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Pension Benefits Guarantee Corporation
The Pension Benefits Guarantee Corporation (PBGC) is a quasi-federal agency. The purpose of the PBGC is to protect employee pension plans (similar to FDIC insurance for bank depositors) against default of benefit payments by the employer.
Participating employers pay an annual premium to the Pension Benefits Guarantee Corporation.
- Flat-Rate:
- For 2010, 2011 and 2012, the rate for the flat-rate premium is $35.00 per participant in insured single-employer plans, while that for multiemployer plans is $9.00 per participant.
PBGC Payments to Retirees:
Retirees entitled to receive payments from the PBGC generally do no receive the full amount of the pension they were originally promised
The PBGC generally pays a smaller benefit amount offering affected retirees some financial relief.
Avoiding Inadequate Funding Problems For Defined Benefit Plans
To avoid the potential problem of not having adequate funds to provide each retiree a specific pension benefit at a future date, many companies are now using defined contribution plans to provide retirement benefits for their employees.
With a defined contribution plan:
- There is no promise of a specific benefit amount at retirement.
- The amount of the benefit depends on the accumulation of:
- Plan contributions plus
- Earnings and gains on plan assets, minus
- Losses and plan expenses.
Bonding Requirement for Qualified Plans
If you, as the employer, have control over the plan or its assets, you are required to be bonded. The idea is to protect employees should you decide to abscond with the company's loot.
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Related Content
- Return to the Retirement Plans Table of Contents to find related links