If your employer is seeking to end the plan, your plan administrator must notify you in writing that your plan is ending at least 60 days before the termination date. This notice is called the Notice of Intent to Terminate. If PBGC itself is seeking to end the plan, we notify the plan administrator and often publish a notice about our action in local and national newspapers.

What is the Pension Benefit Guaranty Corporation (PBGC)?

PBGC is a federal agency that insures and protects pension benefits in certain pension plans. If your plan is insured by PBGC, we guarantee your pension benefits up to certain legal limits. If your employer has financial difficulty and cannot fund the plan and the plan does not have enough money to pay all promised benefits, your plan ends (plan termination). PBGC then takes over the plan as the trustee and begins to pay pension benefits. The amount and type of pension benefits we pay are determined by your plan and the Employee Retirement Income Security Act (ERISA), which established PBGC. PBGC is not funded by taxes; our financing comes mainly from insurance premiums paid by companies whose plans we protect. If your plan is the type of plan insured by PBGC, your plan is insured even if your employer fails to pay the required premiums.

What types of plans does PBGC insure?

PBGC insures defined benefit plans, the type that promises to pay participants a specific monthly benefit at retirement. PBGC does not insure retirement plans that do not promise specific benefit amounts (defined contribution pension plans), such as profit sharing, or 401(k) plans.

How can I find out if my pension plan is insured by PBGC?

The easiest way to find out if your plan is insured by PBGC is to ask your employer or the person who administers the plan. Although PBGC insures most defined benefit plans, there are some that are not covered. For example, plans offered by professional service firms (such as doctors and lawyers) with fewer than 26 employees, church groups, and federal, state, or local governments are usually not insured. These questions and answers cover only single-employer plans, by far the larger group insured by PBGC. These are normally sponsored by an individual company for the benefit of its workers. (PBGC also insures multiemployer plans, which cover unionized workers of nonrelated employers in the same industry, such as trucking or construction.)

Why do pension plans end?

Pension plans usually end for one of three reasons: 

1. The employer is having financial problems and can no longer support the plan. 
2. The plan has enough money to pay all promised benefits and the employer wants to end the pension plan. 
3. The plan does not have enough funds to pay participants, and PBGC decides that it should be ended in order to protect the interests of participants or PBGC.

How do pension plans end?

Employers can end pension plans through a process called termination. There are two types of termination.

In a standard termination, an employer ends a plan that is fully funded after showing PBGC that there is enough money to pay all benefits owed. The plan will provide you the benefits owed either by purchasing an annuity for those benefits from an insurance company or, if your plan allows, in a lump sum. If an annuity is purchased, the insurance company will pay the retirement benefits. Your plan administrator must tell you what insurance company or companies your plan is considering as a possible annuity provider before making a final selection. PBGC's guarantee is ended when the employer purchases the annuities or otherwise pays you the value of your pension.

In a distress termination, an employer ends a plan that does not have enough money to pay all benefits owed. To do so, however, the employer must prove to PBGC that the business is financially unable to support the plan. PBGC takes over the plan as trustee; it uses its own assets and any remaining assets in the plan to make sure that current retirees and future retirees of the plan receive their pension benefits within the legal limits.

Under certain conditions, PBGC may terminate a pension plan, even if a company has not filed to terminate the plan on its own initiative. PBGC can take such action if, for example, a plan does not have sufficient assets to pay benefits currently due.

What other information should I receive from my plan administrator?

In a standard termination, you should receive a second letter, called the Notice of Plan Benefits, that gives you information about the benefits you will receive.

In a distress termination, the plan administrator will send information regarding your benefits to PBGC. We will then determine the amount of your benefits that are guaranteed by our insurance program and will notify you in writing of our determination.

Can I earn additional benefits after my plan ends?

No additional benefits may be earned after the plan ends.

What happens if PBGC takes over my plan?

We try to notify you quickly when we take over a plan. We then begin reviewing your plan's records to determine what benefits each person will receive from PBGC. If you are already retired and receiving benefits, we will continue paying benefits without interruption during our review. These payments (which may be less than you are receiving from your plan) will be an estimate of the benefits that PBGC can pay under the insurance program. If you have not yet retired, we will begin paying your estimated benefits when you become eligible for them and you have applied for those benefits. Once we complete our review, we will tell you in writing what your pension amount will be under the law and what rights you have to appeal our decision. The pension benefit that PBGC can pay will depend on: 

1. Your age 
2. The provisions of your plan 
3. The form of your benefits 
4. The legal limits on what PBGC can guarantee 
5. Amounts PBGC recovers from employers for plan underfunding

To ensure PBGC has the proper information on all participants, we will contact you periodically to request any changes