PBGC Releases 2005 Maximum Insurance Benefits

December 6, 2004 (PLANSPONSOR.com) - The Pension Benefit Guaranty Corporation (PBGC), the agency that insures private defined benefit (DB) pension plans, has announced that the maximum insurance benefit for participants in underfunded pension plans terminated in the upcoming year is $45,614 per year for those who retire at 65.

>That’s up from $44,386 in 2004. The number will be higher for those who retire later and lower for those who retire earlier, the PBGC said in a news release. For a complete list of actual benefit maximums, see the PBGC  news release .

>Two other legal limits on PBGCs insurance coverage can also affect participants’ benefits, the agency said. One is the law that prohibits the agency from guaranteeing benefits that exceed that amount payable at the plan’s normal retirement age, while the other one is a law that limits the agency’s guarantee of any benefit increases made in the five years preceding a plan’s termination. For more information on these legal limits, please see  http://www.pbgc.gov/publications/factshts/GUARFACT.HTM .

>Participants can, in some circumstances, receive more that the maximum guaranteed benefit, according to the press release. When three conditions are met – (1) A participant earned a benefit in excess of the maximum guaranteed amount; (2) a participant retired or was eligible to retire three years prior to a plan’s termination, and; (3) a plan had sufficient assets to pay benefits above the guaranteed amount – participants may be able to collect these excess benefits.

>If a pension plan terminates in 2005 but benefits are not collected until a later date, the 2005 limits still apply, the agency reported.