The cost of living after retirement can be overwhelming. Therefore, many employers offer workers the benefit of a pension plan to provide a source of income during retirement. There are various types of pension plans and organizations dedicated to helping employees ensure a good retirement future. One such organization is the Pension Benefit Guaranty Corporation (PBGC).

Pension Benefit Guaranty Corporation (PBGC)

History

The PBGC was created in 1974 by the Employee Retirement Security Income Act. PBGC headquarters is in Washington D.C. at 1200 K Street, NW. The PBGC’s regular operating hours are 8 a.m. to 5 p.m. eastern time, Monday through Friday. The PBGC’s main goal is to provide pension plan benefits to retirees, encourage the use of pensions, and help to keep the cost of pensions to a minimum. The PBGC is not financed by tax dollars. Rather, the PBGC uses pension premiums paid by employers and investments to supply the capital needed to dole out pensions to an estimated 1,061,000 people.

Statistics

The PBGC has two pension programs; the single employer program and the multiemployer program. The single employer program handles 29,651 pension plans that cover approximately 34.6 million workers. The multiemployer program helps 9.8 million workers and retirees receive funds from 1,587 pension plans. Premiums for those involved with the multiemployer program are $2.60 per worker or retiree. Yearly premiums for single employer plans are $19 per worker or retiree and an additional $9 for every $1000 in unfunded vested benefits provided. Congress determines these premiums and is the only entity that can change them. The maximum benefit provided by the PBGC is changed yearly. In 2005, workers who retired at age 65 received $3,801.14 per month ($45,613.68 per year). The amount of benefits provided increases for those who retire after the age of 65 and decreases for those who retire early.

Purpose

The PBGC was created to protect the American worker in the event that a pension plan is terminated without sufficient funds. This protects a worker from being left out in the cold by a business that cannot afford to pay a retiree’s pension.

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