PBGC Frequently Asked Questions Video Transcript
Jack: Hello and welcome. We know this is a time of uncertainty, change and concern in your life. If you're watching this DVD, chances are you recently learned that your pension plan has been taken over by the Pension Benefit Guaranty Corporation, or PBGC.
Doris: You're probably wondering who we are, what we do and what it means for you. You may be concerned about your retirement and the benefits you have been counting on. No doubt, you have a lot of questions. This DVD is designed to give you answers.
Jack: This interactive DVD is easy to use with a menu listing the questions we hear most often from workers, retirees, and their beneficiaries. With your TV remote, you can find out - the PBGC, what you can expect with your pension plan, how benefits are calculated, how to contact us, and other information you need to know - collect your pension benefit.
Doris: You can click on the topic that interests you most or watch all six sections to get simple answers to your important questions about the PBGC and your pension plan. The PBGC is dedicated to customer service, and we want to ensure that this process is as easy for you as possible.
I. ABOUT THE PBGC
1. Retiree: What is the Pension Benefit Guaranty Corporation?
PBGC Spokesperson: The Pension Benefit Guaranty Corporation is a federal agency created by Congress in 1974. We protect the benefits of 44 million workers in traditional pension plans sponsored by private-sector employers. If your plan ends without enough money to pay all benefits, the PBGC's insurance program will provide your pension-up to the limit set by law.
The PBGC is currently responsible for paying benefits to more than one-point-three million Americans in 3,700 pension plans.
2. Retiree: Where does the PBGC get its money to pay benefits?
PBGC Spokesperson: We are not funded with tax dollars. Our financing comes from insurance premiums paid by the companies whose plans we protect, our investments, assets of the pension plans we take over, and recoveries from bankruptcies.
3. Retiree: What types of plans does the PBGC insure?
PBGC Spokesperson: The PBGC insures defined benefit plans. This type of plan promises to pay a monthly benefit for life when you retire. Your benefit is based on your age, salary and years of service. The PBGC does not insure profit-sharing or 401(k) plans.
The PBGC covers single-employer plans, which are normally sponsored by an individual company. We also insure multi-employer plans covering unionized workers in the same industry.
4. Retiree: When does the PBGC take over a pension plan?
PBGC Spokesperson: The PBGC takes over only if a pension plan ends without enough money to pay all promised benefits. Federal law spells out the specific circumstances when a company pension plan is transferred to the PBGC. This usually happens in the context of corporate bankruptcy or liquidation.
II. YOUR PENSION PLAN:
1. Retiree: The PBGC has taken over my plan. What happens now?
PBGC Spokesperson: We want you to feel secure about your future. As soon as the PBGC takes over your plan as trustee, we will contact you with general information about the pension insurance program and our guarantees. Later, we'll provide specific information about your benefit. This will happen after the PBGC has had an opportunity to review your plan's records to determine the amount each participant will receive.
If you are already receiving benefits, you won't miss a payment. Throughout the review, we will continue to send your benefit in the annuity form you chose at retirement. These payments will be an estimate of the benefits the PBGC can pay under the insurance program and may be less than you were receiving from your plan.
If you are not retired yet, we will pay you an estimated benefit when you become eligible and apply. About four months before you are ready for your benefits to begin, contact the PBGC by calling the Customer Contact Center toll-free at 1-800-400-7242 or by visiting our Web site at pbgc.gov.
2. Retiree: When will I know my final benefit amount?
PBGC Spokesperson: The PBGC needs to collect and review a lot of information in order to calculate final benefits. In addition, the loose ends of your company's bankruptcy must be resolved before we can calculate your final benefit. It may take up to three years from the time we take over your plan to determine the actual amount of your monthly benefit.
3. Retiree: What happens if the PBGC's estimate of my benefit is too high or too low?
PBGC Spokesperson: If the PBGC underpaid your benefit, we will make up for it in a single payment with interest.
If we overpaid you, we will reduce future payments by up to ten percent until the amount has been repaid. You won't be charged any interest.
The payment reduction will begin 45 days after the benefit determination letter. If you have filed an appeal, the reduction won't begin until there is final decision.
4. Retiree: What if I believe my final benefit is incorrect?
PBGC Spokesperson: The PBGC wants to make sure you're treated fairly. If you believe the information used to calculate your benefit is incorrect or the final benefit is wrong, contact us to resolve the issue. After you receive your determination letter, you may file a written appeal within 45 days.
III. GETTING BENEFIT PAYMENTS:
1. Retiree: What benefits does the PBGC guarantee?
PBGC Spokesperson: The PBGC guarantees "basic benefits" earned before your plan ended- at normal retirement age, most early retirement benefits, benefits for disabilities that occurred before the plan was terminated, and annuity benefits for the survivors of plan participants.
The PBGC does not guarantee health care, welfare benefits, vacation, or severance pay. It also does not guarantee benefits for a death or disability that occurs after the plan ended.
2. Retiree: How much money will I receive from my pension?
PBGC Spokesperson: Your benefit from the PBGC is based on the benefit amount you earned under the provisions of your pension plan. The PBGC starts with that amount and then determines if the legal limits set by Congress apply to your benefit. Historically, most people receive the full benefit they had earned before the plan ended. However, some individuals, especially those who are younger than their plan's normal retirement age, do see reductions in their benefit.
3. Retiree: Can I choose the type of annuity I receive from the PBGC?
PBGC Spokesperson: Yes, the PBGC offers annuity choices that are explained on our Web site's Workers and Retirees page. It's called "Your PBGC Benefit Options: Questions and Answers for Participants." When you retire, we will tell you the amount you can receive under each of these annuity choices.
