WASHINGTON-The Pension Benefit Guaranty Corporation today announced it has begun to give financial assistance to two insolvent pension plans covered by its multiemployer insurance program. The PBGC now provides funding for the following pension plans:
- The Southern California, Arizona, Colorado, and Southern Nevada Glaziers Pension Plan, which covers 5,200 workers and retirees in the construction industry. The plan became insolvent in January 2010, and the agency has sent an initial payment of $639,113 to ensure that the plan's 1,500 retirees receive their guaranteed benefit. The plan will receive a cash distribution each month to fund benefit obligations. The agency estimates its total financial commitment to the plan will be $117 million.
- The United Food and Commercial Workers Local 1049 Pension Plan, which covers 400 food service industry workers in Cedar Knolls, N.J. The plan became insolvent in January 2010, and the agency has sent an initial $132,000 to ensure the plan's 240 retirees get their guaranteed benefit. The plan will receive a cash distribution each quarter to fund benefit obligations. The agency estimates its total financial commitment to the plan will be $5.2 million.
Multiemployer plans are pension plans sponsored by unrelated employers that usually share a common industry, and are funded according to the terms of collective bargaining agreements. Unlike PBGC's protection of plans sponsored by a single employer, the agency does not take over insured multiemployer plans, but instead sends financial assistance to insolvent plans. After a multiemployer plan notifies the agency that it has become insolvent, the PBGC begins to fund the plan to ensure guaranteed benefits are paid. The frequency of the payment schedule is based on the size of the plan. Generally smaller plans are paid on a quarterly basis, while larger plans receive monthly assistance.
Federal pension law, however, sets forth limits on retiree benefits in insolvent multiemployer plans. Individuals who retire after 30 years of service may be eligible for a guaranteed benefit of up to $12,870. Under the law, the guaranteed benefit limits are imposed by the plan administrator, not the PBGC, and are triggered when a plan becomes insolvent.
Currently the PBGC gives assistance to 40 insolvent multiemployer plans.
The PBGC multiemployer insurance program protects the benefits of about 10 million workers and retirees in almost 1,500 multiemployer defined benefit pension plans. At the end of fiscal year 2009, the program had assets of $1.5 billion to cover about $2.3 billion of financial assistance expected to be paid in the future. For more information, refer to PBGC’s Multiemployer Insurance Program Facts.
The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. Through its separate insurance programs for single-employer and multiemployer pension plans, the PBGC guarantees basic pension benefits earned by 44 million American workers and retirees participating in over 29,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.