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What’s on the Horizon for PBGC?

The Pension Benefit Guaranty Corporation (“PBGC or Corporation”) is a federal insurance program created by the Employee Retirement Income Security Act of 1974 that protects the retirement security of millions of American workers and retirees in both single-employer, multiple-employer and multiemployer pension plans.

PBGC does not insure defined contribution plans, which are retirement plans that do not promise specific benefit amounts, such as profit-sharing or 401(k) plans.

The financing of the insurance program comes from insurance premiums. The Single-Employer Insurance Program is financed by insurance premiums, investment income, and assets and recoveries from failed single-employer plans. The Multiemployer Insurance Program is financed by insurance premiums and investment income. Insurance premiums are set by law and paid by sponsors of pension plans. For historical premium rates since 2007, click here.

When a pension plan is terminated either by PBGC or an employer through a standard or distress termination, PBGC takes over as the trustee and provides financial assistance to the plan. Once PBGC takes over the plan, PBGC issues benefit payments subject to limits set by law.

For questions or further assistance, please contact a member of the Multiemployer Benefit Plans Group.

As more multiemployer pension plans became insolvent and unable to meet minimum funding requirements, PBGC continues to provide financial assistance and assume promises to pay pension benefits into the future.  In November 2019, Gordon Hartogensis, Director of PBGC, indicated that “The Corporation is in a difficult financial position today. The Single-Employer Program continues to see improvement; however, it still faces considerable risk.  The Multiemployer Program faces a crisis … and is very likely to become insolvent in 2025…”

Although PBGC’s financial condition is dire  and sensitive to economic conditions, PBGC continues to make its top priority the protection of American workers and retirees in pension plans and make sure they continue to receive benefits without interruption.

Author: Fabricia Edwards, CPA | fedwards@withum.com

Multiemployer Benefit Plans

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