What Is the Pension Benefit Guaranty Corporation:

The Pension Benefit Guaranty Corporation (PBGC) is a government entity that provides a pension if your employer can no longer do so. That can happen if your company goes bankrupt, it doesn't provide enough funds for the pension, or the pension fund itself is mismanaged.

The PBGC is financed via insurance payments made by the companies whose pensions it guarantees.

It was mandated by ERISA (Employee Retirement Income Security Act).

What the Pension Benefit Guaranty Corporation Does

PBGC is mandated to guarantee the pension incomes for 44.1 million workers in over 30,000 pension plans. If the companies that have offered these plans can no longer afford to provide them, PBGC steps in.

However, PBGC currently only provides benefits for 683,000 retirees, at a cap of $47,659 per worker. It is doubtful it could afford to pay for two or three times as many retirees, much less the 44 million retirees it guarantees.

How the PBGC Affects the U.S. Economy

Many experts believe that an unknown number of companies will not be financially capable of funding their pension plans. If too many companies apply for protection from PBGC, it too will not be able to pay the pensions. This will leave millions of retired workers without an income, dependent on Social Security and possibly forced to continue working...if they can.

In August 2006, President Bush signed the Pension Protection Act of 2006, which requires companies to more fully fund their plans.

Are You Protected by PBGC?

Find out if you have a pension plan, also known as a defined benefit plan. Most new workers today don't have one, because their companies now offer 401(k)s instead. 

If you are lucky enough to have a pension, ask your plan administrator for a copy of the Summary Plan Description to see if it is covered by PBGC. Also ask if the pension is at least 80% funded.

Most of all, develop a retirement plan that does not include your pension...just in case it's no longer there when you need it