PBGC Guarantee for Multiemployer Plan

[ts1644]

Hello everyone! Great, informative forum; glad I found you!

I'm helping my parents prep for retirement, and we're having trouble with planning when to start drawing the pension. In particular, we're not sure how to take into accound benefits should my father's multiemployer plan fail. Perhaps someone may be able to answer a few questions or point us in the right direction.

In a nutshell (with generic numbers):
Current pension: $2,000 at age 65 (currently age 61)
Current available pension: $1,300
PBGC guaranteed max: $1,300 (based on years of service & accrual calc)

The plan has serious funding issues, and we're pretty sure it's not going to last. Only 1 or 2 employers still paying in, there's no way they are going to continue to support the large (and growing) retiree base.

The question: If my father retires early and takes the $1,300, is that amount fully guaranteed if the plan fails?

There is far less info available for multiemployer plans. Our concern is that he takes the money now, the plan fails in a few years, and then the $1,300 is reduced by some early retirement percentage. I don't think that's the case, but I can't find anything that explicitely says what would happen under that scenario. If he takes the $$ now, it's basically a bet that the plan fails within the next 12 years (the breakeven calc using his actual #'s). But if the early retirement amount would be reduced after the plan fails that would change everything. I know that's not the case under single employer plans, but the calculations are very different under multiemployer plans and the answer isn't clear.

I'll continue to look & will follow up if I find a solid answer in case anyone else finds themself in this situation in the future. If anyone is interested, I'll also post what I can find on multiemployer plans. I would expect more interest as unions (and the multipayer plans) continue fail.

Thank you very much for your help.

 

[W2R]

Hi, and welcome to the Early Retirement Forum. I notice this is your first post.

On something as important as this, I would suggest that you may want to get information in writing directly from the PBGC.

The internet is great, but anonymous posters on message boards are not notably reliable.

 

[Martha]

There is a formula for how much is guaranteed. There also is a cap. The cap for 2009 if $54,000 a year. The formula is based on years of service. Multiemployer Insurance Program Fact Sheet (PBGC.gov) If the plan terminated after the year 2000 the PBGC insures 100% of the first $11 monthly payment per year of service and 75% of the next $33 monthly payment per year of service.

 

[ts1644]

Thanks for the feedback!

We'd found all that, and we definitely weren't planning on making life decisions based on message boards! We were just wondering if anyone had gone through the research on multiemployer plans.

Essentially they guarantee a max of $35.75 * years of service, including "most early retirement & survivor benefits." But we can't find anything that EXPLICITELY says that if you take early retirement and a 100% survivor option AND that number is below the PBGC max THEN there is no chance the pension could be reduced further.

I've spoken to PBGC (support and an analyst) and the fund administrator, and neither could provide a straight answer. The analysts at PBGC are really only helpful if the fund has already been taken over and they are helping you decide what you have available now. The best answer was the PBGC phone support who said "that's why they pay the insurance."

It may seem like an obvious answer, that if what you elect is fully within the covered items and it is below the PBGC max it should not get reduced, but we want to make absolutely sure before drawing. Unfortunately, the two best sources (PBGC & fund) were not as helpful as we'd hoped.

Thanks again, I'll update when we get a square answer.