PBGCThe Pension Benefit Guaranty Corporation (PBGC) is a federal agency created by the Employee Retirement Income Security Act of 1984 (ERISA) to protect pension benefits in private-sector defined benefit plans.

If a plan is terminated without sufficient money to pay all benefits, PBGC’s insurance program will pay the benefits to participants up to certain limits set by law.  The PBGC’s financing comes from insurance premiums paid by companies whose plans are covered and from assets of pension plans taken over by the PBGC, but not from taxes.

Not all defined benefit plans are covered by the PBGC.  Plans sponsored by “professional service” employers with fewer than 26 active participants, or those covering only owners are exempt from PBGC coverage.

As of 2014, the PBGC protects the pensions of more than 41 million workers and retirees in nearly 24,000 private defined benefit plans.

If a defined benefit plan is covered by the PBGC, annual premiums are required.  For 2021, those premiums include a flat-rate premium of $86.00 per participant for single-employer plans plus a Variable Rate Premium (VRP) based on the funded status of the plan.  For 2021, the VRP is $46.00 per $1,000 of unfunded vested benefits.

Reflecting a recent change in reporting requirements, the due date for the premium filing is the 15th day of the tenth month in the plan year (i.e., for a calendar year plan the premium is due 10/15).

Participants in PBGC-covered plans receive an Annual Funding Notice (AFN) that contains more detailed information regarding the funded status of the plan.  For large plans, the AFN is due 120 days after the end of the plan year. For all other plans, the AFN is due by the date the Form 5500 is filed.

Finally, the PBGC is interested in healthy, well-funded retirement plans; therefore, deduction limits are somewhat relaxed for sponsors of PBGC covered plans.

Pinnacle Plan Design is a third-party administrator (TPA) for employer-sponsored qualified retirement plans. We specialize in retirement plan design, administration and actuarial consulting for 401(k)/profit-sharing plans, defined benefit plans, cash balance plans, and 403(b) plans. Pinnacle Plan Design proudly serves businesses nationwide.
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