PBGC uses plan assets and PBGC assets as necessary to make sure current and future retirees receive their pension benefit up to legal limits. PBGC pays benefits according to your plan’s provisions, ERISA, and PBGC regulations and policies.
Your pension plan included a cash balance benefit.A cash balance pension formula looks like an “account balance” in your name; however, it is really just a way for your employer, and now PBGC, to describe your pension.
Before your plan “was frozen”, your account received two types of increases:
- a pay-related credit, and
- an interest credit.
The pay-related credit was a percentage of your pay.
The interest credit is added to your account at the end of each month. Your plan specifies the 4.3% interest for this credit.
Since the plan is no longer sponsored by your employer, there are no pay-related credits after July 1, 2003 the date your plan froze accruals, but we will continue to add interest credits to your account until you begin receiving benefits.
An Annuity Conversion Factor is a number that is used to convert your Account Balance to a monthly benefit. This number, based on interest and
mortality rates, your age and form of benefit, is divided into your Account Balance. The result is your Cash Balance Monthly Benefit.
The benefit earned prior to January 1, 2001 is the benefit you have earned up to the date that your plan changed to a cash balance formula.
No. When your employer changed your pension plan to a cash balance formula, your Account Balance started at zero. You will get the benefit you earned under the old plan formula up to December 31, 2000 plus the benefit you earned under the cash balance formula after that date. Your plan sponsor changed your pension formula to a cash balance formula on January 1, 2001.
Yes. The rates used to determine your Account Balance (see Q&A 1) and “Annuity Conversion Factor” (see Q&A2) are fixed. Because these rates will not change over time, PBGC can determine precisely your Account Balance and Annuity Conversion Factor as of when you decide to start receiving your monthly retirement benefit.
PBGC will pay you the benefit provided by your pension plan up to the limits set by law. There are several legal limits that PBGC must apply. Your plan provides a lump sum death benefit that PBGC does not guarantee. Please see your benefit statement for details.