The Pension Benefit Guaranty Corporation (PBGC) is a government corporation established by the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406). It was created to protect the pensions of participants and their beneficiaries covered by private sector defined benefit (DB) plans. These pension plans provide a specified monthly benefit at retirement, usually either a percentage of salary or a flat dollar amount multiplied by years of service. Defined contribution (DC) plans, such as 401(k) plans, are not insured. PBGC is chaired by the Secretary of Labor, with the Secretaries of the Treasury and Commerce serving as board members. PBGC runs two distinct insurance programs: one for single-employer pensions and a second for multiemployer plans. Single-employer pension plans are sponsored by one employer and cover eligible workers employed by the plan sponsor. Multiemployer plans are collectively bargained plans to which more than one company makes contributions. PBGC maintains separate reserve funds for each program. A firm must be in financial distress to end an underfunded single-employer plan and for PBGC to become the trustee of the plan. PBGC does not become trustee of multiemployer plans. An insolvent multiemployer plan is one that does not have sufficient resources from which to pay promised benefits. PBGC provides financial assistance to insolvent multiemployer plans in the form of loans, although PBGC does not expect the loans to be repaid. In FY2025, PBGC insured about 23,500 DB pension plans covering approximately 30.0 million people: the single-employer program covered 18.4 million workers in about 22,200 plans, and the multiemployer program covered 11.1 million workers in 1,305 plans. PBGC became the trustee of 31 newly terminated single-employer pension plans and began providing financial assistance to an additional six multiemployer pension plans in FY2025. PBGC paid $6.4 billion in benefits to participants in the single-employer program in FY2025. At the end of FY2025, 908,651 participants were receiving monthly benefits in the single-employer program, and 5,171 single-employer pension plans were trusteed or pending trusteeship. In the multiemployer program, 60,952 participants in 100 plans received $169 million in traditional financial assistance in FY2025. There is a statutory maximum benefit that PBGC can pay. Participants receive the lower of their benefit as calculated under the plan or the statutory maximum benefit. If a participant’s benefit is higher than the statutory maximum benefit, the participant’s benefit is reduced. The maximum pension guarantee is $93,477 a year for workers aged 65 in single-employer plans that terminate in 2026. This amount is adjusted annually for changes in the national average wage. In addition, the benefit is decreased if participants begin receiving the benefit before age 65 (reflecting the fact that they will receive more monthly pension checks over their expected lifetime) or if the pension plan provides benefits in some form other than equal monthly payments for the life of the retiree. Multiemployer plans determine benefits by multiplying a flat dollar rate by years of service, so the benefit guarantee ceiling is tied to this formula. The benefit guarantee limit for participants in multiemployer plans equals a participant’s years of service multiplied by the sum of (1) 100% of the first $11 of the monthly benefit rate and (2) 75% of the next $33 of the benefit rate. For a participant with 30 years of service, the guaranteed limit is $12,870. This benefit formula is not adjusted for increases in the national wage index or by any other measure of inflation or cost of living. Currently, most workers in single-employer plans taken over by PBGC and multiemployer plans that receive financial assistance from PBGC receive the full pension benefit that they earned. At the end of FY2025, PBGC had a total surplus of $64.9 billion, which consisted of a $62.2 billion surplus from the single-employer program and a $2.6 billion surplus from the multiemployer program. PBGC’s single-employer and multiemployer programs are funded by premiums set by Congress and paid by the private sector employers that sponsor DB pension plans. Other sources of income for the single-employer program are assets from terminated plans taken over by PBGC, investment income, and recoveries collected from companies when they end underfunded pension plans. Another source of income for the multiemployer program is investment income on its revolving fund assets. The American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) authorized the Special Financial Assistance (SFA) program, which provides financial assistance to eligible financially troubled multiemployer DB plans and represents a new source of financing outside of PBGC’s revolving fund. SFA is administered by PBGC and financed by appropriations from Congress. Due to SFA, PBGC estimated that its multiemployer program is likely to remain solvent for roughly the next 40 years.
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