The Pension Benefit Guaranty Corporation (PBGC) is a federal government agency that was established in 1974 to protect the benefits of participants in private-sector defined benefit pension plans. The PBGC runs two insurance programs: a single-employer program and a multiemployer program. Single-employer pension plans are plans to which one employer makes contributions. Multiemployer pensions are collectively bargained pension plans to which more than one employer contributes. The single-employer program is the larger of the two insurance programs.
The PBGC oversees the termination of single-employer defined benefit pension plans and pays the benefits to participants in those terminated plans which do not have assets sufficient to pay 100% of promised benefits. There is a statutory maximum benefit that the PBGC is allowed to pay, which is indexed annually for inflation ($60,136 per year for a participant in a pension plan terminated in 2016 who receives a single-life annuity beginning at age 65). Most participants in terminated single-employer pension plans receive the full benefit earned at the time of plan termination.
The PBGC does not directly pay benefits to participants in multiemployer pensions. Rather, the PBGC provides insolvent multiemployer plans with financial assistance, sufficient to pay PBGC guaranteed benefits and reasonable administrative expenses. Such assistance is in the statutorily-required form of loans, which the PBGC indicates are rarely repaid. The PBGC statutorily guaranteed benefit for a participant in a multiemployer plan generally is the participant’s years of service times 100% of the first $11 of the monthly benefit rate and 75% of the next $33 of the monthly benefit rate. Thus, a participant with 30 years of service would receive a maximum annual benefit of $12,870. This benefit amount is not indexed for inflation.
The two insurance programs are financed by premiums paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by the PBGC, and recoveries from the companies formerly responsible for the trusteed plans. The PBGC does not receive any funds from general tax revenues, and the obligations of the PBGC are not obligations of the U.S. government.
The following provides a legislative history of the PBGC during the end of the 113th and beginning of the 114th Congresses. For prior legislative history, please see the prior editions of the Green Book.
The Multiemployer Pension Reform Act of 2014, enacted as Division O in the Consolidated and Further Continuing Appropriations Act, 2015 (MPRA; P.L. 113-235)
The Multiemployer Pension Reform Act of 2014 (MPRA) contained several provisions that affected the PBGC. MPRA increased the premiums that the sponsors of multiemployer defined benefit pension plans pay to PBGC to $26 per participant in 2015 and provided for the premium to be indexed to changes in the average national wage beginning in 2016. MPRA also changed the PBGC’s authorities with regard to facilitating mergers and partitions of multiemployer pension plans.
Further details about MPRA's effects on the PBGC may be found in the General Explanation Of Tax Legislation Enacted In The 113th Congress, which was prepared by the Staff of the Joint Committee on Taxation in March of 2015.
This page was prepared October 2016 for the 2016 version of the House Ways and Means Committee Green Book.