC's main assets are the value of its trust fund and revolving funds.30 The trust fund contains the assets of the pension plans of which PBGC becomes trustee and the returns on the trust fund investments. The revolving funds contain the premiums that plan sponsors pay to PBGC, transfers from the trust fund that are used to pay for participants' benefits, and returns on the revolving funds' investments in U.S. Treasury securities.

    PBGC's main liabilities are the estimated present values of (1) future benefits payments in the single-employer program and (2) future financial assistance to insolvent plans in the multiemployer program.31

    Table 4 provides information on the net financial position of PBGC from FY1999 through FY2018. PBGC has had an end of fiscal year deficit each year since FY2002.

    Table 4. PBGC Single and Multi-Employer Insurance Programs: Net Financial Position, FY1999-FY2018

    (billions of dollars)

    Fiscal Year

    Single-Employer Program

    Multiemployer Program

    Total PBGC Surplus / Deficit

    1999

    2000

    2001

    2002

    -3.6

    0.2

    -3.5

    2003

    -11.2

    -0.3

    -11.5

    2004

    -23.3

    -0.2

    -23.5

    2005

    -22.8

    -0.3

    -23.1

    2006

    -18.1

    -0.7

    -18.9

    2007

    -13.1

    -1.0

    -14.1

    2008

    -10.7

    -0.5

    -11.2

    2009

    -21.1

    -0.9

    -21.9

    2010

    -21.6

    -1.4

    -23.0

    2011

    -23.3

    -2.8

    -26.0

    2012

    -29.1

    -5.2

    -34.3

    2013

    -27.4

    -8.3

    -35.7

    2014

    -19.3

    -42.4

    -61.7

    2015

    -24.0

    -52.3

    -76.3

    2016

    -20.6

    -58.8

    -79.4

    2017

    -10.9

    -65.1

    -76.0

    2018

    2.4

    -53.9

    -51.4

    Source: PBGC Pension Insurance Data Books and FY2018 Annual Reports.

    The weakness in the economy in can you take money off a walmart gift card, particularly in the steel and airline industries, led to large and expensive plan terminations that created a deficit for PBGC. By the end of 2004, the single-employer program had a deficit of $23.3 billion. For the first time since FY2001, partly as a result of increases to the premiums that employers pay, the single-employer program showed a surplus in FY2018.32

    The multiemployer program had a surplus from FY1982 to FY2002, but PBGC reported deficits each year since. PBGC projects that the multiemployer program will be likely become insolvent in FY2025 and there is a less than 1% chance that the us pension benefit guaranty corporation will remain solvent in FY2026. Both the single-employer and multiemployer programs are on the Government Accountability Office's (GAO's) list of high-risk government programs.33

    Benefit Payments in the Single-Employer Insurance Program

    Table 5 shows that approximately 825,000 participants received monthly payments from PBGC in FY2015 (the most recent year for which comprehensive data on benefit payments are available).34 The average monthly payment was $536 and the median monthly payment was $279. Among retiree payees, the average monthly benefit was $606 and among beneficiary payees, the average monthly benefit was $307.35 Approximately 40,000 participants received a lump-sum payment in FY2015, and the average amount of the lump-sum payment was $2,054.36

    Table 5. PBGC Benefit Payments and Payees, FY2000-FY2015

    (single-employer insurance program)

    Periodic Pension Payments

    Lump-Sum Payments

    Fiscal Year

    Annual Total
    (millions of dollars)

    Number of Payees in Year (thousands)

    Average Monthly Payment

    Median Monthly Payment

    Annual Total
    (millions of dollars)

    Number of Payees in Year (thousands)

    Average Payment

    Number of Deferred Payees (thousands)

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    Source: Table S-20 Pension Benefit Guaranty Corporation Pension Insurance Data Book, 2015.

    Notes: Deferred payees are participants who are owed, but not yet receiving, benefits under the plan. Data for FY2016 and FY2017 are not available. Due to rounding of individual items, the average monthly payment may not be exactly equal to the total payments divided by the number of payees. Average monthly payment is not equal to annual total payments divided by number of payees because some payees did not receive benefits for all 12 months in a year.

