Tuesday, July 21, 2009

Pension Benefit Guaranty Corporation rules

The Pension Benefit Guaranty Corporation (PBGC) protects the retirement incomes of American workers in private-sector defined benefit pension plans. A defined benefit plan provides a specified monthly benefit at retirement, often based on a combination of salary and years of service.

PBGC is not funded by general tax revenues. PBGC collects insurance premiums from employers that sponsor insured pension plans, earns money from investments and receives funds from pension plans it takes over.

PBGC pays monthly retirement benefits, up to a guaranteed maximum.

The maximum pension benefit guaranteed by PBGC is set by law and adjusted yearly. For plans ended in 2009, workers who retire at age 65 can receive up to $4,500 a month ($54,000 a year). The guarantee is lower for those who retire early or when there is a benefit for a survivor. The guarantee is increased for those who retire after age 65.

PBGC is headed by a Director who reports to a Board of Directors consisting of the Secretaries of Labor, Commerce and Treasury, with the Secretary of Labor as Chair.

Available benefit choices .
• a straight-life annuity;
• 5-year, 10-year or 15-year certain-and-continuous annuity;
• joint-and-survivor annuity; joint-and-50% survivor "pop-up" annuity;
• automatic" form of benefit offered to you under your plan

You select the form of annuity you want at the time you file your application to begin receiving your pension benefits.

PBGC must receive your application no more than 90 days before the date you requested that your benefits begin.

To find out what your benefit amount would be under the optional forms of annuity call PBGC's Customer Service Center toll-free at 1-800-400-7242 and request a benefit application package.

PBGC will send you the application and the exact benefit calculations to show the amount of your benefit under all of your annuity form options. If you are married, the calculations will also show the amount of your spouse's benefit.
PBGC Guarantee

PBGC guarantees "basic benefits" earned before your plan’s termination date (or the date your employer’s bankruptcy proceeding began, if applicable), which include:
• Pension benefits at normal retirement age
• Most early retirement benefits
• Annuity benefits for survivors of plan participants
• Disability benefits (see exception below)

PBGC does not guarantee:
• Health and welfare benefits
• Vacation pay
• Severance benefits
• Lump-sum death benefits for a death that occurs after the date the plan ended
• Disability benefits for a disability that occurs after the plan’s termination date (or the date your employer’s bankruptcy proceeding began, if applicable)

Legal Limits on PBGC's guarantees
• Generally, PBGC does not guarantee any monthly pension amount that is greater than the monthly benefit your plan would have provided if you had retired at your normal retirement age.
• Higher limits may apply for people who met their plan’s requirements for a disability pension before the plan’s termination date.
• PBGC may not fully guarantee your benefits if your plan was created or amended to increase benefits within five years before its termination date.
• If the plan terminated while your employer was in a bankruptcy proceeding that began on or after September 16, 2006, guarantees are determined as of the date your employer’s bankruptcy proceeding began.

The following are PBGC Maximum Monthly Guarantees for 2009 (assuming participant and spouse are same age), for Life Annuity (L.A) and Joint and 50% Survivor (J&S)

At age 65 L.A. = $4,500.oo, and J&S = $4,050.00
At age 64 L.A. = $4,185.00, and J&S = $3,766.50
At age 63 L.A. = $3,870.00, and J&S = $3,483.00
At age 62 L.A. = $3,555.00, and J&S = $3,199.50
At age 61 L.A. = $3,240.00, and J&S = $2,916.00
At age 60 L.A. = $2,925.00, and J&S = $2,632.50
At age 59 L.A. = $2,745.00, and J&S = $2,470.50
At age 58 L.A. = $2,565.00, and J&S = $2,308.50
At age 57 L.A. = $2,385.00, and J&S = $2,146.50
At age 56 L.A. = $2,205.00, and J&S = $1,984.50
At age 55 L.A. = $2,025.00, and J&S = $1,822.50

All the above and further information can be obtained by clicking on the PBGC link on this page or entering http://www.pbgc.gov/ into your browser.

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