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Benefit eligibility

While minimum standards for pension and other retirement plans are set by law, plans have considerable flexibility to set their own rules. This means that rules can vary widely and differ in how generous their benefits are and how benefits are calculated. There are also varying criteria for determining whether someone is covered under a defined benefit pension plan, whether someone has earned a benefit, and how that benefit will be paid out.

PBGC also has its own rules governing the payment of benefits. When PBGC trustees a plan, it will follow that plan’s specific rules, as well as its own rules, when paying out benefits under that plan.

Below are some factors that may impact whether you are likely to be owed a benefit from your plan.

Participation. Were you eligible to be a participant in the plan? Some plans require the employee to be a salaried employee or a member of a union. Not all a plan sponsor’s employees earn benefits under its defined benefit plan.

Vesting. Were you vested in your benefit? Being vested means that, even if you leave your job, you are still entitled to receive a pension benefit once you reach the eligible age. You must have worked long enough before the plan’s termination date to be vested. For many plans, you needed at least 10 years of service if you left employment before January 1, 1984, and at least five years if you left employment after that date.

Lump Sum Payments. Are you still owed benefits? Some plans require participants with small benefit amounts to take their benefit as a lump sum if their benefit’s value is low. The set amount for these mandatory cash-outs is determined by law. In 1997, this amount was increased from $3,500 to $5,000, and it was again increased from $5,000 to $7,000 in 2024.

Plans may also allow lump sum payments of larger amounts. If you received a lump sum payment of your entire benefit, you have already received your pension benefit. No more benefits will be paid to you.

If it is likely you received a lump sum payment, PBGC will require copies of your tax returns as proof that you did not receive a lump sum payment. PBGC cannot assist you in obtaining tax records from the IRS.
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