What happens if PBGC's estimate is too high or too low?

In general, if we underpay a benefit when we take over a plan, we will make it up in a single payment with interest when we complete our calculations. If we overpay you, we will reduce future payments until the overpayment has been repaid. The reduction usually is no more than 10 percent of each payment. Of course, if both overpayments and underpayments were made, we will calculate the net overpayment or underpayment.

What is the maximum amount that PBGC can guarantee?

The maximum plan benefit PBGC can guarantee is set by law each year, under provisions of ERISA. For pension plans ending in 1999, for example, the maximum guaranteed amount is $3,051.14 per month ($36,613.68 per year) for a worker who retires at age 65. This maximum monthly amount is reduced if you begin receiving payments before age 65 or if your pension includes benefits for a survivor or other beneficiary. The table at the end of these questions and answers lists examples of PBGC's maximum guaranteed benefits for 1999 and prior years.

What benefits does PBGC guarantee?

PBGC guarantees basic benefits, which include: 

1. Pension benefits at normal retirement age 
2. Most early retirement benefits
3. Disability benefits for disabilities that occurred before the plan was terminated (for terminations started after December 7, 1994, the reduced maximum guarantee for ages younger than 65 does not affect the benefits received by disabled participants who receive a disability benefit from both the pension plan and Social Security)
4. Certain benefits for survivors of plan participants

PBGC does not guarantee such benefits as health care, vacation pay, or severance pay.

Are there other limits on PBGC's guarantee?

Yes. For example, if your plan was created or increased within five years before it ended, your benefits may not be fully guaranteed. A phase-in rule is applied to determine how much of the benefits or the benefits increase is guaranteed. Generally, the larger of 20 percent or $20 per month of the benefits (or of the benefits increase) is guaranteed for each full year the plan (or increase) was in effect.

Does PBGC pay survivor benefits?

PBGC pays survivor benefits if you retired before your plan ended and your benefits included survivor benefits or if you were receiving survivor benefits before the plan ended. If you are married and begin receiving retirement benefits after the plan ends, we will normally pay your benefits as a joint-and-survivor annuity unless you and your spouse tell us, in writing, that you do not want this kind of annuity. Joint-and-survivor coverage provides that if you die first, your spouse will continue to receive a portion of your benefits. With a joint-and-survivor annuity, your monthly benefits are generally reduced during your lifetime to pay for the cost of the survivor annuity.

For plans that are terminated on or after August 23, 1984, we also provide preretirement survivor annuity coverage if you are married and not yet retired. This coverage provides benefits to your spouse if you die before you retire. PBGC provides the coverage without charge after plan termination.

Can I receive my benefits from PBGC in a lump sum or as a monthly annuity?

Normally, benefits are paid in the form of an annuity on a monthly basis. However, if the monthly benefit is $50 or less, payments generally will be made on a yearly basis. If the full value of the benefit is $5,000 or less, you will receive a single lump sum payment. If, in this case, the benefits are at least $25 a month, you may elect to receive them as an annuity.

Can I put my lump sum into an Individual Retirement Account (IRA)?

Yes. If the taxable portion of your lump sum payment is transferred directly by the plan or PBGC into an IRA, you will not have to pay taxes on your benefits until you begin receiving IRA payments. This deposit is called a tax-free rollover. (A single payment from PBGC for missed or underpaid benefits is not a lump sum that can be rolled over.) For more information about tax-free rollovers and the laws controlling IRAs, call 1-800-TAX-FORM or write the Internal Revenue Service office nearest you.

Will PBGC adjust my pension yearly for inflation?

No, there is no cost of living adjustment. Your benefits are fixed as of the date your plan ended (date of termination), subject to the maximum limits and restrictions already mentioned in these questions and answers.

Will my deductions stay the same if PBGC takes over my plan?

PBGC only deducts federal income taxes. You will have to make your own arrangements to pay state taxes and other amounts deducted.

If I have other questions about PBGC, how can I find the answers?

If you have questions about a pension plan that PBGC has taken over or about our insurance programs and retirement guarantees, contact PBGC's Technical Assistance Branch at 1200 K Street, NW, Suite 930, Washington, DC 20005-4026 or call us at (202) 326-4000 (not a toll-free number). For TTY/TDD users, call the federal relay service toll-free at 1-800-877-8339 and ask to be connected to (202) 326-4000. If you have specific questions about your plan or benefits, you should first contact your plan administrator or your employer.

PBGC Maximum Monthly Guarantees

Examples of the maximum guarantee for a single life annuity with no survivor benefits are shown for retirement at ages 65, 62, 60, or 55. The maximum is further reduced if the benefits are paid in a form other than for a single life annuity, such as a form that provides for survivor benefits. The pension benefits that PBGC can pay will depend on your age, the provisions of your plan, the form of your benefit, the legal limits on what PBGC can guarantee, and amounts PBGC recovers from employers for plan underfunding.

[Monthly Guarantee Table]

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