Perhaps the biggest cause of concern for retirees is the fear that they will outlive their retirement income. Face it, thanks to medical advances we are living longer, but without proper planning, living longer does not mean living better. In fact, four-fifths of seniors suffer from at least one chronic disease and medical costs are guaranteed to absorb an increasing portion of any fix income. As such, protecting your pension is a critical component of any retirement plan. Luckily, you have help from the Pension Benefit Guaranty Corporation (PBGC), which is the best friend a retiree never knew that they had working for them.
Uncertain Economic Climate
At the beginning of the 1970s, business expansion was running full throttle, but ensuring that the hard work that these workers put in for years is safeguarded against changing economic conditions is at the heart of the PBGC mission. Under the Employee Retirement Income Security Act of 1974, employee pensions were protected by encouraging the continuation and maintenance of privately defined pension plans. Recent economic indicators suggest such protection in necessary.
In 2015, the PBGC covered more than $5.6 billion in benefits to participants in single-employer pension plans. That same year, the corporation also paid out more than $100 million dollars in benefit packages to nearly sixty multiemployer pension plans.
Defined Benefit Pension Plans
A defined benefit pension plan promises to pay a set amount on a monthly basis that is typically based on a lifetime of work, salary, and years on the job. It is the job of the PBGC to ensure that these payments arrive in a timely manner as agreed. In short, they deliver the promise of timely and uninterrupted benefit payments to the retiree.
The PBGC is funded, not through general tax revenues, but rather through the premiums paid by recipients over the course of their working lives, and from money earned by investing that money in the open market.
To meet their mission, the PBGC pays the benefits of nearly a half a million retirees who’s benefit plans would have ended with the closing of more than 3,000 pension plans. Indeed, considering current retirees, and those on the brink of retiring, the PBGC is tasked with protecting the retirements of approximately 930,000 current and future pensioners.
Towards that end, the corporation closely monitors corporate transactions that might lead to destabilizing a person’s pension plan. Of particular concern is plans that they view as underfunded by $50 million or more, and also watch plans that offer benefits to plans with over 5,000 participants.
If you or a loved one is worried about financial security as they age, the Pension Benefit Guaranty Corporation is your first line of defense against an uncertain retirement landscape.