Fewer PBGC Retirees Getting Full Earned Benefits
Eighty-four percent of the retirees who receive benefits from the federal pension insurance program receive the full benefit amount they earned under their retirement plans, according to the 2006 edition of the Pension Benefit Guaranty Corporation's Pension Insurance Data Book, which was released last week. In a 1999 study, the figure was 94 percent.
Federal law limits the benefit amount PBGC can guarantee when it takes responsibility for a failed pension plan. Of more than 525,000 PBGC participants studied this time, 16 percent had their retirement benefits reduced by an average of 28 percent. "The increased number of plan participants who experience benefit reductions was not unexpected, due to characteristics of the large airline and steel-company plans the agency has taken in since 2001," PBGC said in its Nov. 29 release of the new figure. "The PBGC's maximum insurance limitation caused the greatest reduction in benefits for affected participants. In addition, many airline and steel plans were affected by limits on supplemental payments and recent benefit increases."
For pension plans that end in 2008, the maximum benefit guarantee is $51,750 for a 65-year-old retiree. PBGC said it conducted the study to determine how statutory and regulatory limits affect plan participants. The sample population for the survey included 206,600 retirees, 171,600 separated vested workers, and 147,500 active vested workers. Beneficiaries of deceased workers were not included in the study.
The new edition of the Data Book also reports that about 14 percent of the single-employer defined benefit plans insured by PBGC were "hard-frozen" at the end of the 2005 plan year -- 50 percent more than the 9.5 percent that were hard-frozen at the end of the 2003 plan year. When a plan is hard-frozen, employees receive the benefits they've earned, but no new benefits are earned after the date the plan has been frozen. An employee who has spent 20 years at a company and intends to stay for another five years until retirement will not receive additional pension benefits for future work, for example, and new employees are not allowed to participate in the pension plan.