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PBGC Blog: Retirement Matters

Keyboard with the word, retirement, as a keySimilar to that of a "payday loan," retirees are being offered pension advances with alarmingly high interest rates — rates often higher than those on credit cards.

While financial products like pension advances, which promise quick cash, may appear enticing, keep in mind that the long-term costs are largely hidden from the borrowers.

In an effort to protect your pensions and retirement security, Senators Tom Harkin (D-IA) and Lamar Alexander (R-TN), Chairman and Ranking Member of the Senate Health, Education, Labor, and Pensions Committee, sent a letter to the National Association of Attorneys General (NAAG) requesting documentation and information that could help the Committee identify Americans who may have been targeted by lenders offering lump-sum payments, with potentially illegally high rates of interest repayment, in exchange for a stake in the borrower's pension benefits.

In the letter, Harkin wrote, "Pensions are the bedrock of economic security in retirement for millions and millions of middle-class families. But now, it appears that there are some financial operations trying to siphon a profit off of people's retirement benefits. These unscrupulous companies are offering to buy pensions for a lump-sum. That may sound like a good idea to someone who is facing financial challenges, but long term, it can actually leave them worse off down the road. I hope this bipartisan investigation will shed light on the scope of this issue and uncover the companies that are taking advantage of our nation's pensioners."

Read the full text of the letter.

Here's more useful information: The U.S. Securities and Exchange Commission Investor Bulletin - Pension or Settlement Income Streams: What You Need to Know Before Buying or Selling Them

PBGC will pay retirement benefits for more than 2,400 current and future retirees of KidsPeace Corporation, a private charity dedicated to serving the behavioral and mental health needs of children, families, and communities.

KidsPeace Corporation is headquartered in Schnecksville, Pennsylvania with operations in Georgia, Indiana, Maine, Maryland, Minnesota, Nevada, New York, North Carolina, Virginia, and the District of Columbia.

The agency stepped in because the charity organization can't pay its pension obligations and remain in business.

PBGC will pay all pension benefits earned by the hospital's retirees up to the legal limit of almost $56,000 per year for a 65-year-old.

Retirees will continue to get benefits without interruption, and future retirees can apply for benefits as soon as they are eligible.

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The Economic Mobility Project of the Pew Charitable Trusts released a new report titled "Retirement Security Across Generations: Are Americans Prepared for Their Golden Years?," which provides a glimpse into the uncertain situation facing those who are approaching retirement age.

The report explores the retirement security for different age groups and examines how the Great Recession affected the wealth and retirement security of baby boomers as compared to younger and older age groups.

This research reveals that younger age groups face the greatest prospect of downward mobility in their golden years. 

Among the many significant findings in the study is that Americans born after 1955 carry more debt than have previous generations, and that this age group faces a severe decline in living standards upon retirement.

Read the full report

How PBGC is changing the narrative on Retirement Security

From J. Jioni Palmer, Director, Communications and Public Affairs:

Photo of J. Jioni Palmer, Director of Communications & Public Affairs, CPAD

J. Jioni Palmer
Director of Communications & Public Affairs

I've always been fascinated by storytelling: The Harry Potter series, This American Life, Grimm, The Twilight Zone, The New Yorker and just about anything by Walter Mosely. Books, movies, radio, print or online periodicals, fact or fiction, it doesn't matter. Interesting characters and a compelling narrative rivet me.

I also particularly like watching commercials and I'm constantly amazed by the brilliance of ad writers who can develop the scene, introduce relatable characters and tell a complete story in 30 or 60 seconds. Beyond hawking products or pushing ideas, I find commercials offer interesting insights on the zeitgeist of a particular demographic, culture or society.

Today, in almost any hour of evening television, sandwiched between myriad commercials for insurance companies and the latest solution to make housecleaning a breeze, you'll see spots about encouraging the viewer to plan for retirement.

One really resonates with me because it echoes a true story we at the Pension Benefit Guaranty Corporation tell a lot lately: people are living longer but retirement security isn't keeping pace. In the commercial, the narrator asks people to place a blue sticker along a timeline next to the age of the oldest person they've ever known. Not surprisingly, there are many dots ranging between 80 and 110. The spot closes with, "How do you make sure you have enough money to enjoy all of these years?"

Disclaimer: Neither the author nor PBGC endorses the products or services of the sponsor.

Since its inception in 1974, PBGC has been at the forefront of protecting the retirement security of the American people in defined-benefit pension plans offered by private companies. Now, most people probably don't know the agency exists, let alone think about us until the business they work for goes belly-up and they hear talk that the pension they've been looking forward to is about to evaporate.

Fortunately, PBGC does exist, and the safety net it provides allows most workers and retirees to keep the full promised benefit they've earned over many years.

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PBGC will pay retirement benefits for more than 830 current and future retirees of Noble Health Systems Inc., which operates Noble Hospital, a 97-bed acute-care hospital in Westfield, Mass.

The agency stepped in because the hospital can't pay its pension obligations and remain in business.

PBGC will pay all pension benefits earned by the hospital's retirees up to the legal limit of $54,000 a year for a 65-year-old.

Retirees will continue to get benefits without interruption, and future retirees can apply for benefits as soon as they are eligible.

According to PBGC estimates, as of April 15, 2011, the pension plan was 61 percent funded with $28 million in assets to pay $46 million in benefits. The agency expects to cover $17.8 million of the $17.9 million shortfall.

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Did you catch Director Josh Gotbaum's interview on C-SPAN? In case you missed it, we've got the details.

Josh spoke with Bob Litan, director of research at Bloomberg Government, about PBGC's efforts to safeguard the pensions of millions of Americans. Another trending topic Director Gotbaum spoke about: multiemployer pension plans and PBGC's multiemployer program.

Then, the conversation gained added insights from panelists Earl Pomeroy, Cary Franklin, Norman Stein, and Randy DeFrehn. 

Together, the panelists and Director Gotbaum talked about the need for pension reform.

Check out Director Gotbaum's remarks on C-SPAN.