PBGC's FY2013 Annual Report, released Friday, provides a detailed summary of our year — both successes and areas for improvement.
The 125-page review of the agency covers the period beginning Oct. 1, 2012 and ending Sept. 30, 2013.
PBGC's deficit increased to about $36 billion in FY2013, up from about $34 billion last year.
Opening with messages from PBGC Board Chair, Secretary of Labor, Thomas E. Perez and PBGC Director Josh Gotbaum, the report examines ways to improve the agency's financial health and highlights our great scores in customer service.
Retirees receiving benefits continue to rate PBGC as one of the best in government for its commitment to customer service. The agency ranks in the top 3 percent in a survey measuring 154 categories of customer responsiveness. Retirees gave PBGC a score of 90 on the American Customer Satisfaction Index (ACSI), more than 20 points above the government average. A score of 80 or higher is considered excellent, whether for a government agency or a private business.
Aside from our distinguished customer service, the report also discusses three overarching goals:
- Preserve plans and protect pensioners
- Pay pension benefits on time and accurately, and
- Maintain high standards of stewardship and accountability
Since you're a Retirement Matters subscriber, you've been kept abreast of PBGC news as it happens. This report can give you further insight on the year in review at PBGC.
See the full FY2013 Annual Report (PDF).
Beginning in 2014, the maximum yearly guarantee for a 65-year-old retiree will be almost $59,320 – a 3.2% increase from the $57,500 rate in 2013.
Most retirees who get their pension from PBGC – almost 85 percent according to a 2006 study – receive the full amount of their promised benefit. In some cases, retirees can receive more than the PBGC maximum guarantee.
The PBGC maximum guarantee is based on a formula prescribed by federal law. Yearly amounts are higher for people older than age 65 and lower for those who retire earlier or choose survivor benefits.
If a pension plan ends in 2014, but a retiree does not begin collecting benefits until a future year, the 2014 rates still apply. For plans that terminate as a result of bankruptcy, the maximum yearly rates are guided by the limits in effect on the day the bankruptcy started, not the day the plan ended.
The increase is not retroactive and applies only to single-employer pension plans. The maximum guarantee limit for participants in multiemployer plans is $12,870 with 30 years of service, which has been in place since 2001.
For more information, see PBGC's Maximum Monthly Guarantee Tables or a previous blog post "Making Sense of the Maximum Insurance Benefit."
PBGC will pay retirement benefits for nearly 580 current and future retirees of Pennfield Corp., an animal feed mill based in Lancaster, Pa.
The agency stepped in because Pennfield sold the majority of its assets in bankruptcy proceedings to agribusiness giant Cargill, Inc. Cargill did not assume responsibility for the pension plan.
PBGC will pay all pension benefits earned by Pennfield retirees up to the legal limit of about $56,000 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, Pennfield's plan was 54 percent funded with $15 million in assets to pay $28 million in benefits. The agency expects to cover the entire $13 million shortfall.
There's a growing trend among employers who want to exit the pension game. Some have decided to close out their traditional pension plans and instead offer lump-sum payouts or an annuity from an insurance company.
Many of the reasons companies give for leaving traditional pensions are understandable: the boom and bust market cycles that make it difficult to maintain a reliable funding stream and the often complex regulatory hassles connected to such plans.
But the problem with this practice is the responsibility for helping people prepare for retirement is shifting away from companies, which are well-suited to handle this burden, to retirees who aren't. The heavy lifting of managing investments, making sure returns can pay for a lifetime, and possibly the lifetime of a surviving spouse, all rest on the shoulders of retirees.
By Janell Muhammad
Social Media Specialist
As PBGC takes part in National Save for Retirement Week, one employee reflects on the generation gap between Boomers and XYs in the quest for a secure retirement.
Working always has been a privilege and an honor for me. From the moment I was legally able, which in my case was the age of 13, I have held a job. As part of my duties, I have perfected the ice cream cone, salted McDonald's world-famous French fries, and advised young ladies on wardrobe choices at Loft. Whether part-time or full-time, after school or on the weekends, as a teenager, work kept me busy.
Today, I work for an agency focused on retirement. Considering the people we serve at PBGC, I pondered what it meant beyond being a federal employee.
Confused about saving for retirement? Or have you been procrastinating on getting started? Here's a recommendation on how to begin.
Last year, Time magazine ran a top 10 hit list to improve your financial health. Coming in at number three: "Put 10% of Your Income Toward Retirement." One of the experts in the piece suggests that saving and investing at least 10 percent of your income no matter how much you make will put you on the right path.
In April, the retirement publication, PlanSponsor, echoed this approach with the headline, "Households Saving 10% on Track for Retirement." The piece was based on findings from a Lifetime Income Survey by Putnam Investments. "Overall, the study found that American households deferring 10% or more of their income to retirement savings are on track to replace more than 106% of pre-retirement income."
So if you've been putting off saving for retirement and don't know where to begin, start putting away 10% and grow your nest egg from there.