The PBGC is a federal agency that insures and protects defined-benefit pension plans, which are those that promise to pay participants a specific monthly benefit at retirement. Not all defined-benefit plans are insured. The PBGC estimates that about 1500 large companies are required to send the notices. Next year, about 4000 smaller companies, with plans covering 100 or fewer employees, will be required to send the notices. Getting a notice does not mean that the pension plan is broke or will go bankrupt.
Many companies are healthy enough to cover any shortfall in their plans.
Pension benefits at normal retirement age Most early retirement benefits Certain disability benefits and Certain benefits for survivors of plan participants. The maximum benefits that PBGC can pay are set by law each year. Under the proposal, companies could withdraw funds and use them for any purpose, so long as they left 25 percent more than needed to meet current liabilities. The money would be taxed at the normal corporate income tax rate until July 1996, when a 6.5 percent excise tax would be added. The law would replace a 1990 law that imposes a 50 percent excise tax on most withdrawals.