Pension Benefit Guaranty Corporation (PBGC) is a federal government agency
established in 1974 by the Employee Retirement Income Security Act (ERISA;
P.L. 93-406). It was created to protect the pensions of participants and
beneficiaries covered by private sector, defined benefit (DB)
plans. These pension plans provide a specified monthly benefit at retirement,
usually either a percentage of salary or a flat dollar amount multiplied
by years of service. Defined contribution plans, such as §401(k)
plans, are not insured. The PBGC is chaired by the Secretary of Labor, with
the Secretaries of the Treasury and Commerce serving as board members.
The PBGC runs two distinct insurance programs for single-employer and
multiemployer plans. Multiemployer plans are collectively bargained plans
to which more than one company makes contributions. PBGC maintains
separate reserve funds for each program. In FY2011, the PBGC insured about
27,066 DB pension plans covering 44.2 million people. The PBGC paid or owed benefits
to 1.5 million people and took in 152 newly terminated pension plans. A firm
must be in financial distress to end an underfunded plan. Most workers in
single-employer plans taken over by PBGC receive the full benefit earned
at the time of termination, but the ceiling on multiemployer plan benefits
that could be guaranteed has left almost all of these retirees without full
In the 111th Congress, H.R. 3962, the Preservation of Access to Care for
Medicare Beneficiaries and Pension Relief Act of 2010 (P.L. 111-192)
provided defined benefit pension plans sponsors some relief from funding
requirements. In the 112th Congress, an amendment offered by Senate Majority
Leader Harry Reid to S. 1813, Moving Ahead for Progress in the 21st Century
(MAP- 21), contains provisions that would address the use of excess
defined benefit pension plan assets and the interest rates that defined
benefit plans use to value plan liabilities.
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