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1 1 (January 8, 2021)

handle is hein.crs/goveadx0001 and id is 1 raw text is: ressknal Resean~h Service n&ormirlu th&. 41 ttv lob ~rga 1)14 Updated January 8, 2021 An Overview of the Pension Benefit Guaranty Corporation (PBGC) The PensionBenefit Guaranty Corporation (PBGC) is a government corporation established by the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93- 406). It was created to protectthe pensions of participants and beneficiaries by paying participants' benefits ifthe pensionplan is unable to do so. PBGC insures only private sector definedbenefit (DB) plans. Thesepensionplans provide a specified monthly benefit at retirement, usually either a percentage of s alary or a flat dollar amount multiplied by years of service. Defined contribution (DC) plans, such as 401(k) plans, are not insured. More detailed information about PBGC is available in CRS Report 95- 118, Pension Benefit Guaranty Corporation (PBGC): A Primer. In FY2020, PBGC insured approximately 25,000 DB pensionplans covering about 34 million people. PBGC operates two distinct insurance programs: one for single- employerpensionplans anda second formultiemployer plans. Single-employer pension plans are sponsored by one employer and cover eligible workers employed by the plan sponsor. Multiemployer plans are collectively bargained plans to which more thanone company makes contributions. PBGC maintains separate reserve funds for each program, and funds fromthe reserve of one program may not be used for the other program. PBGC Administration PBGC is a government-owned corporation. A three- member board of directors, chaired by the Secretary of Labor, administers the corporation. The Secretary of Commerce and the Secretary of the Treasury are the other members of the board of directors. The director of PBGC is appointed by the President with the advice and consent of the Senate. ERISA also provides for a seven-member advisory committee, appointed by the President, for staggered three-year terms. The advisory committee advises PBGC on issues, such as investment of funds, plan liquidations, and other matters. PBGC Financing PBGC is required by ERISA to be self-supporting and receives no appropriations fromgeneral revenue. ERISA Section 4002(g)(2) states that the United States is not liable for any obligation or liability incurred by the corporation, and some Members ofCongress have expres sed a reluctance to consider providing financial assistance to PBGC. The most reliable sourceofPBGC revenue is the premiums set by Congress and paid by the private sector employers that sponsor DB pensionplans. Other sources ofincome are as sets fromterminated plans taken over by PBGC, investment income, andrecoveries collected fromcompanies whenthey end underfunded https :/c rs repo pensionplans. P.L. 96-364 requires thatPBGC's receipts and disbursements be included in federalbudget totals. Premiums The sponsors of private sectorpension plans pay a variety of premiums to PBGC. The sponsors of single-employer and multiemployer pensionplans pay a flat-rate, per- participant premium. The sponsors ofunderfunded single- employerpensionplans pay an additionalpremiumthat is based on the amount ofplan underfunding. In addition, pensionplans that are terminatedin certain situations pay a per-p articip ant premiumper year for three years after termination. Except for the termination premium, the premiums are increased annually for changes in the national wage index In 2021, the premiums are: * Single-employerflat-rate premium: The sponsors of single-employer DB pension plans pay an annual premiumof $86 for each participant in the plan. * Single-employer variable -rate premium: In addition to the flat-rate premium, the sponsors of underfunded single-employer DB pension plans pay an additional annualpremiumof $46 for each $1,000 of unfunded vested benefits. There is a per-participant limit of $582 for this premium. * Single-employer terminationpremium: The sponsors of single-employer DB pensionplans that end in certain situations pay an annualpremiumof $1,250 per participantper year for three years following plan termination. * Multiemployerflat-rate premium: The sponsors ofmultiemployerDB pension plans pay an annual premiumof $31 for each p articip ant in the plan. Pension Benefit Insurance Programs In the single-employer program, PBGC becomes the trustee of the terminated, underfunded single-employer DB pensionplans. The terminated plan's as sets are placed in a PBGC-operated trustfund. The participants in the trusteed plans receive their benefits fromPBGC. Since 1974, PBGC has trusteed5,031 single-employerpensionplans. In the multiemployerprogram, PBGC does notbecome the trusteeofplans. PBGC makes loans to multiemployerDB .conqgress.gov 9

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