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.
Your employer manages the investment side of funding its pension plan(s), so the employer bears the risk of choosing investments and the risk that the market will decline. Pensions differ in that respect from employee-managed retirement plans (such as 401(k) plans) in which employees choose how much to save and how to invest. The term "pension" is not typically used to refer to such savings plans. The IRS provides additional information about the various types of retirement plans.
To be precise, PBGC also uses the terms "defined benefit pension" and "defined benefit plan" to refer to your pension. ("Defined benefit" refers to the specified, usually monthly payment that your pension promises. 401(k) plans are "defined contribution" plans. While the legal definition of "pension plan" includes both defined benefits and defined contributions, people most often compare defined contribution 401(k) plans to defined benefit pensions.)
PBGC works to ensure that pension plans are adequately funded and we back the pension plans of most private (non-governmental) employers: If your employer cannot continue to sponsor your pension plan, we step in and pay promised benefits, up to legal limits.
Companies that offer pension plans buy pension insurance from PBGC. Search for your PBGC-insured pension plan using our Single-Employer Pension Plan Search or Multiemployer Pension Plan Search.
If PBGC has stepped in and now provides you a pension, you can search for your PBGC-trusteed pension plan on our website. There are also more than 38,000 people owed pensions whom we have been unable to contact. Check out our Unclaimed Pension Search to see if you or someone you know is owed an unclaimed pension.
So, what is a pension? When people say "pension" they mean a defined benefit owed to a retiree. Though for many current and future retirees, a pension is the cornerstone that supports retirement security, financial well-being, and peace of mind.