Introduction
Pension Benefit Guaranty Corporation is a nonbusiness organization that oversees the continuous compensation of social security welfares for "defined-benefit plans" in the private sector. Defined-benefit are those sponsored by the employer and which are formulated using a methodology that considers elements like the income history and employment period (Kagan, 2019). The corporation provides two plans of participation: single and multiemployer plans. In a multiemployer plan, multiple employers are required to make contributions. The plan is maintained under a joint bargaining agreement between employers. On the other hand, a single-employer plan is managed by a single employer through a unilateral agreement. This paper provides a detailed discussion of how the PBGC's performs in meeting retirement plans for employees.
PBGC Involvement in the Administration of a Retirement Plan
PBGC only covers a plan when it has been trusteed over by a company that has either terminated its retirement benefits plans or has become bankrupt hence cannot continue operating if it keeps its pension liabilities. The corporation comes to play in a situation where companies offering retirement benefits are unable to provide these benefits and guarantees pension incomes for employees (Amadeo, 2019). The corporation provides protection to the retirement wages of U.S. employees in the private sector. Additionally, the corporation has an advisory committee responsible for developing procedures and policies for pension trustee as well as advocating education related to relinking workers to their pension benefits.
The role the PBGC in the Administration of Private Employer Retirement Plans
The corporation oversees investment risk and portfolio management of the pension plan. Other than overseeing the payment of defined-benefits, the corporation is also responsible for providing on-time and continual compensation of retirement benefits and maintaining retirement coverage premiums at lowest (Smith, 2019). Money distributed by the corporation are not from general tax incomes but are instead from the insurance premiums paid by employers, accrued interests on these premiums and assets of retirement plans taken over by the corporation.
Some of the primary benefits provided by the Pension Benefit Guaranty Corporation include pension for employees attaining the retirement age and early retirement benefits. The corporation also offers annuities for those people who survived plan participants as well as disability benefits. However, these benefits are dependent on employees' particular plan, age, legal limits and plan assets. Generally, the corporation provides security to workers to shift from one company to another without fearing to lose retirement income benefits.
PBGC's Laws on Employers
The Pension Benefit Guaranty Corporation requires employers to provide employees' information and their plan benefits annually. Such information is meant to ensure that employees do not earn extra benefits once PBGC becomes the trustee (Amadeo, 2019). PBGC also requires employers to provide financial commitments or make substantial contributions to a defined-benefit plan when they cease operations in their facilities.
Conclusion
Pension Benefit Guaranty Corporation comes into action to facilitate pension plan administration in a situation where a plan sponsor initiates a distressed termination. It also steps in a case where the corporation identifies that a pension plan is not able to achieve its onuses and hence orders a takeover. According to Smith (2019), "Distress terminations generally occur in conjunction with bankruptcy, but in most cases, a PBGC-mandated takeover is a method by which the entity becomes responsible for a plan." In taking over, employers need to provide full information concerning the pension plans of their employees.
References
Amadeo, K. (2019, March 18). Pension Benefit Guaranty Corporation: Will Your Pension Be There When You Retire? Retrieved from https://www.thebalance.com/pension-benefit-guaranty-corporation-3305994
Kagan, J. (2019, November 21). Pension Benefit Guaranty Corporation (PBGC). Retrieved from https://www.investopedia.com/terms/p/pbgc.asp
Smith, L. (2019, November 24). An Overview of the Pension Benefit Guaranty Corporation (PBGC). Retrieved from https://www.investopedia.com/articles/retirement/06/pbgc.asp
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Essay Sample on Pension Security: PBGC Ensures Safety of Defined-Benefit Plans. (2023, Mar 27). Retrieved from https://proessays.net/essays/essay-sample-on-pension-security-pbgc-ensures-safety-of-defined-benefit-plans
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