How Much of My Pension Is Guaranteed by the PBGC?

The Pension Benefit Guaranty Corporation (PBGC) is a federal agency established by the Employee Retirement Income Security Act of 1974 (ERISA) to protect workers in private-sector defined benefit pension plans. When a company’s pension plan cannot meet its obligations, the PBGC ensures timely and uninterrupted benefit payments up to a legal maximum. This protection has specific limits and does not cover the full amount of every promised pension. The agency is an insurance program funded by premiums from plan sponsors, investment income, and assets recovered from failed plans, not by general tax revenues.

Determining if Your Pension is Insured

PBGC protection applies to private-sector defined benefit plans, which are traditional pensions that promise a specified monthly benefit at retirement based on factors like salary and years of service. Coverage is automatic for qualifying plans.

The PBGC does not insure defined contribution plans, where the benefit is based on contributions and investment performance. This category includes:

• 401(k)s and 403(b)s
• Employee Stock Ownership Plans (ESOPs)
• Profit-sharing plans

Certain defined benefit plans are also excluded from PBGC coverage, including:

• Government pension plans, including those for federal, state, and local government employees
• Church plans
• Plans for professional service employers (like doctors or lawyers) with 25 or fewer active participants
• Plans established by fraternal benefit societies

For coverage purposes, the PBGC distinguishes between two types of plans: single-employer and multiemployer plans. A single-employer plan is sponsored by one employer or a group of related companies. A multiemployer plan is a collectively bargained plan maintained by more than one unrelated employer, typically within the same industry, and a union. The guarantee rules and limits are different for each.

Maximum Guarantee for Single-Employer Plans

For single-employer plans, the PBGC guarantees a maximum monthly benefit set by law and updated annually. For 2025, the maximum annual guarantee for a 65-year-old retiree receiving a straight-life annuity is $89,182. This translates to a maximum monthly benefit of $7,431.82, but your actual guaranteed benefit could be lower based on several factors.

Your retirement age is a primary factor that adjusts the maximum guarantee. If you retire early and begin payments before age 65, the guaranteed amount is reduced. For example, at age 60, the maximum is reduced to $4,830.69 per month, and at age 55, it is further reduced to $3,344.32. This reduction accounts for the longer period over which benefits will be paid.

Conversely, if you delay retirement and begin receiving payments after age 65, the maximum guaranteed amount increases. For an individual starting benefits at age 70, the maximum monthly guarantee rises to $13,005.69. This increase reflects the shorter life expectancy over which payments will be made.

The form of benefit you elect also impacts the guaranteed amount. The maximum guarantee is calculated based on a straight-life annuity, which provides payments for the life of the retiree only. If you choose a payment option that provides for a survivor, such as a joint-and-50%-survivor annuity, the PBGC guarantee will be lower because benefits are expected to be paid over two lives.

Limitations on the Guarantee

Even if your pension is below the maximum cap, other limitations can reduce the guaranteed amount. The “phase-in” rule applies to benefit increases from plan amendments made within five years of the plan’s termination. The PBGC does not fully guarantee recent benefit improvements to prevent underfunded plans from promising larger pensions they cannot afford.

The guarantee for a recent benefit increase is phased in over a five-year period. For each full year the benefit increase has been in effect, the greater of 20% of the increase or $20 per month is guaranteed. For example, if a plan amendment increased your monthly pension by $200 three full years before the plan terminated, the guaranteed portion of that increase would be $120 per month (60% of $200).

Another limitation involves certain types of supplemental benefits. Some pension plans offer temporary supplements, such as extra payments for individuals who retire before they are eligible for Social Security benefits. These benefits are not guaranteed by the PBGC.

Finally, the PBGC guarantee is limited to the benefit amount that was accrued under the terms of the pension plan. The agency only guarantees benefits that were properly earned and vested according to the plan’s documents.

Guarantee Rules for Multiemployer Plans

The guarantee for multiemployer plans uses a different calculation method. The amount is based on a formula that incorporates a participant’s years of service and the plan’s benefit accrual rate.

The PBGC guarantees 100% of the first $11 of the monthly benefit rate, plus 75% of the next $33 of the monthly benefit rate. This amount is then multiplied by the participant’s years of service. The benefit rate is the amount of monthly pension a participant earns for each year of service.

To illustrate, consider a participant with 30 years of service in a multiemployer plan that has a monthly benefit accrual rate of $50 per year of service. The PBGC guarantees 100% of the first $11 (which is $11) and 75% of the next $33 ($33 0.75 = $24.75). The total guaranteed monthly accrual rate is $35.75 ($11 + $24.75).

This guaranteed accrual rate is then multiplied by the participant’s years of service. In this example, the participant’s total monthly guaranteed benefit would be $1,072.50 ($35.75 multiplied by 30 years). This calculation determines the maximum amount the PBGC will pay, regardless of the participant’s age at retirement.