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PBGC Blog: Retirement Matters

‘What is a Pension?’

  |   April 17, 2013

PBGC protects pensions. So, what is a pension? To most people, a pension is a retirement arrangement in which your employer promises you a regular payment from the day you retire, for as long as you live. The amount of your pension usually depends on how long you worked for an employer and your salary with that employer. Ask a retiree, "What is a pension?" and they may say,

"A pension is the $400 per month I receive for my many years of service at Acme Widgets. My pension helps to supplement the $600 per month I receive from Social Security and my retirement savings."

Normally, employees must work for an employer for a certain time period before the benefits they have earned belong to them. After they have done so, they are considered "vested" in those benefits. Today, in some pension plans, you are fully vested after five years on the job. In others, it takes you seven years to become fully vested - but you become vested in increasing portions of your benefit starting at three years. If you've worked for more than one company long enough to become vested in multiple pension plans, you can receive more than one pension payment.

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Here's what made headlines this week in pension news: 

Crain's Detroit Business writes, "PBGC to take over Metavation pension plans before supplier is sold."

PLANSPONSOR.COM offers PBGC perspectives on multiemployer plan issues in "Gotbaum Offers Suggestions for Multiemployer Plan Crisis."

PBGC insures more than 10 million Americans in multiemployer pension plans. As the name suggests, a multiemployer plan is funded by more than one employer, typically in the same industry. Each employer makes contributions to the plan on behalf of their employees, usually under the terms of a collective bargaining agreement. More...