Defined benefit retirement plans, better known as pensions, have been at risk for decades now. In fact, the Pension Benefit Guaranty Corporation (PBGC), a federal agency dedicated to protecting “the retirement incomes of over 33 million American workers in private sector defined benefit pension plans,” was created under the Employee Retirement Income Security Act of 1974.
One of the functions of the PBGC is to periodically increase the federal guarantee (insurance) limit for pension plans that fail. The annual changes are linked to increases in a Social Security index.
The guaranteed formula provides for different limits based on a covered person’s age when that individual begins getting benefits from the PBGC. For example, the limit is lower for people who begin getting benefits at a younger age, reflecting the fact that they’ll receive more monthly pension checks over their expected lifetimes. Conversely, the limit is higher for people who start receiving benefits later in life. In addition, the formula calls for adjustments for retirees who choose a payment form that continues payments to a beneficiary after the retiree’s death.
In October, the PBGC announced that the guaranteed limit for single-employer pension plans that are insured by the agency and fail in 2023 will be 8.79% higher than the limit that applied for 2022. A table showing the 2023 guarantee limits for various ages and payment forms — that is, straight-life annuities and joint and 50% survivor annuities — is posted on the PBGC’s website. (The guaranteed limit under a separate program for multiemployer plans isn’t indexed and, thus, remains unchanged.)
Earlier in 2022, the PBGC reminded participating employers that the login process for its My Plan Administration Account (PAA) online portal has been modified to meet new federal cybersecurity requirements for public-facing websites. Most notably, there’s now a requirement to implement two-factor authentication. My PAA users may now log in via Login.gov, a secure sign-in service used by the public to access participating government services — including the U.S. Transportation Security Administration’s PreCheck, Social Security and USAJobs. With this new process, users can use the same email address and password to access all participating government services.
Stapley Accounting can provide further information on the single-employer guarantee limit, as well as offer support in managing the financial challenges of a pension plan.