Pension Benefit Guaranty Corporation Introduction and Overview

Introduction

The Pension Benefit Guaranty Corporation (PBGC) is a federal government agency that was established in 1974 to protect the benefits of participants in private-sector defined benefit pension plans.  The PBGC runs two insurance programs: a single-employer program and a multiemployer program.  Single-employer pension plans are plans to which one employer makes contributions. Multiemployer pensions are collectively bargained pension plans to which more than one employer contributes.  The single-employer program is the larger of the two insurance programs.

The PBGC oversees the termination of single-employer defined benefit pension plans and pays the benefits to participants in those terminated plans which do not have assets sufficient to pay 100% of promised benefits.  There is a statutory maximum benefit which the PBGC is allowed to pay ($59,318 per year for a worker in a pension plan terminated in 2014 who receives a single-life annuity beginning at age 65).  Most participants in terminated pension plans receive the full benefit earned at the time of plan termination. 

The PBGC does not pay benefits to participants in multiemployer pensions.  Rather, the PBGC provides insolvent multiemployer plans with financial assistance, in the statutorily-required form of loans, which PBGC indicates are rarely repaid, sufficient to pay PBGC guaranteed benefits and reasonable administrative expenses.  The maximum benefit is an annuity of $12,870 for a worker with thirty years of service.

The two insurance programs are financed by premiums paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by the PBGC, and recoveries from the companies formerly responsible for the trusteed plans.  The PBGC does not receive any funds from general tax revenues and the obligations of the PBGC are not obligations of the U.S. government.  The PBGC had a deficit of $35.7 billion at the end of fiscal year 2013, of which $27.4 billion was from the single-employer program and $8.3 billion was from the multiemployer program.  PBGC expects the single-employer program’s deficit to improve over the next 10 years.  However, PBGC expects the multiemployer program to deplete its assets and be unable to pay out statutorily required benefits in 8 years.

Chapter Overview

This chapter of the Green Book includes Congressional Research Service (CRS) Reports, a section that lists Tables and Figures in the CRS reports, Legislative History and Links to Additional Resources.

This page was prepared on August 19, 2014 for the 2014 version of the House Ways and Means Committee Green Book.