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Is My Pension Safe?

How Safe Is My Monthly Pension Benefit?


Pension plans provide a source of guaranteed income, although in this case the word "guaranteed" is used loosely; there have been plenty of cases where pension plans got themselves in a financial mess and were forced to reduce benefits being paid out to existing employees. So how do you know if your pension is safe?

Is Your Pension Safe?

The good news; there is a form of insurance in place - an organization called the Pension Benefit Guarantee Corporation (PBGC) - set up to protect your pension benefit. If your company participates in the PBGC, it is likely that at least a portion of your pension benefit is insured.

How Much Of Your Pension Is Safe?

The amount of monthly income that is insured by the PBGC has a cap. In 2013, for a pension recipient age 65, whose company was part of PBGC, and who is taking a joint life payout with 50% that would be paid to a survivor, the cap on the insured amount is $4,310 a month. For single life payout the cap at 65 is $4,789.77 If your pension benefit is greater than the cap, the excess amount is not insured.

Important: the insured amount (the cap) of pension benefits is reduced a bit for each year younger than 65 that you are, and increased by a factor for each year older than 65 that you are, with the maximum insured amount available for those age 75.

You can see the exact amount of monthly payment that is insured based on your age by visiting the PBGC Maximum Monthly Guaranteed Tables

Not All Pensions Are Insured

Private pension plans typically participate in PGBC, however pension plans offered by states and city governments do not. You can find out if your pension plan is insured by using the Is My Plan Insured - Single Employer or Is My Plan Insured - Multi-Employer feature of the PBGC website to type in your company or plan name.

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