    Finances of the Single-Employer Insurance Program

    Figure 1 displays the net financial position of PBGC's single-employer program from FY1980 to FY2018. In FY1996, PBGC showed a surplus in its single-employer program for the first time in its history. That surplus peaked at $9.7 billion in FY2000, helped by the strong performance of the equity markets in the mid- and late 1990s. In FY2018, PBGC the single-employer program showed a surplus of $2.44 billion. The improvement in the financial condition of the single-employer program is a result of several factors, such as investment income (there has not been an investment loss since FY2008) and increase in premium income (premium income was 3.6 times greater in FY2018 compared to FY2008).37

    Figure 1. Financial Position of PBGC Single-Employer Insurance Program,
    FY1980 to FY2018

    (Billions of Dollars)

    Source: PBGC Pension Insurance Data Books and FY2018 Annual Report.

    Finances of the Multiemployer Insurance Program

    Table 6 provides data on the number of plans that have received financial assistance and the annual amounts of the financial assistance from FY1995 to FY2018. Seventy-eight multiemployer plans received financial assistance in FY2018. The FY2018 annual report indicated that approximately 62,300 multiemployer plan participants received financial assistance in FY2018 and that approximately 27,800 participants will receive benefits in the future because they are in plans that are currently receiving financial assistance.38

    Table 6. PBGC Multiemployer Insurance Program:
    Financial Assistance to Pension Plans, FY1995 to FY2018

    Year

    Number of Plans Receiving Financial Assistance

    Total Amount of Financial Assistance (millions)

    1995

    9

    1996

    12

    1997

    14

    1998

    18

    1999

    21

    2000

    21

    2001

    22

    2002

    23

    2003

    24

    2004

    27

    2005

    29

    2006

    33

    2007

    36

    2008

    42

    2009

    43

    2010

    50

    2011

    49

    2012

    49

    2013

    44

    2014

    53

    2015

    57

    2016

    65

    2017

    72

    2018

    78

    Source: PBGC Pension Insurance Data Books and FY2016, FY2017, and FY2018 Annual Reports.

    Figure 2 indicates that the financial condition of the multiemployer insurance program has been worsening. The deficit in the multiemployer insurance program increased from $8.3 billion in FY2013 to $42.4 billion in FY2014, and $65.1 billion in FY2017. It decreased to $53.8 billion in FY2018. The large increase in the deficit in FY2014 was the result of the increase in the likelihood of the insolvency of several large multiemployer pension plans in financial distress.

    Figure 2. Financial Position of the Multiemployer Insurance Program
    of the Pension Benefit Guaranty Corporation, FY1980 to FY2018

    (Billions of Dollars)

    Source: PBGC Pension Insurance Data Books and FY2018 Annual Report.

    PBGC and the Federal Budget

    PBGC's budgetary cash flows are based on its premium income, interest income, benefit outlays, and the interaction of PBGC's trust and revolving funds. The trust fund contains the assets of the pension plans of which PBGC becomes trustee and the returns on the trust fund investments.39 Revolving funds contain the premiums that plan sponsors pay to PBGC, transfers from the trust fund that are used to pay for participants' benefits, and returns on the revolving funds' investments in U.S. Treasury securities.

    PBGC Trust Fund

    When PBGC becomes trustee of a single-employer pension plan, the assets of the terminated pension plan are transferred to PBGC and placed in a nonbudgetary trust fund.40 Transfers of assets to the trust fund do not appear in the federal budget and the assets of this trust fund do not appear on the federal balance sheet. The assets of the trust fund are managed by private-sector money managers in accordance with an investment policy established by PBGC's Board of Directors. The current investment policy establishes assets allocations of 30% for equities and other nonfixed income assets, and 70% for fixed income.41 Trust fund investments totaled $70.2 billion at the end of FY2018.42

    PBGC Revolving Funds

    ERISA authorized the creation of seven revolving funds for PBGC, although only three revolving funds have been used by PBGC. The revolving funds contain the premiums paid by single-employer and multiemployer pension plan sponsors, returns on revolving funds' investments, and transfers from the trust fund that are used to pay benefits. Each year, PBGC transfers funds from the trust fund to the revolving funds to pay for a share of participants' benefits.43

    The investments of the revolving funds are, by law, invested exclusively in U.S. Treasury securities. The revolving funds' assets at the end of FY2018 were $1.8 billion for Fund 1, $2.1 billion for Fund 2, and $29.3 billion for Fund 7, for a total of $33.2 billion.44

    The revolving funds are on-budget accounts: increases or decreases in the revolving funds appear as on-budget federal receipts and outlays. The funds' gross outlays include PBGC benefit payments and administrative expenses and receipts include premiums paid, interest on federal securities, and reimbursements from the trust fund.

