Corporate Pension Plan

Finance Allah shmoop What is the Pension Benefit Guaranty Corporation

Well the PBGC is a notionally independent agency of the

federal government Its goal is to protect the retirement incomes

of nearly forty million American workers in nearly twenty four

thousand private sector defined benefit engine plans And that mission

statement is right off their website The agency was set

up in nineteen seventy for is part of Arisa Employee

Retirement Income Security Act to protect defined benefit plans That

one were there Benefit is a huge deal because it's

non identical Twin sister is a defined contribution plan The

big diff well in a defined contribution pension plan employees

contribute some percentage of their income to their retirement pension

and the employer matches it and that's it The money

gets invested in the stock market and goes up and

down and up and down but over time mostly up

And then the employees retires Decades later owning whatever the

market or their investments that they risk say they young

period End of story But in a defined benefit plan

the employer essentially guarantees a minimum amount of invested return

That is the big boss Usually the federal government with

its union employees on taxpayer dollars then guarantees a raid

of say nine percent a year to the employee retiring

in the form of a minimum monthly draw from their

pension that the employees can take out If the market

goes through a really bad spell well then it's up

to the company to make up the difference to that

employees The people who framed a Risa knew of the

likely issue that the guaranteed investment return could end up

bankrupting states and or the country So PBGC was formed

and it helps a lot of people like one point

five million who ultimately rely on PBGC to bail out

their pensions And if you're one of those people while

you can expect to get something like sixty five thousand

dollars annually or about fifty three hundred bucks a month

assuming you retire at sixty five So if you retire

early well those cheques arriving in your mailbox won't be

quite so heavy Retire late in while the numbers go

up And maybe the best part is that the U

S taxpayer doesn't need to get all up in arms

Since the dough used to manage PBGC doesn't come from

John Q Taxpayer but rather from the private worlds employers

So in forty or fifty years PBGC may be your

best friend but until then well you're invisible Rabbit pal 00:02:30.543 --> [endTime] will be with you through thick and thin