An Overview of the Pension Benefit Guaranty Corporation (PBGC)
Updated February 7, 2023
An Overview of the Pension Benefit Guaranty Corporation
(PBGC)
The Pension Benefit Guaranty Corporation (PBGC) is a
through the enactment of SFA are intended to ensure the
government corporation established by the Employee
continued solvency of the multiemployer program.
Retirement Income Security Act of 1974 (ERISA; P.L. 93-
406). It was created to protect the pensions of participants
The single-employer and multiemployer programs are
and beneficiaries by paying participants’ benefits if the
funded by premiums set by Congress and paid by the
pension plan is unable to do so. PBGC insures only private
private sector employers that sponsor DB pension plans.
sector single-employer and multiemployer defined benefit
Other sources of income for the single-employer program
(DB) pension plans. These plans provide a specified
are assets from terminated plans taken over by PBGC,
monthly benefit at retirement, usually either a percentage of
investment income, and recoveries collected from
salary or a flat dollar amount multiplied by years of service.
companies when they end underfunded pension plans. In
Single-employer pension plans are sponsored by one
addition to premiums, the multiemployer program also
employer and cover eligible workers employed by the plan
receives investment income on its revolving fund assets.
sponsor. Multiemployer plans are collectively bargained
The SFA program, which is financed by appropriations
plans to which more than one company makes
from Congress, results in a new source of financing outside
contributions. Defined contribution (DC) plans, such as
of PBGC’s revolving fund.
401(k) plans, are not insured. More information about
PBGC is available in CRS Report 95-118, Pension Benefit
Premiums
Guaranty Corporation (PBGC): A Primer.
The sponsors of private sector pension plans pay a variety
of premiums to PBGC. The sponsors of single-employer
In FY2022, PBGC insured approximately 25,000 DB
and multiemployer pension plans pay a flat-rate, per-
pension plans covering about 33 million people. PBGC
participant premium. The sponsors of underfunded single-
operates two distinct insurance programs: one for single-
employer pension plans pay an additional premium that is
employer plans and a second for multiemployer plans.
based on the amount of plan underfunding. In addition,
PBGC maintains separate reserve funds for each program,
pension plans that are terminated in certain situations pay a
and funds from the reserve of one program may not be used
per-participant premium per year for three years after
for the other program. The American Rescue Plan Act of
termination. Except for the termination premium, the
2021 (P.L. 117-2) authorized Special Financial Assistance
premiums are increased annually for changes in the national
(SFA)—a new program—for eligible financially troubled
wage index.
multiemployer DB plans.
In 2023, the premiums are
PBGC Administration
Single-employer flat-rate premium: The sponsors
PBGC is a government-owned corporation. A three-
of single-employer DB plans pay an annual
member board of directors, chaired by the Secretary of
premium of $96 for each participant in the plan.
Labor, administers the corporation. The Secretary of
Single-employer variable-rate premium: The
Commerce and the Secretary of the Treasury are the other
members of the board of directors. The director of PBGC is
sponsors of underfunded single-employer DB
appointed by the President with the advice and consent of
plans pay an additional annual premium of $52
the Senate. ERISA also provides for a seven-member
for each $1,000 of unfunded vested benefits.
advisory committee, appointed by the President, for
There is a per-participant limit of $652 for this
staggered three-year terms. The advisory committee advises
premium.
PBGC on issues, such as investment of funds, plan
Single-employer termination premium: The
liquidations, and other matters.
sponsors of single-employer DB plans that end in
certain situations pay an annual premium of
PBGC Financing
$1,250 per participant per year for three years
PBGC’s single-employer and multiemployer insurance
following plan termination.
programs are required by ERISA to be self-supporting.
Multiemployer flat-rate premium: The sponsors of
These programs receive no appropriations from general
multiemployer DB plans pay an annual premium
revenue. SFA provides assistance to multiemployer plans
but is accounted for separately from the traditional
of $35 for each participant in the plan.
financial assistance provided by PBGC’s multiemployer
Pension Benefit Insurance Programs
insurance program to insolvent plans. Although ERISA
states that the “United States is not liable for any obligation
In the single-employer program, PBGC becomes the trustee
or liability incurred by the corporation,” funds provided
of terminated, underfunded single-employer DB plans. The
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An Overview of the Pension Benefit Guaranty Corporation (PBGC)
terminated plan’s assets are placed in a PBGC-operated
If it appears that available resources will not support the
trust fund. The participants in the trusteed plans receive
payment of benefits at the guaranteed level, PBGC will
their benefits from PBGC. Since 1974, PBGC has trusteed
provide the additional resources needed as a loan, which
5,100 single-employer plans.