    Because increases in the premiums paid by pension plan sponsors to PBGC are increases in federal revenue, some stakeholders and policymakers have criticized recent PBGC premium increases because they feel increases in premiums are used to offset other federal spending, do not address the financial condition of PBGC, and may discourage employers from maintaining their DB pension plans.45

    Future Financial Condition

    In its FY2017 Projections Report,46 PBGC estimated its financial condition over the next 10 years. The report indicated that the single-employer program's deficit is likely to shrink and the multiemployer program is likely to run out of money in FY2025. PBGC projected that the single-employer program was likely to emerge from deficit by FY2018 (which it did). The average estimate of PBGC's simulations was a $26 billion surplus for the single-employer program in 10 years.47

    PBGC projected that there is a 90% chance that the multiemployer program will be insolvent before the end of FY2025 and a 99% chance that the multiemployer program will be insolvent by 2026.48 This is a result of the likely insolvency of several large multiemployer pension plans. PBGC's FY2018 Annual Report indicated that the multiemployer program's probable exposure to future financial assistance would be $53.8 billion.49 Premium levels are likely inadequate to provide continued financial assistance to insolvent multiemployer plans. The financial assistance to these plans could exhaust PBGC's ability to guarantee participants' benefits. PBGC has indicated that once resources are exhausted in the PGBC's multiemployer program, insolvent plans would be required to reduce benefits to levels that could be sustained through premium collections only.50

    The Multiemployer Pension Reform Act of 2014 (MPRA, enacted as part of P.L. 113-235), allowed, among other provisions, multiemployer DB pension plans that expect to become insolvent to reduce benefits to participants in these plans. An insolvent plan has no assets from which to pay any benefits. Plans that reduce benefits to forestall insolvency would not require financial assistance from PBGC, and would reduce the amount of future financial assistance PBGC would expect to provide. This would likely improve PBGC's financial condition. PBGC indicated that there is uncertainty in how the provisions of MPRA that allow benefit suspensions and plan partitions will be used. PBGC estimated that the effect of MPRA would likely not change PBGC projections of future solvency.51

    In response to the increasing concerns of policymakers and stakeholders (such as participants, participating employers, and plans), the Bipartisan Budget Act of 2018 (P.L. 115-123) created a new joint select committee of the House and Senate: The Joint Select Committee on Solvency of Multiemployer Pension Plans.52 The committee was tasked with formulating recommendations and legislative language by November 30, 2018, that would "significantly improve the solvency of multiemployer pension plans and the Pension Benefit Us pension benefit guaranty corporation Corporation."53 The committee did not release a report containing recommendations or legislative language by the deadline.54

    Appendix. Historical PBGC Premium Rates

    Table A-1 provides historical data on the single-employer program premium levels.

    Table A-1. PBGC Single-Employer Program Premium Levels

    Authorizing Statute

    Flat-Rate Premium

    Variable-Rate Premium

    Termination Premium

    September 2, 1974-1977

    Employee Retirement Income Security Act of 1974
    (ERISA; P.L. 93-406)a

    $1.00

    -

    -

    1978-1985

    Multiemployer Pension Plan Amendments Act of 1980 (MPPAA, P.L. 96-364)

    $2.60

    -

    -

    1986-1987

    Consolidated Omnibus Budget Reconciliation Act of 1985
    (P.L. 99-272)

    $8.50

    -

    -

    1988-1990

    Omnibus Budget Reconciliation Act of 1987
    (P.L. 100-203)

    $16.00

    $6.00

    -

    1991-2005

    Omnibus Budget Reconciliation Act of 1990
    (P.L. 101-508)

    $19,00

    $9.00

    -

    2006

    Deficit Reduction Act of 2005 (P.L. 109-171)b

    $30.00

    $9.00

    $1,250.00c

    2007

    $31.00

    $9.00

    $1,250.00

    2008

    $33.00

    $9.00

    $1,250.00

    2009

    $34.00

    $9.00

    $1,250.00

    2010-2012

    $35.00

    $9.00

    $1,250.00

    2013

    MAP-21 (P.L. 112-141)d

    $42.00

    $9.00

    2014

    $14.00

    $1,250.00

    2015

    Continuing Appropriations Resolution, 2014 (P.L. 113-67)

