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PBGC plan coverage

PBGC only insures defined benefit pension plans. A defined benefit pension plan pays participants a specified benefit, either in a lump sum payment or monthly amount based on some combination of the participant's years of credited service, salary, and age.

PBGC insures defined benefit pension plans under two different programs. The Single-Employer Program insures pension plans sponsored by a single employer, and the Multiemployer Program insures pension plans sponsored by more than one employer.

A multiemployer plan is a pension plan created through an agreement between two or more employers and a union. PBGC does not make direct payments to participants in multiemployer plans and does not have any information on those participants.

Under the rules established by Congress, PBGC can insure only defined benefit plans sponsored by private-sector employers. PBGC does not insure defined benefit pension plans that cover foreign, federal, state or local government employees. Also, PBGC generally does not insure plans offered by churches or other religious groups, such as pension plans covering employees of religious hospitals, universities, or other institutions and related employers.

Retirement plans that do not promise a specific benefit at retirement – such as 401(k) plans – are called defined contribution plans. Defined contribution plans allow employees and employers to contribute money into an individual account. That money is usually invested, and the size of the employee’s benefit is determined by how much money is in the employee’s account at the date of payment. There is no predetermined benefit amount, and defined contribution plans are not insured by PBGC. Common types of defined contribution plans are profit-sharing plans, 401(k) plans, 403(b) plans, employee stock ownership plans (ESOPs), thrift savings plans, and money purchase plans.

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