WASHINGTON — The Pension Benefit Guaranty Corporation announced today that the annual maximum guaranteed benefit for a 65-year-old retiree in a single-employer plan has increased to $60,136 for 2015, up from $59,318 for 2014.
The increase is not retroactive; payments to retirees whose plans terminated before 2015 will not change. The guarantee for multiemployer plans has not changed.
Single-Employer Plan Guarantee
The PBGC maximum guarantee for participants in single-employer plans is determined using a formula prescribed by federal law that calls for annual increases. The formula provides lower amounts for people who begin getting benefits from PBGC before age 65, reflecting the fact that they will receive more monthly pension checks over their expected lifetime. Conversely, amounts are higher for benefits starting at ages above 65. The formula also calls for reducing the amount for retirees who choose a payment form that continues benefits to a beneficiary after the retiree’s death.
The following table shows the maximum annual guarantee limits for 2015 for sample ages and payment forms. Amounts for other ages are posted on a table on PBGC's website.
Single Life Annuity
Joint & 50% Survivor Annuity*
|*Assumes both spouses are the same age. Different amounts apply if that is not the case|
The limits shown above generally apply for participants whose plan terminates in 2015. However, if a plan terminates in 2015 as a result of a bankruptcy that began in an earlier year, the limits in effect for that earlier year apply.
In most cases, the single-employer PBGC guarantee is larger than the pension earned by people in such plans. In fact, according to a 2006 study, almost 85% of retirees receiving PBGC benefits at that time received the full amount of their earned benefit.(For more information see the entry "Making Sense of the Maximum Insurance Benefit" in PBGC blog, Retirement Matters.)
The limits shown above represent the cap on what PBGC guarantees, not on what PBGC pays. In some cases, PBGC pays benefits above the guaranteed amount. Whether that happens depends on the retiree’s age and how much money was in the plan when it terminated.
For more information about how the single-employer guarantee works, see PBGC's fact sheet Pension Guarantees.
Multiemployer Plan Guarantee Limit
The PBGC maximum guarantee for participants in multiemployer plans is also based on a formula prescribed by federal law. Unlike the single-employer formula, the multiemployer guarantee is not indexed (i.e., it remains the same from year to year) and does not vary based on the retiree’s age or payment form. Unlike the single-employer formula, it varies based on the retiree’s length of service. In addition, the multiemployer guarantee structure has two tiers, providing 100% coverage up to a certain level and 75% coverage above that level. For a retiree with 30 years of service, the current annual limit is 100% of the first $3,960 and 75% of the next $11,760 for a total guarantee of $12,870. This limit has been in place since 2001.
PBGC protects the pension benefits of more than 40 million of America's workers and retirees in nearly 26,000 private-sector pension plans. The agency is directly responsible for paying the benefits of more than 1.5 million people in failed pension plans. PBGC receives no taxpayer dollars and never has. Its operations are financed by insurance premiums and with assets and recoveries from failed plans.