    $24.00

    $1,250.00

    2016

    $1,250.00

    2017

    Bipartisan Budget Act of 2015 (P.L. 114-74)e

    $1,250.00

    2018

    $1,250.00

    2019

    $1,250.00

    Source: Congressional Research Service (CRS).

    a. The Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406) established the initial premium rate of $1.00 per participant.

    b. The Deficit Reduction Act of 2005 (P.L. 109-171) adjusted the flat-rate premium annually for increases in the national wage index beginning in 2007.

    c. The Pension Protection Act of 2006 (PPA; P.L. 109-280) provided for a special termination premium of $2,500 per participant for pension plans of commercial airlines that terminated within a five-year period that began with the year that a commercial airline plan adopted funding rules made available to commercial airlines in the PPA.

    d. MAP-21 (P.L. 112-141) increased the variable-rate premium by $4 (after the 2013 level is adjusted for changes in the national wage index) per $1,000 of unfunded benefits in 2014, and by another $5 (after the 2014 level is adjusted for changes in the national wage index) per $1,000 of unfunded vested benefits in 2015. The Continuing Appropriations Resolution, 2014 (P.L. 113-67) increased the variable-rate premium in 2015 by $10 (after the 2014 level is adjusted for changes in the national wage index) per $1,000 of unfunded benefit and by another $5 in 2016 (after the 2015 premium is adjusted for changes in the national wage index).

    e. The Bipartisan Budget Act of 2015 (P.L. 114-74) increased the flat-rate premium to $69 in 2017, $74 in 2018, and $80 in 2019, and increased the variable-rate premium by $3 in 2017, an additional $4 in 2018, and an additional $4 in 2019.

    Table A-2 provides historical data on the multiemployer program premium levels.

    Table A-2. PBGC Multiemployer Program Premium Levels

    Year

    Authorizing Statute

    Premium Rate

    September 2, 1974-1980

    Employee Retirement Income Security Act of 1974
    (ERISA; P.L. 93-406)

    $0.50

    September 1, 1979-September 26, 1980

    Multiemployer Pension Plan Amendments Act of 1980
    (MPPAA, P.L. 96-364)

    $0.50-$1.00a

    September 27, 1980-September 26, 1984

    $1.40

    September 27, 1984-September 26, 1986

    $1.80

    September 27, 1986-September 26, 1988

    $2.20

    September 27, 1988-December 31, 2005

    $2.60

    2006-2007

    Deficit Reduction Act of 2005 (P.L. 109-171)

    $8.00b

    2008-2012

    $9.00

    2013

    MAP-21 (P.L. 112-141)

    $12.00

    2014

    $12.00

    2015

    The Multiemployer Pension Reform Act of 2014 (P.L. 113-235)

    $26.00

    2016

    $27.00

    2017

    $28.00

    2018

    $28.00

    2019

    $29.00

    Source: Table M-16 Pension Benefit Guaranty Corporation Pension Insurance Data Book, 2015.

    a. $0.50 for plan year beginning in September 1979, growing gradually to $1.00 for plan years beginning September 1, 1980, to September 26, 1980.

    b. From 2007 to capital one spark business credit card application status, this amount was adjusted annually based on the national average wage index and rounded to the nearest multiple of $1.

    Author Contact Information

    John J. Topoleski, Specialist in Income Security ([email address scrubbed], [phone number scrubbed])


    Acknowledgments

    Emma Sifre provided research assistance to update this report.

    Footnotes

    1.

    These plans are authorized in §401(k) of the Internal Revenue Code.

    2.

    See Pension Benefit Guaranty Corporation (PBGC), PBGC Annual Report 2018, p. 30, https://www.pbgc.gov/sites/default/files/pbgc-annual-report-2018.pdf.

    3.

    See Pension Benefit Guaranty Corporation (PBGC), PBGC Annual Report 2018, pp. 31-32, https://www.pbgc.gov/sites/default/files/pbgc-annual-report-2018.pdf.

    4.

    See Pension Benefit Guaranty Study, PBGC's Multiemployer Guarantee, March 2015, https://www.pbgc.gov/documents/2015-ME-Guarantee-Study-Final.pdf.

    5.

    See ERISA 4002 §1302(g)(2) and 29 U.S.C. 1302 §(g)(2).

    6.

