Pension Benefit Guaranty Corporation (PBGC)
A federal agency that insures private-sector defined benefit pension plans and pays benefits when underfunded plans are terminated.
In Detail
The PBGC was created by ERISA in 1974 to protect the retirement benefits of workers in private-sector defined benefit plans. It operates two insurance programs: the single-employer program covers about 22 million workers in roughly 22,000 plans, and the multiemployer program covers about 11 million workers in approximately 1,400 plans. When a single-employer plan is terminated without sufficient assets, PBGC takes over and pays benefits up to a legal maximum (approximately $81,000 per year for a 65-year-old retiree in 2024). The agency is funded by insurance premiums paid by covered plans, not by general tax revenue.
PBGC does not cover public-sector (government) pension plans — those plans rely entirely on their sponsoring government's ability and willingness to fund them. The multiemployer program faced insolvency before Congress passed the American Rescue Plan Act in 2021, which provided $94 billion in special financial assistance to the most troubled multiemployer plans. PBGC risk classifications (low, moderate, high, critical) are used in PensionWatch's Health Score as a measure of plan security.
Frequently Asked Questions
What does Pension Benefit Guaranty Corporation (PBGC) mean in pension finance?
A federal agency that insures private-sector defined benefit pension plans and pays benefits when underfunded plans are terminated.
Why does Pension Benefit Guaranty Corporation (PBGC) matter for my retirement?
The PBGC was created by ERISA in 1974 to protect the retirement benefits of workers in private-sector defined benefit plans. It operates two insurance programs: the single-employer program covers about 22 million workers in roughly 22,000 plans, and the multiemployer program covers about 11 million ...