PBGC indicates are rarely repaid. PBGC may provide loans
to the plan year after year. One multiemployer plan has
In the multiemployer program, PBGC does not become the
repaid any of its financial assistance.
trustee of plans. PBGC makes loans to multiemployer DB
pension plans when the plans become insolvent. An
PBGC guarantees benefits to multiemployer plans as it does
insolvent multiemployer plan has insufficient assets
for single-employer plans, although a different guarantee
available from which to pay participant benefits. Through
ceiling applies. Multiemployer plans determine benefits by
FY2022, PBGC has provided financial assistance to 115
multiplying a flat dollar rate by years of service, so the
multiemployer plans.
benefit guarantee ceiling is tied to this formula. The benefit
guarantee limit for participants in multiemployer plans
Single-Employer Pension Insurance Program
equals a participant’s years of service multiplied by the sum
When an underfunded plan terminates, the benefits PBGC
of (1) 100% of the first $11 of the monthly benefit rate and
will pay depend on the statutory limit on guaranteed
(2) 75% of the next $33 of the benefit rate. For a participant
benefits, the amount of the terminated plan’s assets, and
with 30 years of service, the guaranteed limit is $12,870.
recoveries by PBGC from the employer that sponsored the
This benefit formula is not adjusted for increases in the
terminated plan.
national wage index or by any other measure of inflation or
cost of living.
Within limits set by Congress, PBGC guarantees any
retirement benefit that was nonforfeitable (vested) on the
Approximately 93,525 multiemployer plan participants in
date of plan termination other than benefits that vest solely
115 plans received $226.3 million in financial assistance in
on account of the termination and any death, survivor, or
FY2022. In the next 10 years, 50 multiemployer plans
disability benefit that was owed or was in payment status at
covering 63 million participants are expected to receive
the date of plan termination. In general, only that part of the
financial assistance totaling $839 million (in present value
retirement benefit that is payable in monthly installments
terms).
(rather than, for example, lump-sum benefits payable to
encourage early retirement) is guaranteed.
Special Financial Assistance for
Multiemployer Plans
ERISA sets a maximum on the individual benefit amount
PBGC administers the SFA program, which provides
that PBGC can guarantee. The maximum pension guarantee
financial assistance to certain financially troubled
is $81,000 a year for workers aged 65 in plans that
multiemployer plans. SFA is funded by transfers from the
terminate in 2023. This amount is adjusted annually for
general fund of the U.S. Treasury. Plans approved for SFA
changes in the national average wage. In addition, the
receive a lump-sum payment intended to ensure that they
benefit is decreased if participants begin receiving the
can remain solvent through 2051. In July 2022, PBGC
benefit before age 65 (reflecting the fact that they will
estimated that it would provide total SFA ranging from $74
receive more monthly pension checks over their expected
billion to $91 billion. Unlike the financial assistance for
lifetime) or if the pension plan provides benefits in some
insolvent multiemployer plans described in the previous
form other than equal monthly payments for the life of the
section, plans do not have to repay SFA.
retiree.
Current Financial Status
In FY2022, PBGC’s single-employer program paid a total
PBGC’s net financial position is the difference between its
of $7.1 billion in payments. Approximately 963,000
assets and its liabilities. At the end of FY2022, PBGC’s
participants were receiving monthly benefit payments at the
assets were $127.9 billion, PBGC’s liabilities (mostly
end of FY2022.
future benefit obligations) were $90.3 billion, and its net
financial position was a $37.6 billion surplus. PBGC is not
Multiemployer Pension Insurance Program
at risk of immediate insolvency because it has sufficient
In the case of multiemployer plans, PBGC insures plan
resources to pay benefits for the next several years.
insolvency rather than plan termination. Accordingly, a
multiemployer plan need not be terminated to qualify for
Since 2018, the single-employer program has had a surplus.
PBGC financial assistance. A plan is insolvent when its
The single-employer program surplus in FY2022 was $36.6
available resources are not sufficient to pay the plan
billion. In FY2021, PBGC’s multiemployer program had a
benefits for the plan year in question or when the sponsor of
surplus for the first time since FY2001. This increase in net
a plan in reorganization reasonably determines, taking into
financial position was largely due to federal financial
account the plan’s recent and anticipated financial
assistance to the United Mine Workers of America 1974
experience, that the plan’s available resources are
Pension Plan (P.L. 116-94) and to SFA for certain
insufficient to pay benefits that come due in the next plan
multiemployer plans. The multiemployer program surplus
year. More information is available in CRS Report R43305,
in FY2022 was $1.1 billion.
Multiemployer Defined Benefit (DB) Pension Plans: A
Primer.
John J. Topoleski, Specialist in Income Security
Elizabeth A. Myers, Analyst in Income Security
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An Overview of the Pension Benefit Guaranty Corporation (PBGC)
IF10492
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