What is the Maximum Guaranteeable Benefit Limit? - Salaried Video Transcript
The Maximum Guaranteeable Benefit limitation, or MGB, is a cap on the monthly benefit amount that PBGC can guarantee.
For a Delphi Retiree receiving a Straight Life Annuity who was age 65 when the plan terminated, the MGB is $4,500 per month. This dollar amount will vary for ages other than 65, and for forms of benefit other than a Straight Life Annuity.
The amount of your MGB is adjusted based on your age when you began to receive benefits from PBGC. Since you were already receiving benefits when your plan terminated, your MGB is based on your age at July 31, 2009 or DoPT. If you were younger than age 65 on that date, we apply a PBGC age adjustment factor to lower your MGB. Likewise, if you were older than age 65 on July 31, 2009, we will use a PBGC age adjustment factor to increase your MGB.
We will also adjust the MGB if you are receiving a form of benefit that provides survivor payments.
Since the MGB is adjusted based on your age and form of benefit, your maximum monthly benefit may be different from that of someone else in your plan.
If you left your employee contributions in the plan and die before you've received the value of those contributions, they must be paid to your beneficiary or estate. This type of benefit is called a "Modified Cash Refund." This also adds value to your benefit and hence, reduces the MGB. PBGC does not apply this reduction, however, if your benefit form includes a survivor benefit as of plan termination. Since the MGB is adjusted for these reasons, your maximum monthly benefit may be different from that of someone else in your plan.
Here are some sample MGB amounts based on various ages at the date of plan termination.
For example, if you were retired and age 60 at the date of plan termination, your MGB is $2,925 per month in the form of a Straight Life Annuity. Or, if you were age 70, this maximum is $7,470 per month.
As we mentioned, the Maximum Guaranteeable Benefit will also be adjusted for the form of benefit you were receiving when the plan terminated. For example, it is lower if you're receiving a Joint and Survivor benefit. This is because a form of benefit that pays survivor benefits is likely to be paid for a longer period of time since it covers two lives instead of one, and is therefore more valuable than a Straight Life Annuity. PBGC starts with a 10% reduction if you and your beneficiary are the same age and if you have 50% survivor coverage without a "pop-up" feature. Your benefits however may require different factors.
For example, if you and your spouse were both age 65 on July 31, 2009, the date your plan terminated, and you were receiving the Joint and 65% Survivor Pop-up Annuity, your Maximum Guaranteeable Benefit would be $3,813.30. Again, this amount will be higher if you were older than age 65 on July 31, 2009 and will be lower if you were younger than age 65 on July 31, 2009.
If you met the plan's eligibility requirements for a Total and Permanent Disability Retirement before the date of plan termination (or at DoPT), and the Social Security Administration has determined that you were permanently disabled before you retired, you may qualify for the Disability Maximum Guaranteeable Benefit. It is the same as the regular MGB except that it's not reduced if you're under age 65 at DOPT.
Most participants in the Delphi plan did not withdraw their employee contributions. However, if you did withdraw your contributions, your MGB will be reduced by the amount of the monthly benefit equivalent to the value of those contributions. In other words, your employee contributions count towards your MGB.