Underfunded pension plans give PBGC the heebie-jeebies. The Pension
Benefit Guaranty Corporation, or PBGC -- itself operating at a
multi-billion-dollar deficit -- was set up to
promote the growth of defined-benefit pension plans, provide
payment of retirement benefits, and keep pension premiums as low as
possible. The government agency protects the pensions of more
than 34 million workers and monitors employers to ensure that
plans are adequately funded. The agency receives no tax funds; its
income is generated by insurance premiums paid by employers,
investments, and assets recovered from terminated plans. The
corporation was created by the Employee Retirement Income Security
Act of 1974.
Insurance premiums paid by employers go into
two programs: single-employer (about 28,800 pension plans) and
multi-employer (some 1,500 pension plans under collective
bargaining agreements that involve several unrelated employers).
Employers pay about $8 per employee in the multi-employer plans and
about $31 per employee for single-employer programs (plus a flat
fee per $1,000 of unfunded vested benefits in underfunded
PBGC terminates pension plans when it
determines that a company can no longer pay benefits; it can take a
portion of a company's assets to ensure that pension obligations
are met. When PBGC takes over a failed plan, it pays each
individual pensioner covered by the plan monthly payments.
Many companies have moved from traditional defined benefit
pension plans to so-called defined contribution plans, usually
reducing the benefits of long-time workers in the process. Workers
and their advocates criticize the switched plans, but they don't
come under PBGC's jurisdiction unless they fail.
The corporation is lead by a director who is appointed by the US
President. Joshua Gotbaum was appointed in mid-2010 to replace a
retiring Charles Millard.