PBGC guarantees your disability benefit for as long as you remain disabled if your pension plan provides a disability benefit and you were entitled to that disability benefit as of your retirement date. Your retirement date must have occurred before the date your plan terminated (or the date your employer's bankruptcy proceeding began, if applicable).
Disabled participants receiving non-disability benefits
If you did not elect a disability retirement but you met the requirements explained below, your benefit will be subject to the higher limits that apply to disability benefits as long as your disability continues. The key point isn't whether you retired on a disability benefit under your plan but whether
- Your plan provided disability benefits;
- You were entitled to a disability benefit as of your retirement date under your plan; and
- You have been awarded disability benefits from the Social Security Administration for that disability.
If you retired with a plan disability benefit that converts to a non-disability benefit at a specified age, such as normal retirement age, the higher limits continue to apply.
Higher Guarantee Limits
In two key ways, the guarantee limits for people who met their plan's requirements for a disability pension (whether they are receiving a disability pension or a non-disability pension) are higher, generally, than the guarantee limits that apply to retirement benefits for non-disabled participants. These higher limits continue to apply as long as you remain disabled.
1. No age reduction for maximum guaranteed benefit
Normally, the maximum guaranteed amount is reduced if benefit payments from PBGC start before age 65. However, the maximum guaranteed amount is not reduced for age for workers who begin receiving disability payments from PBGC before reaching age 65. This rule applies to you if:
- you met your plan's requirements for a total disability benefit before your plan's termination date or the date your employer's bankruptcy proceeding began, if applicable, and
- you have a Social Security disability award for that disability.
As noted earlier, if you meet these two requirements the higher guarantee limit will apply as long as your disability continues, even if you did not apply to your plan for a disability benefit or if your plan benefit converts to a non-disability benefit at a specified age. In addition, the maximum is increased if you begin receiving payments from PBGC after age 65. The maximum is reduced if your pension includes benefits for a surviving spouse or other beneficiary.
The maximum amount that PBGC guarantees is set each year — see Maximum monthly guarantee tables. The maximum benefit that PBGC can guarantee is fixed as of your plan's termination date except when termination occurs during a plan sponsor's bankruptcy and the sponsor entered bankruptcy on or after September 16, 2006. In such a case, the maximum guarantee is fixed as of the date the sponsor entered bankruptcy.
2. Guarantee of temporary supplements that are part of disability benefits
Some plans provide disabled retirees a temporary supplement as part of their disability benefit. A temporary supplement is an additional benefit, on top of the benefit the participant has accrued, that is payable for a fixed number of years, often from the first month of retirement until the date the retiree reaches a certain age or becomes eligible to receive a benefit from Social Security.
Generally, PBGC cannot guarantee an early retirement benefit that is greater than the monthly benefit your plan would have provided if you had retired at your normal retirement age. However, if you are receiving a temporary supplemental benefit as part of your plan's disability benefit, PBGC will guarantee your temporary supplement, subject to other legal limits, even if your total disability benefit is greater than the monthly benefit your plan would have provided if you had retired at your normal retirement age.
Guarantee limit on benefit improvements
If your plan was created, or was amended to add or increase disability benefits, within five years before its termination date (or the date your employer's bankruptcy proceeding began, if applicable), your benefit may not be fully guaranteed. PBGC guarantees the larger of 20% of the new benefit or $20 per month for each full year the new benefit was in effect. If you own 50% or more of the business, stricter limits apply.
Also see: What PBGC Guarantees