What About My Pension?

As a safeguard against the risk that a defined benefit pension plan may contain insufficient funds to pay the promised benefits to workers upon retirement, a federal statute, ERISA, imposes minimum funding standards on plan sponsors.  ERISA also established a pension insurance program that guarantees that retirees receive at least some of their earned benefits if and when an employer terminated an under-funded defined benefit plan.  The Pension Benefit Guaranty Corporation ("PBGC") administers the pension insurance program.  If a pension plan has insufficient assets to pay benefits, regardless of whether the plan sponsor is in bankruptcy, the PBGC will either provide financial assistance to the plan to enable it to pay certain guaranteed benefits or take over the plan and pay benefits directly to beneficiaries, up to a statutory maximum.  For plans terminated in 2011, the PBGC's maximum benefit amount is $4,500 per month ($54,000 per year).