PBGC Announces Maximum Insurance Benefit for 2009
The Pension Benefit Guaranty Corporation (PBGC) announced that the maximum insurance benefit for participants in underfunded pension plans terminating in 2009 is $54,000 per year for those who retire at age 65, up from $51,750 for 2008. The amount is higher for those who retire later and lower for those who retire earlier or elect survivor benefits. If a pension plan terminates in 2009 but a participant does not begin collecting benefits until a future year, the 2009 maximum insurance limits still apply. The Pension Protection Act of 2006 provides that the maximum benefit payable is determined by the legal limits in force on the date of the plan sponsor's bankruptcy and not on the date of plan termination.
The maximum insurance benefit is set by law. Two additional legal limits on PBGC's insurance coverage can also affect participants' benefits. The first prohibits the PBGC from guaranteeing benefits that exceed the amount payable at the plan's normal retirement age. The second limits PBGC's guarantee of benefit increases made within the five years prior to plan termination, or the date the sponsor filed for bankruptcy, if the sponsor is in bankruptcy when the plan terminates.
Under the PBGC's single-employer insurance program, retirees sometimes can receive more than the maximum guaranteed benefit. In general, three conditions must apply:
1) the participant earned a benefit in excess of the maximum guaranteed amount;
2) the participant retired or was eligible to retire at least three years prior to plan termination; and
3) the plan had sufficient assets to pay benefits above the guaranteed amount.