PBGC (Pension Benefit Guarantee Corporation) Form-1, Form-A, Form-EZ

The PBGC was created by the Employee Retirement Income Security Act of 1974 to encourage the growth of defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at a minimum. Defined benefit pension plans promise to pay a specified monthly benefit at retirement, commonly based on salary and years on the job. Multiemployer plans are set up by collectively bargained agreements involving more than one unrelated employer, generally in one industry.

How Pension Plans End

An employer can voluntarily ask to close its single employer pension plan in either a standard or distress termination. In a standard termination, the plan must have enough money to pay all benefits, whether vested or not, before the plan can end. After workers receive promised benefits, in the form of a lump sum payment or an insurance company annuity, PBGC guarantee ends. In a distress termination, where the plan does not have enough money to pay all benefits, the employer must prove severe financial distress—for instance the likelihood that continuing the plan would force the company to shut down. PBGC will pay guaranteed benefits, usually covering a large part of total earned benefits, and make strong efforts to recover funds from the employer. In addition, PBGC may seek to close a single employer plan without the employer's consent to protect the interests of workers, the plan or PBGC's insurance fund. PBGC must act to terminate a plan that cannot pay current benefits. For multiemployer pension plans that are unable to pay guaranteed benefits when due, PBGC will provide financial assistance to the plan, usually a loan, so that retirees continue receiving their benefits.

Maximum Guaranteed Benefit

The maximum pension benefit guaranteed by PBGC is set by law and adjusted yearly. For plans ended in 2004, workers who retire at age 65 can receive up to $3,698.86 a month (or $44,386.32 a year). The guarantee is lower for those who retire early or when there is a benefit for a survivor. The guarantee is increased for those who retire after age 65.