    For example, Chairman Phil Roe and then-Ranking Member Robert Andrews, of the Subcommittee on Health, Employment, Labor, and Pensions in the House Education and Workforce Committee, both expressed reservations about providing government financial assistance for PBGC. Us pension benefit guaranty corporation U.S. Congress, House Committee on Education and the Workforce, Subcommittee on Health, Employment, Labor, and Pensions, Examining the Challenges Facing PBGC and Defined Benefit Pension Plans, 112th Cong., 2nd sess., February 2, 2012, 112-50 (Washington: GPO, 2012) and U.S. Congress, House Committee on Education and the Workforce, Subcommittee on Health, Employment, Labor, and Pensions, Strengthening the Multiemployer Pension System: What Reforms Should Policymakers Consider?, 113th Cong., 1st sess., June 12, 2013.

    7.

    Vested benefits are those benefits that a participant has earned a right to receive from a pension plan. Participants are entitled to their vested benefits even if they leave the pension plan or if the plan terminates.

    8.

    The termination premium applies to plans that end in distress terminations in which ERISA §4044(c) applies, unless certain conditions about the plan's sponsors apply. For more information, see Termination Premium Payment Package, including PBGC Form T, available from PBGC at http://www.pbgc.gov/documents/Form-T-package-2014.pdf.

    9.

    The termination premium was authorized in Deficit Reduction Act of 2005 (P.L. 109-171). The termination premium is $2,500 for airlines that chose the funding relief available under §402 of the Pension Protection Act of 2006 (PPA; P.L. 109-280) if the plan terminated within five years of choosing the funding relief.

    10.

    See 26 U.S.C. §401.

    11.

    See 25 U.S.C. §401(a)(25) and 26 C.F.R. §1.401(a)-1. Definitely determinable benefits are benefits that are based on actuarial assumptions over which an employer does not have the discretion to make changes, such as those calculated from a formula specified in the pension plan documents. As a counter example, a benefit that could be changed based on the employer's profits would not be definitely determinable.

    12.

    See 29 U.S.C. §1321.

    13.

    More information is available in CRS Report RS22624, The Pension Benefit Someone is trying to access my gmail account Corporation and Single-Employer Plan Terminations.

    14.

    Contingent benefits are benefits that are available when certain specified events occur. For example, a plan might provide "shutdown benefits," which are additional benefits should a plant or facility close.

    15.

    An asset reversion is cash and property received login to my regions bank account the sponsor of a DB pension plan. See 26 U.S.C. §4980(c)(2).

    16.

    For example, PBGC pays 20% of a participant's shutdown benefit if the benefit was adopted within one year prior to plan termination. The percentage increases from year to year. If the benefit was adopted more than five years prior to plan termination, PBGC pays 100% of the participant's shutdown benefit. For more information, see PBGC, "Benefits Payable in Terminated Single-Employer Plans; Limitations on Guaranteed Benefits; Shutdown and Similar Benefits," 79 Federal Register 25667-25675, May 6, 2014.

    17.

    The maximum benefit is different for participants in terminated single-employer pension plans compared with participants in insolvent multiemployer pension plans.

    18. us pension benefit guaranty corporation

    A straight-life annuity pays the monthly benefit until the participant dies. A joint and 50% survivor annuity provides a participant with fixed monthly lifetime benefit payments and, upon death, continues lifetime payments reduced by 50% to the spouse or other beneficiary.

    19.

    Further information on the maximum benefit is available in 29 C.F.R. §4022.23, Computation of Maximum Guaranteeable Benefits.

    20.

    A single life annuity is a benefit that pays an equal monthly benefit for the life of the participant. A survivor's annuity pays an equal monthly benefit for the longer of the life of the participant and the participant's spouse. The monthly payment in a survivor's annuity is typically less than the amount of the single life annuity.

    21.

    See Pension Benefit Guaranty Corporation, Pension Insurance Data Book, 2015, Table S-24, https://www.pbgc.gov/sites/default/files/2015-pension-data-tables.pdf. Data for the average benefit in 2016 are not available.

    22.

    PBGC studied 125 single-employer plans that were terminated prior to 2006. See Pension Benefit Guaranty Corporation, PBGC's Guarantee Limits—an Update, September 2008, http://www.pbgc.gov/docs/guaranteelimits.pdf. CRS is not aware of a more recent study regarding the percentage of participants who receive their full pension benefits.

    23.

    See Pension Benefit Guaranty Corporation (PBGC), PBGC Annual Report 2017, p. 41, https://www.pbgc.gov/sites/default/files/pbgc-annual-report-2017.pdf.

    24.

    See PBGC, 2015 Pension Insurance Data Tables, table M-4, https://www.pbgc.gov/sites/default/files/2015-pension-data-tables.pdf.

