What is the Pension Benefit Guaranty Corporation (PBGC)?
The US Department of Labor oversees an independent federally-chartered agency known as the Pension Benefit Guaranty Corporation. It was set up under the act of ERISA, i.e. Employee Retirement Income Security Act, 1974. It is a government body to make the payment of pension benefits if the firm cannot. The sole purpose of PBGC is to promote the maintenance and continuity of pension benefits plans as defined by the private sector. It ensures that the pension benefits must be paid on time and without any interrupts or delays. It strives to keep the premiums of pension insurance at a minimum.
How the Pension Benefit Guaranty Corporation Works
Funding from the PBGC is not collected from general income taxes, rather the employers pay insurance premium funds following the insured pension plans, the accumulated interest on premiums, and the pension plans assets that PBGC takes over.With effect from 2018, the Pension Benefit Guaranty Corporation makes the insurance policy of retirement incomes for almost twenty-four thousand pre-defined benefit plans that covers almost forty million workers of the United States. It covers nearly thirty million workers via the single-employer program. It covers an extra ten million workers by the multi-employer program that many unrelated employers pay. Within a single industry, the collective bargaining process sets up and maintains the multi-employer program.PBGC covers basic benefits such as a pension for employees reaching the age of retirement, benefits of early retirement and annuities for plan participants survivors as well as disability benefits in some cases.PBGC guarantees the max pension benefit that is annually adjusted by law. 2017 record shows that the eligible participants who were going to retire at the age of 65 could get 5369 US dollars maximum benefit on a monthly basis. It becomes 64432 US dollars a year. This protection increases for the ones who retire after the age of 65 and decreases for the ones who get early retirement or at the time, PBGC is paying the survivors benefits.According to 2016 record, PBGC made payment of almost eight lac and forty thousand retired employees in above four thousand and seven hundred pension plans. It could not make payment of promised benefits. It was liable to pay present and future pension benefits around one and half million people.The employers have offered private pensions as a benefit to the workers of the United States since the late nineteenth century. Before 1975, there was lesser protection for such funds. The companies declared bankruptcy. They were not able to provide the promised benefits, thus the employees left without recourse. The case of the automaker Studebaker is famous in this regard. In 1963, it ended the employee pension program. As a result, four thousand workers could get no retirement benefits.New York Senator named Jacob Javits, in 1967, requested the federal legislation to provide protection of private pension plans. The United States Congress, in 1974, devised the act of ERISA (Employee Retirement Income Security Act). Gerald Ford was the President of America who signed this law. He set up the Pension Benefit Guaranty Corporation (PBGC) as an agency to guarantee the benefits of retirement for millions of employees.
