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Simple English definitions for legal terms
Pension Benefit Guaranty Corporation
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A quick definition of Pension Benefit Guaranty Corporation:
Term: Pension Benefit Guaranty Corporation
Definition: The Pension Benefit Guaranty Corporation (PBGC) is a government organization that helps protect the retirement benefits of workers in private sector pension plans. If a company's pension plan is unable to pay the promised benefits, the PBGC steps in to pay a portion of those benefits to eligible workers. This helps ensure that workers receive at least some of the retirement benefits they were promised, even if their employer is unable to fulfill those promises.
A more thorough explanation:
The Pension Benefit Guaranty Corporation (PBGC) is a federal corporation that provides insurance to protect the retirement benefits of workers in private sector pension plans. It was created by the Employee Retirement Income Security Act of 1974 (ERISA) to ensure that workers receive the pension benefits they have earned.
When a covered pension plan fails to meet its obligations, the PBGC steps in to pay benefits to retirees and their beneficiaries. The PBGC is funded by insurance premiums paid by the pension plans it insures, as well as by the assets of failed pension plans that it takes over.
For example, if a company goes bankrupt and its pension plan is underfunded, the PBGC may take over the plan and pay benefits to the retirees. Without the PBGC, these retirees might not receive the full amount of their promised pension benefits.
Another example is if a company terminates its pension plan and does not have enough money to pay all of the promised benefits. The PBGC will pay the benefits that were promised, up to certain limits.