    25.

    An accrual rate is a factor in the pension benefit formula (expressed either as a dollar amount or as a percentage of salary) at which a pension benefit is earned. In single-employer pension plans, the pension benefits formula is typically expressed as the number of years participating in the plan times the accrual rate (e.g., 1% or 2%) times a measure of salary (e.g., the average of the participant's highest five years of salary). In multiemployer pension plans, the pension benefits formula is typically expressed as the number of months or years of service times a dollar amount.

    26.

    This is calculated as [30 × ((100% × $11) + (75% ×$33)] = $1,072.50 per month, which is $12,870 per year.

    27.

    See Pension Benefit Guaranty Study, PBGC's Multiemployer Guarantee, March 2015, https://www.pbgc.gov/documents/2015-ME-Guarantee-Study-Final.pdf.

    28.

    The average monthly benefit in terminated plans that are likely to receive PBGC financial assistance was $383.33; in plans that were projected to become insolvent within 10 years it was $546.17; and in remaining, ongoing plans it was $1,010.44. See Pension Benefit Guaranty Corporation, PBGC's Multiemployer Guarantee, March 2015, Figure 4, https://www.pbgc.gov/documents/2015-ME-Guarantee-Study-Final.pdf.

    29.

    The dollar amounts do not sum because of rounding. As reported on page 30 of PBGC's FY2018 Annual Report, total assets were $112,252 million, total liabilities were $163,689 million, and the net financial position was -$51,437 million.

    30.

    Other assets include us pension benefit guaranty corporation lending collateral and receivables.

    31.

    Other liabilities include payables. PBGC's benefit obligations are spread anno onb ac at over many years in the future. These future benefits are calculated and reported as current dollar values (also called present value). Benefits that are expected to be paid in a particular year in the future are calculated so they can be expressed as a current value. The process is called discounting and it is the reverse of the process of compounding, which projects how much a dollar amount will be worth at a point in the future. For more information, see the appendix in CRS Report R43305, Multiemployer Defined Benefit (DB) Pension Plans: A Primer.

    32.

    See PBGC FY2018 Annual Report, p. 31, at https://www.pbgc.gov/sites/default/files/pbgc-annual-report-2018.pdf.

    33.

    More information is available at http://www.gao.gov/highrisk/pension_benefit/why_did_study.

    34.

    Table A-2 reports data from PBGC's Data Book. PBGC's FY2017 Annual Report indicated that approximately 840,000 participants were receiving monthly benefits at the end of FY2017.

    35.

    See Tables S-24 and S-25 Pension Benefit Guaranty Corporation Pension Insurance Data Book, 2015 https://www.pbgc.gov/sites/default/files/2015-pension-data-tables.pdf.

    36.

    See Table S-20 Pension Benefit Guaranty Corporation Pension Insurance Data Book, 2015 https://www.pbgc.gov/sites/default/files/2015-pension-data-tables.pdf. The data book does not provide similar information for multiemployer plans. In the multiemployer program, PBGC does not provide benefits directly to participants, but to the plans.

    37.

    See the AppendixHistorical PBGC Premium Rates for the history of PBGC premium rates. See also Pension Benefit Guaranty Corporation, FY2018 Annual Report, p. 31, https://www.pbgc.gov/sites/default/files/pbgc-annual-report-2018.pdf.

    38.

    See Pension Benefit Guaranty Corporation, FY2018 Annual Report, p. 11, https://www.pbgc.gov/sites/default/files/pbgc-annual-report-2018.pdf.

    39.

    For more information, see Congressional Budget Office, A Guide to Understanding the Pension Benefit Guaranty Corporation, September 2005, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/66xx/doc6657/09-23-guidetopbgc.pdf.

    40.

    When PBGC becomes trustee of a single-employer pension plan, the plan typically has assets in it. These assets are transferred to PBGC trust fund. PBGC does not become trustee of multiemployer plans, so it does not take any multiemployer plan assets.

    41.

    See Pension Benefit Guaranty Corporation, "Pension Benefit Guaranty Corporation Investment Policy Statement – September 2016," https://www.pbgc.gov/documents/Investment-Policy-Statement.pdf.

    42.

    See Pension Benefit Guaranty Corporation, PBGC Annual Report 2018, p. 48, https://www.pbgc.gov/sites/default/files/pbgc-annual-report-2018.pdf.

