Overview: The Pension Benefit Guaranty Corporation (PBGC), created by the Employee Retirement Income Security Act, was established to encourage the expansion and continuation of defined benefit pension plans, to provide timely and uninterrupted payment of pension benefits, and to keep pension insurance premiums to a minimum. The PBGC protects the retirement incomes of more than 44 million American workers.
The PBGC collects insurance premiums from employers that sponsor insured pension plans. If a plan covers 500 or more participants, the employer must file two premium-related documents annually. The first, the Estimated Premium Filing (Form 1-ES), provides the PBGC with the employer's estimate of its annual premium. This filing must be accompanied by the employer's estimated premium payment. The second is the Comprehensive Premium Filing, which must be accompanied by the remainder of the premium payment after the end of the year.
Plans that cover fewer than 500 employees are only required to file the comprehensive filing and payment.
If an employer-sponsored retirement plan does not have sufficient funds to pay the promised benefits, the PBGC guarantees payment of such benefits up to a maximum amount. The PBGC does not insure retirement plans that do not promise a determinable benefit upon retirement (e.g., defined contribution plans).
Author: Tracy Morley, SPHR, Legal Editor