PBGC Insurance Quick Facts
The Pension Benefit Guarantee Corp. (PBGC) provides insurance for defined benefit pension plans. This insurance helps protect participants from losing their accrued benefits if the plan is terminated and not fully funded at the time of termination.
- The PBGC will pay benefits as of the plan’s termination date, up to a maximum amount as set by law. The maximum monthly payout is set annually and depends on the participant’s age and the type of annuity. The annual tables can be found on the PBGC website: www.pbgc.gov.
- PBGC insurance covers most defined benefit plans, but usually not those offered by governmental employers, religious organizations or professional service firms with less than 26 employees.
- PBGC insurance does not apply to defined contribution plans, including 401k, 403b or profit sharing plans.
- The best way to identify if your plan is covered is to refer to your Summary Plan Description.
- The PBGC is funded by insurance premiums paid by the pension plan sponsors, investment earnings and assets recovered from terminated plans. It is not funded by tax dollars.
- The 2010 annual flat rate premium is $35 per participant for single employer plans and $9 per participant for multiemployer plans. If the plan is an unfunded, single employer plan then an additional variable rate applies. The 2010 variable rate is $9 for each $1,000 of unfunded vested benefits.
Plan sponsors are encouraged to monitor the amount charged by the PBGC for their annual insurance premium as part of their internal process.
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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your plan’s individual facts and circumstances.
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