If Your Retirement Plan Goes Under
Defined-benefit pension plans -- the kind that pay monthly benefits for life -- are backed by the Pension Benefit Guaranty Corp., a federal government-sponsored insurance agency.
Here are some questions and answers about the agency.
Question: Who is covered by the agency?
Answer: Pension plan participants whose company or plan can no longer meet its obligations. The agency, funded by premiums paid by company pension plans, currently pays benefits to 518,220 retirees in failed plans. An additional 540,000 individuals are covered by the insurer but have not yet retired.
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Q: Do these participants get their full pensions?
A: Not always. The maximum payout is currently $45,614 a year for someone who retires at age 65. The maximum is less for people who retire before age 65. Most rank-and-file employees get 100% of what they are owed, but workers with generous pension benefits, or who retire early, can come up short.
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Q: Does the agency cover all terminated plans?
A: No. Plans that are fully funded can choose to terminate by buying annuities to provide lifetime payments or by giving participants a lump sum based on the actuarial assumptions of the value of their pensions. The agency’s involvement in this standard termination is mainly oversight. The agency generally steps in for plans that do not have sufficient assets to pay the benefits owed.
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Q: How can pension plan participants apply for benefits with the agency?
A: Go to the agency’s website at www.pbgc.gov or call the agency’s toll-free number at (800) 400-7242 and fill out a claim form. It takes six to eight weeks to receive retirement benefits.
Those benefits can be adjusted based on the agency’s review of the terminated plan’s documents, a process that can take about two years.
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Q: What do I do if I think the agency’s benefit estimate is wrong?
A: Once you receive a final determination letter, you may appeal. The appeals process requires that you send a letter within 45 days of the date noted on the letter. You must say why you believe the agency’s number is wrong and include the plan name, your Social Security number and contact information.
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Q: Is there a way to get help in determining whether the agency is paying the right amount?
A: Yes. There are 10 pension counseling projects nationwide funded by the U.S. Administration on Aging. They can help retirees evaluate whether they’re getting the right amount and even help participants find a defined-benefit plan that they may have lost track of. To find the nearest counseling project, go to the administration’s website at www.aoa.gov.
