Pension Benefit Guaranty Corporation (PBGC) Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Pension Benefit Guaranty Corporation (PBGC), written in plain English, along with examples of how it is used.
What is Pension Benefit Guaranty Corporation (PBGC)?
n. It is a federal corporation that provides insurance benefits on specific benefit pension plans.The PBGC has to provide guaranteed insurance benefits to its paricipants even if the plan goes bankrupt.
History and Meaning of Pension Benefit Guaranty Corporation (PBGC)
The Pension Benefit Guaranty Corporation (PBGC) was created under the Employee Retirement Income Security Act of 1974 (ERISA) as a federal corporation responsible for protecting the pension benefits of private sector workers. The PBGC provides insurance to participants in defined benefit pension plans, which are plans that promise to pay a specified monthly benefit to retirees. The PBGC is funded by insurance premiums paid by plan sponsors and investment returns on its assets.
In the event that a plan sponsor cannot meet its obligations to its pension plan participants, the PBGC steps in and takes over the plan's assets and liabilities. The PBGC then pays guaranteed insurance benefits to the participants, subject to certain limits set by law.
Examples of Pension Benefit Guaranty Corporation (PBGC)
- After his company's pension plan was terminated, John's monthly retirement benefit was partially restored by the PBGC.
- Mary's employer went bankrupt, and as a result, the PBGC took over the company's pension plan and began paying Mary her guaranteed insurance benefit.
- When a plan sponsor fails to meet its obligations to a pension plan, the PBGC may initiate legal action to recover assets and protect the rights of plan participants.
Legal Terms Similar to Pension Benefit Guaranty Corporation (PBGC)
- Defined benefit plan - a pension plan that promises to pay a specified monthly benefit to retirees.
- Defined contribution plan - a pension plan in which the employer or employee (or both) make contributions to an individual account for each participant, and the benefit at retirement depends on the amount contributed and the investment performance of those contributions.
- 401(k) plan - a specific type of defined contribution plan that allows employees to contribute a portion of their salary to an individual account, with the employer often providing matching contributions.