Help on PBGC guarantees

[Guest DBPension]

In 2009 the PBCG guarantee is limited to $54,000 at age 65, and assume it is $27,000 at age 59. Also let's assume that in 6 years (in 2015) the PBGC Limit at age 65 has increased to $75,000. A question:

If someone currently age 59 retires in 2009 with a straight life annuity of $65,000 annually, and the plan terminates in 2015, is that person's PBGC guarantee in 2015 limited to the $27,000 since he/she was 59 at the age of retirement, $54,000 because that was the age 65 Limit in the year she/he retired, or is the full annuity of $65,000 guaranteed because the reference number is the increased PBGC limit of $75000 at age 65 in 2015 (noting that this person reached age 65 in 2015)?

[david rigby]

From http://www.pbgc.gov/workers-retirees/benef...nt/page789.html

"The maximum guarantee applicable to a plan is fixed as of that plan's termination date except where termination occurs during a plan sponsor's bankruptcy and the sponsor entered bankruptcy on or after September 16, 2006, in which case the maximum guarantee is fixed as of the date the sponsor entered bankruptcy."

[Andy the Actuary]

From David R's reference: "Your maximum guaranteed amount is based, in part, on your age on the plan termination date."

Consider someone age 45 who started disability payments in 1985 of $4,000/month. It would be absolutely draconian of the PBGC now to cut the person's benefit to $1,125. Then all of those airline flight attendents who were crying about losing their pensions would finally be telling the truth!

[david rigby]

One could also state that it would be draconian for Congress to create a mandatory insurance program, where there is no insurable interest.

But I digress.

[tymesup]

One could also state that it would be draconian for Congress to create a mandatory insurance program, where there is no insurable interest.

But I digress.

And then use that mandatory insurance program as justification to pervert the funding rules and impose additional compliance burdens.