    43.

    A GAO report indicated that the formula for the transfer is net trust fund assets divided by the present value of future benefits excluding probable terminations. See GAO, Pension Benefit Guaranty Corporation: Asset Management Needs Better Stewardship, GAO-11-271, June 2011, http://www.gao.gov/new.items/d11271.pdf.

    44.

    See Pension Benefit Guaranty Corporation, PBGC Annual Report 2018, p. 45, https://www.pbgc.gov/sites/default/files/pbgc-annual-report-2018.pdf.

    45.

    See, e.g., Rep. Jim Renacci, "Renacci, Pocan Introduce the Pension and Budget Integrity Act," press release, January 31, 2017, https://renacci.house.gov/index.cfm/press-releases?ID=1F1896CA-3D93-477C-8B71-0DDF8C672920.Sean Forbes, "House Approves Budget Agreement That Includes Hikes in PBGC Premiums," Pension & Benefits Reporter, December 17, 2013, or Interindustry Forecasting at the University of Maryland, Increasing. Pension. Premiums: The Impact on Jobs and Economic Growth, May 2014, http://www.nam.org/~/media/0948C22BD34742678A3DA9078EA28915/Increasing_Pension_Premiums_Full_Report_MAY2014.pdf.

    46.

    The Projections Report was formerly called the Exposure Report. It is available at http://www.pbgc.gov/about/projections-report.html.

    47.

    To estimate the likelihood of PBGC's future financial condition, PBGC uses an internally developed computer modelling program that it calls the Pension Insurance Modelling System (SIMS). Separate models are used for the single-employer program (SE-SIMS) and the multiemployer program (ME-SIMS). For more discussion of SIMS, see Jeffrey R. Brown, Douglas J. Elliott, and Tracy Gordon, et al., A Review of the Pension Benefit Guaranty Corporation Pension Insurance Modeling System, Brookings Institution, September 11, 2013, http://www.brookings.edu/research/papers/2013/09/11-review-pension-benefit-guaranty-corporation-pension.

    48.

    See PBGC Projections: Multiemployer Program Insolvent in FY 2025, May 31, 2018, https://www.pbgc.gov/news/press/releases/pr18-02.

    49.

    Plans are classified as probable (for future financial assistance) if the plan is ongoing but is projected to be insolvent within 10 years.

    50.

    See Pension Benefit Guaranty Corporation, PBGC Insurance of Multiemployer Pension Plans, March, 2016, https://www.pbgc.gov/documents/Five-Year-Report-2016.pdf.

    51.

    This improvement in the deficit is not larger because the application by one of the largest multiemployer DB pension plans to reduce benefits was rejected by the U.S. Treasury in May 2016 and this plan is likely to become insolvent within 10 years. See Pension Benefit Guaranty Corporation, FY2016 Projections Report, p. 10, https://www.pbgc.gov/sites/default/files/fy-2016-projections-report-final-signed.pdf.

    52.

    See CRS Report R45107, Joint Select Committee on Solvency of Multiemployer Pension Plans: Structure, Procedures, and CRS Experts.

    53.

    For more information on the policy issues relevant to the work of the committee, see CRS Report R45311, Policy Options for Multiemployer Defined Benefit Pension Plans.

    54.

    See Joint Select Committee on Solvency of Multiemployer Pension Plans, "Hatch, Brown Commit to Continued Work on Pension Crisis Past Nov. 30," press release, November 29, 2018, https://www.pensions.senate.gov/content/hatch-brown-commit-continued-work-pension-crisis-past-nov-30.

    Источник: https://www.everycrsreport.com/reports/95-118.html
    Pension Benefit Guaranty Corporation (PBGC)

    From a retiree’s perspective, the biggest risk with defined benefit retirement is that you are at the mercy of your former employer. That could put your retirement at risk if the employer or its pension fund runs into trouble. The solution: The Pension Benefit Guaranty Corporation (PBGC), which was founded in 1974 and protects retirees if a pension plan becomes insolvent. As of 2019, the PBGC covers more than 26,000 individual pension plans. In turn, around 40 million American workers have insurance protection for their pension earnings.

    What Is the Pension Benefit Guaranty Corporation (PBGC)?

    When a defined benefit plan goes bankrupt, or when it is otherwise unable to continue making payments, the Pension Benefit Guaranty Corporation assumes its obligations. The PBGC makes payments in the pension plan’s stead, ensuring that the covered retirees won’t lose allie x is often their primary source of income. It’s a bit like the pension equivalent of the Federal Despot Insurance Corporation, which insures deposit accounts so that savers don’t have to worry about losing their money to a bank failure.

