This section describes each of the benefit forms that PBGC offers, with examples using a participant named Sam who is applying for a benefit. Sam will be age 65 when his benefit payments begin. He is married to Carol, who will be 61 years old when Sam’s benefit payments begin. We show what Sam and Carol would receive under each benefit form, assuming Sam names Carol as his beneficiary.
Straight-life annuity
A straight-life annuity provides a fixed monthly benefit for the rest of your life only. No survivor benefit will be paid upon your death, but you should name a beneficiary for anything that is owed at the time you die, ex. uncashed checks.
Example: Sam elects a straight-life annuity, and he receives $500 a month for the rest of his life. After Sam dies, Carol does not receive any benefits.
Joint-and-survivor annuities
A joint-and-survivor annuity provides a benefit for the rest of your life at an amount reduced from the straight-life annuity amount, with your choice of 50%, 75%, or 100% of that reduced amount to be paid to your beneficiary if you die before that person. If your beneficiary dies before you, your benefit will remain at the reduced level, and no survivor benefits will be payable when you die.
You may name your spouse or someone else as your beneficiary. You cannot change your beneficiary after PBGC makes your first payment. The amount of your benefit will depend on the age of your beneficiary and the survivor percentage you choose.
Examples:
- Joint-and-50% survivor annuity: Sam receives $450 a month for the rest of his life. If Sam dies first, Carol receives $225 a month for the rest of her life. If Carol dies first, Sam continues to receive $450 a month for the rest of his life.
- Joint-and-75% survivor annuity: Sam receives $429 a month for the rest of his life. If Sam dies first, Carol receives $322 a month for the rest of her life. If Carol dies first, Sam continues to receive $429 a month for the rest of his life.
- Joint-and-100% survivor annuity: Sam receives $409 a month for the rest of his life. If Sam dies first, Carol receives $409 a month for the rest of her life. If Carol dies first, Sam continues to receive $409 a month for the rest of his life.
Joint-and-50% survivor “pop-up” annuity
The “pop-up” annuity is the same as the joint-and-50% survivor annuity (described above) except that if your beneficiary dies before you, your benefit “pops up” to the straight-life annuity amount. Like the other joint-and-survivor benefit forms, you may choose your spouse or someone else to be your beneficiary. The amount of your benefit will depend on the age of your beneficiary. You cannot change your beneficiary after PBGC makes your first payment.
Example: Sam elects a joint-and-50% survivor “pop-up” annuity and receives a payment of $444 a month. If Sam dies first, Carol receives $222 a month for the rest of her life. However, if Carol dies first, Sam’s benefit “pops up” to his straight-life annuity benefit amount of $500 a month for the rest of his life.
Certain-and-continuous annuities
A certain-and-continuous annuity provides a benefit for the rest of your life at an amount reduced from the straight-life annuity amount. If you die within 5, 10 or 15 years after the date your benefits are first payable (the Annuity Starting Date (ASD) you choose on your benefit application in item 1), your designated beneficiary will receive the benefit for the remainder of that “certain” period. If you die after the certain period, no survivor benefit is payable. You may choose any beneficiary for your certain-and-continuous annuity, such as your spouse, another person, an estate, a trust, a church or other organization, etc. You can change this beneficiary designation at any time subject to spousal consent if you are married. If your beneficiary dies before you and before the end of the certain period, you should designate a new beneficiary. The amount of your benefit is the same regardless of whom you designate as beneficiary.
Examples:
- 5-year certain-and-continuous annuity: Sam receives $494 a month for the rest of his life. If Sam dies within five years of his ASD, Carol receives $494 a month for the remainder of the five-year period. If Sam dies after the 5 year period, Carol does not receive any benefits.
- 10-year certain-and-continuous annuity: Sam receives $477 for the rest of his life. If Sam dies within ten years of his ASD, Carol receives $477 a month for the remainder of the ten-year period. If Sam dies after the 10 year period, Carol does not receive any benefits.
- 15-year certain-and-continuous annuity: Sam receives $452 a month for the rest of his life. If Sam dies within 15 years of his ASD, Carol receives $452 a month for the remainder of the 15-year period. If Sam dies after the 15 year period, Carol does not receive any benefits.
Summary of examples
These examples assume that Sam (participant) will be age 65 and Carol will be age 61 when benefit payments start. These examples assume that in Sam’s plan the automatic form of benefit is a straight-life annuity for an unmarried participant and a joint-and-50% survivor annuity for a married participant. Automatic forms vary from plan to plan but a straight-life annuity and a joint-and-50% survivor annuity are common.
| Benefit form | Sam’s benefit | Carol’s survivor benefit | Additional explanation |
|---|---|---|---|
| A. Plan’s Automatic Benefit Form for unmarried participants (Straight life annuity) | $500 | None | Carol will not receive any benefits after Sam’s death. |
| B. Plan’s Automatic Benefit Form for married participants (Joint- and-50% survivor annuity) | $450 | $225 |
If Sam dies first, Carol’s survivor benefit will be paid for the rest of her life. If Carol dies first, Sam’s benefit continues at the same amount for the rest of his life. |
| C. Straight life annuity | $500 | None | Carol will not receive any benefits after Sam’s death. |
| D. Joint-and-50% survivor annuity | $450 | $225 |
If Sam dies first, Carol’s survivor benefit will be paid for the rest of her life. If Carol dies first, Sam’s benefit continues at the same amount for the rest of his life. |
| E. Joint-and-75% survivor annuity | $429 | $322 | |
| F. Joint-and-100% survivor annuity | $409 | $409 | |
| G. Joint-and-50% survivor “pop-up” annuity | $444 | $222 |
If Sam dies first, Carol’s survivor benefit will be paid for the rest of her life. If Carol dies first, Sam’s benefit will increase to $500 for the rest of his life. |
| H. 5-year certain-and-continuous annuity | $494 | $494 |
If Sam dies before the end of the 5-year, 10-year, or 15-year certain period (whichever he chooses), Carol will receive benefits for the remainder of that period. The certain period starts on the ASD chosen. If Sam dies after the end of the certain period, Carol will not receive any benefits. |
| I. 10-year certain-and-continuous annuity | $477 | $477 | |
| J. 15-year certain-and-continuous annuity | $452 | $452 |