Finance: What is Pension Benefit Guaranty Corporation?

What is Pension Benefit Guaranty Corporation? Created in 1974, the Pension Benefit Guaranty Corporation (PBGC) is a branch of the Dept. of Labor responsible for maintaining pension benefit payments to beneficiaries in the event of private sector plans going into bankruptcy. PBGC monies are derived from pension insurance premiums and pension assets acquired and managed by PBGC.

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Transcript

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statement is right off their website The agency was set

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up in nineteen seventy for is part of Arisa Employee

00:31

Retirement Income Security Act to protect defined benefit plans That

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one were there Benefit is a huge deal because it's

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non identical Twin sister is a defined contribution plan The

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big diff well in a defined contribution pension plan employees

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contribute some percentage of their income to their retirement pension

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and the employer matches it and that's it The money

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gets invested in the stock market and goes up and

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down and up and down but over time mostly up

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And then the employees retires Decades later owning whatever the

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market or their investments that they risk say they young

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period End of story But in a defined benefit plan

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the employer essentially guarantees a minimum amount of invested return

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That is the big boss Usually the federal government with

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its union employees on taxpayer dollars then guarantees a raid

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of say nine percent a year to the employee retiring

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in the form of a minimum monthly draw from their

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pension that the employees can take out If the market

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goes through a really bad spell well then it's up

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to the company to make up the difference to that

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employees The people who framed a Risa knew of the

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likely issue that the guaranteed investment return could end up

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bankrupting states and or the country So PBGC was formed

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and it helps a lot of people like one point

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five million who ultimately rely on PBGC to bail out

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their pensions And if you're one of those people while

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you can expect to get something like sixty five thousand

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dollars annually or about fifty three hundred bucks a month

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assuming you retire at sixty five So if you retire

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early well those cheques arriving in your mailbox won't be

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quite so heavy Retire late in while the numbers go

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up And maybe the best part is that the U

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S taxpayer doesn't need to get all up in arms

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Since the dough used to manage PBGC doesn't come from

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John Q Taxpayer but rather from the private worlds employers

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So in forty or fifty years PBGC may be your

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best friend but until then well you're invisible Rabbit pal 00:02:30.543 --> [endTime] will be with you through thick and thin