Pension -PBCG

[Guest DDDlump]

If a participants terminates prior to retirement age, but leaves fully vested in a company's pension plan are those benefits protected and covered under PBCG in the event the plan is taken over?

[mbozek]

Yes but only to the extent that the PBGC guarantees the benefits. E.g., if the employee is 65 when the plan terminates in 03 the max benefit is about 44k. At 60 it is 27, at 43 its 9k. There is no PBGC guarantee of benefits if the employer purchased a deferred annuity for the employee from an insurer. Also the PGBC is quite inept at calculating benefits. There is continuing lawsuit against the agency for its failure to calculate the guaranteed benefits of Pan am employees in a bankrutcy over 10 years old - these are not just deferred vested benefits - it includes terminated employees who are eligible to collect retirement benefits. See yesterdays NY Times, P1 of the Business section- airline pilots are electing to retire now with a lower pension in order to take lump sums rather than risk having benefits reduced to PBGC levels if their airline goes bankrupt.

[WDIK]

Since this was posted under the 401(k) Plans forum, I feel compelled to point out that individual account plans are not covered by the PBGC. I'm not sure if it will be relevant or not.

[david rigby]

There may be other situations that could impact whether this plan is covered by the PBGC. See ERISA section 4021.

(BTW, please not the correct acronym above.)