    Employers who have retirement plans under PBGC coverage pay mandatory premiums that fund this insurance. The PBGC also collects whatever is left in any plans that it takes over. If a retirement plan still has some capital and investments, but not enough to make all of its payments, the PBGC will take over both its assets and its liabilities. As a result, taxpayers currently do not fund the PBGC whatsoever.

    The PBGC was created by the federal government as part of the 1974 Employee Retirement Income Security Act (ERISA).

    What Are The Limits of PBGC Insurance Coverage?

    Pension Benefit Guaranty Corporation (PBGC)

    Most private-sector pension plans fall under PBGC coverage. However, it does not apply to the following:

    • Government/military pensions

    • Private retirement accounts, like IRAs and 401(k)s

    • Religious institution pensions

    • Small professional practice pensions (companies with less than 25 employees)

    • Profit-sharing plans

    • Employee stock ownership plans (ESOPs)

    • Thrift savings plans

    • Money purchase plans

    PBGC coverage is not an unlimited plan. It only replaces a defined benefit plan up to a maximum amount. In 2019, that amount is $5,607.95 per month, or $67,295.40 per year. Any retiree who would have earned more than that under their pension will unfortunately face some loss in benefits.

    The PBGC has rarely had to reduce retiree benefits. The limits are there to keep its premiums low. Additionally, these limits prevent employers from offering outrageously high pensions with the knowledge that the government will cover them.

    Distress Terminations vs. Standard Terminations

    If a company is unable to pay off its pension benefits, it can file a distress termination with the PBGC. To receive this status, the plan provider must prove that it and any affiliated companies are fully unable to pay plan participants what they’re owed.

    Should the PBGC grant the company a distress termination, it will become the pension plan’s new trustee. This will allow it to pay current and future retirees exactly what they are entitled to. The PBGC will use a combination of its own assets and existing assets within the plan to pay participants.

    While the PBGC was created to protect retirees against insolvent companies and bad investments, a company can also hand over its pension plan voluntarily. This process is known as a standard termination.

    To complete a standard termination, the company must demonstrate that it has enough money in its fund to meet all obligations. This typically involves either purchasing a lifetime annuity for each qualifying retiree or finding a way to deliver the total value of the retiree’s pension plan in a lump sum. The PBGC will oversee this process and intervene if necessary.

    Problems With the PBGC

    In 2009, policy experts believed that the PBGC might itself soon become insolvent. This was in very large part because of the looming bankruptcy of the American auto industry. Due to the industry’s historic unionization and prosperity, it has assumed vast pension benefits. In fact, at one point General Motors was infamously spending more on retiree benefits than on steel.

    Widespread bankruptcy would have shifted those retirement payments onto the PBGC’s books. This lead observers like the Brookings Institute to report that the agency could run deficits of $100 billion or more under these circumstances.

    Fortunately that didn’t happen, though this hasn’t saved the PBGC from financial problems altogether. As the number of employers who run defined benefit plans has declined, the PBGC has steadily lost premiums. Yet, even while its income is shrinking, its responsibilities are growing thanks to ongoing retirements, the 2008 financial crisis and more.

    Bottom Line

    Pension Benefit Guaranty Corporation (PBGC)

    While the PBGC has had its share of financial issues, it’s still there to protect you if the pension you’re counting on runs into trouble. Still, even if you’ve got a pension coming your way, it’s a good idea to build a nest egg of retirement savings that you can tap in addition to that fixed income. You can use a retirement calculator to see if you’re on track for a secure retirement, and it’s also a good idea to work with a financial advisor who specializes in retirement planning.

    Tips for Retirement Planning

    • Planning out your retirement income can be extremely difficult. You need to consider your income needs, including healthcare expenses; figure out how much money you’ll need to meet those needs; and then build an investing plan that gets you there. If you’d like some help, consider working with a financial advisor. SmartAsset’s free financial advisor matching tool consider your financial situation and goals to match you with up to three fiduciary advisors in your area.

    • Although it shouldn’t be your only source of retirement income, Social Security can be a big help. If you’re curious about what you’ll earn in Social Security, check out our Social Security calculator.

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    Источник: https://www.yahoo.com/now/pension-benefit-guaranty-corporation-pbgc-194914312.html