PBGC guarantees disability benefits provided by plans for disabilities that occurred before the date the plan ended.

In two key ways, the guarantee limits for disability benefits are higher, generally, than the guarantee limits that apply to retirement benefits for non-disabled participants.

Guarantee of temporary supplements that are part of disability benefits

Some plans provide early retirees a temporary supplement.  A temporary supplement is a benefit that is payable for a fixed number of years, often from the first month of retirement until the date the retiree is eligible to receive a benefit from Social Security.    

Generally, PBGC does not guarantee an early retirement benefit that is greater than the monthly benefit your plan would have provided if you had retired at your normal retirement age.  However, if you are receiving a temporary supplemental benefit as part of your plan’s disability benefit, PBGC will guarantee your temporary supplement, subject to other legal limits, even if your total disability benefit is greater than the monthly benefit your plan would have provided if you had retired at your normal retirement age.

Maximum Guaranteed Benefit for certain disability benefits

For pension plans ending in 2008, the maximum guaranteed amount is $4,312.50 per month ($51,750.00 per year) and is not reduced for age for workers who begin receiving disability payments from PBGC before reaching age 65. This rule applies to you if you met your plan's requirements for a total disability benefit before your plan's termination date for the date your employer's bankrupcy proceeding began, if applicable (whether or not you applied for the benefit) by that date, and you have a Social Security disability award for that disability.  The maximum is increased if you begin receiving payments from PBGC after age 65 and it is reduced if your pension includes benefits for a surviving spouse or other beneficiary.  

Disabled participants receiving non-disability benefits

If you did not elect a disability retirement, but you (1) met your plan’s requirements for a disability benefit or the disabling event occurred before your plan ended (whether or not you applied for the disability benefit) and (2) you have a Social Security disability award for a disability that occurred before your date of retirement, your benefit will be subject to the limits on disability benefits described above.  In short, the key point isn’t whether you retired on a disability benefit under your plan, but whether you would have been entitled to a disability benefit under your plan and have been awarded disability benefits from the Social Security Administration.

Guarantee limit on benefit improvements

If your plan was created, or was amended to add or increase disability benefits, within five years before it ended, your benefit may not be fully guaranteed. PBGC guarantees the larger of 20% of the benefit or $20 per month for each full year the benefit was in effect. If you own more than 10% of the business, stricter limits apply.

Also see: What PBGC guarantees