4. Retiree: How will I receive my benefit?
PBGC Spokesperson: We pay most benefits through safe and secure Electronic Direct Deposit. Your monthly payments will be sent directly to your financial institution for deposit into your account.
5. Retiree: Can I receive my benefits from the PBGC in a lump sum?
PBGC Spokesperson: Generally, the PBGC does NOT pay a lump sum. We pay benefits in monthly payments for life. BUT, if the total value of your benefit is $5,000 or less, you can receive a lump sum.
6. Retiree: Can I put my lump sum into an Individual Retirement Account or IRA?
PBGC Spokesperson: Yes, generally you can put all or part of your lump sum into a traditional IRA or another qualified plan. If you have the PBGC pay the lump sum directly to your IRA or some other plan, we will not withhold taxes from the payment. It's called a "tax-free rollover."
For more information, contact the Internal Revenue Service by calling 1-800-TAX-FORM, or visiting their Web site at irs.gov.
IV. YOUR MAXIMUM BENEFIT:
1. Retiree: What is the maximum benefit amount that the PBGC can guarantee?
PBGC Spokesperson: The maximum benefit the PBGC can guarantee is set by law and linked to the year in which your plan ended. You may lose some of the benefits you were counting on if the promised amount exceeds the limits set by Congress.
The maximum is based on your age at the date you began receiving benefits from us. This guarantee amount is lower if you begin receiving payments from the PBGC before age 65 or if your pension includes benefits for a survivor or beneficiary. The guarantee amount may be higher if you are over 65 when you begin receiving benefits.
Please visit our Web site at pbgc.gov for a table that shows the PBGC's maximum guarantee for retirement at various ages.
2. Retiree: Are there other limits on the PBGC's guarantee?
PBGC Spokesperson: Yes. If your benefit was increased within five years of the date the pension plan ended, that increase may not be fully guaranteed.
Also, if your plan provides supplemental benefits, such as temporary payments, they may not be fully guaranteed. Generally, the PBGC cannot guarantee an early retirement benefit greater than the benefit you would receive at your normal retirement age.
3. Retiree: I am disabled. What is the maximum benefit I can receive?
PBGC Spokesperson: The maximum benefit for disabled workers is the same as it would be for other workers. However, it is not reduced on account of age for workers who begin receiving benefits from the PBGC before age 65. This rule applies if you met your plan's requirements for a disability benefit before your plan ended and you have a Social Security award for that disability.
Other adjustments to the maximum guarantee are the same as for non-disabled workers.
4. Retiree: Can I earn additional benefits after my plan ends?
PBGC Spokesperson: No, you cannot earn additional benefits after your plan ends.
V. CONTACTING THE PBGC:
1. Retiree: How do I contact the PBGC?
PBGC Spokesperson: Customer service is our top priority. You can call our Customer Contact Center toll free at 1-800-400-7242 on weekdays 8 AM to 7 PM, Eastern Time. You can also write to us at PBGC, PO BOX 151750, Alexandria, VA 22315-1750.
But doing business with the PBGC has gotten even easier-thanks to computers. You can check on the status of your plan by visiting the Workers and Retirees section of our Web site at pbgc.gov. Click on the link under "Find Your Pension Plan".
We're also available 24 hours a day, seven days a week, through our on-line service - My Pension Benefit Account. We hope you'll take advantage of My PBA. It's simple to use. And we want to assure you that your information is safe and secure on our website.
2. Retiree: How can I set up a MyPBA account?
PBGC Spokesperson: To use MyPBA, go to the Workers and Retirees page on the PBGC Web site at pbgc.gov.
You can open up a new account or log into an existing one. Just enter your pension case name or number. You'll find it on the letter you received from the PBGC announcing trusteeship.
With MyPBA, you can: apply for benefits, set up electronic direct deposit, edit your existing deposit information, designate or change federal tax withholdings, request an estimate of your benefits or name a beneficiary. You can also change your address and telephone number so we know how to contact you.
VI. OTHER INFORMATION:
1. Retiree: Will the deductions from my pension check stay the same when the PBGC takes over my plan?
PBGC Spokesperson: The PBGC deducts only federal income taxes from your monthly benefit. You will have to pay separately any state taxes or other obligations that were previously withheld.
2. Retiree: Will the PBGC adjust my pension yearly for inflation?
PBGC Spokesperson: No, the PBGC cannot make any cost-of-living adjustments to pensions.
3. Retiree: Does the PBGC pay survivor benefits?
PBGC Spokesperson: Yes, if the benefit you choose provides for survivor benefits. The PBGC will allow all future retirees, whether they are married or not, to elect a benefit form that provides survivor benefits.
If you are married and die before electing a benefit form, we pay your surviving spouse. Your spouse can begin this benefit on the earliest date you could have received it.
If you are entitled to, or are receiving a survivor benefit when your plan ends, the PBGC will continue to pay that benefit under the provisions of your plan.
4. Retiree: What happens to my benefit if the PBGC runs out of money?
PBGC Spokesperson: The PBGC is not funded with tax dollars. Our financing comes from the insurance premiums paid by the companies whose plans we protect, our investments, assets of the pension plans we take over, and recoveries from bankruptcies.
In recent years, we have experienced budget shortfalls, but we have enough assets to continue paying benefits for years to come. In 2006, Congress passed legislation to strengthen the PBGC's finances and improve pension funding. But challenges remain. The PBGC will continue to work with policymakers to ensure that the pensions Americans have earned will be protected.