What is the Pension Benefit Guaranty Corporation (PBGC)?

by Investing School on February 28, 2011

The Pension Benefit Guaranty Corporation, which is also known as the PBGC, is an agency that was formed through the passing of the Employee Retirement Income Security Act (ERISA) as an independent agency affiliated with the government of the United States. PBGC maintains and encourages voluntary, privately defined benefit pension plans while also providing payment of pension benefits to those who have already earned them. It is also in charge of keeping pension insurance premiums as low as possible while maintaining effective operations.

The PBGC insurance program is responsible for disbursing pension benefits to those who participate in the programs and retire at age 65. The amount payable goes up to the maximum guaranteed benefit set by law, which was $54,000 a year in 2009. The amount of benefits available can be altered and adjusted for those eligible retirees who choose to begin receiving their benefits at another age.

The funds for the PBGC do not come from tax revenues; rather, they come from four other sources. These include the premiums paid by the sponsors of the pension plans, assets that are held by the pension plans over which PBGC takes control, receipt of the unfunded pension liabilities from the bankruptcy estates of some plan sponsors, and income from investments.

Counting the people who have not yet reached retirement age, as well as other participants receiving financial assistance through multiple employers, the PBGC covers the present and forthcoming pension payments of well over one million people.

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