Pension Benefit Guaranty Corporation (PBGC): A Primer

Source: John J. Topoleski, Congressional Research Service (CRS), CRS Report, 95-118, November 3, 2016

The Pension Benefit Guaranty Corporation (PBGC) is a federal government 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. 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 FY2015, PBGC insured about 23,600 DB pension plans covering about 40 million people. It paid or owed benefits to 1.5 million people. PBGC is the trustee of 4,706 single-employer plans. PBGC provided financial assistance to 57 multiemployer pensions. PBGC pays a maximum benefit to plan participants. 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…..