The Pension Benefit Guaranty Corporation (PBGC) said Oct. 28 that the 2016 annual maximum guaranteed benefit for a retiree at age 65, as well as that for multiemployer plans, will remain at the same levels as those set for 2015.
The 2016 annual maximum guaranteed benefit for a retiree at age 65 will stay at $60,136. The multiemployer guarantee structure has two tiers, providing 100% coverage up to a certain level, and 75% coverage above that level. For a retiree with 30 years of service, the current annual limit is 100% of the first $3,960 and 75% of the next $11,760 for a total guarantee of $12,870. This limit has been in place since 2001.
The PBGC maximum guarantee for people covered by single-employer plans is linked to a cost-of-living adjustment (COLA) for Social Security. There was no COLA for 2016, the Social Security Administration announced on Oct. 15; accordingly, there will be no increase in the guarantee for people covered by single-employer plans.
The published maximum insurance benefit represents the cap on what PBGC guarantees, not on what PBGC pays. In some cases, PBGC pays benefits above the guaranteed amount. This depends on the retiree's age and how much money was in the plan when it terminated.
The single-employer guarantee formula provides lower amounts for people who begin getting benefits from PBGC before age 65, reflecting the fact that they will receive more monthly pension checks over their expected lifetime. Amounts are higher for benefits starting at ages above 65.
The PBGC maximum guarantee for participants in multiemployer plans also is based on a formula prescribed by federal law. Unlike the single-employer formula, the multiemployer guarantee is not indexed and does not vary based on the retiree's age or payment form — instead, it varies based on the retiree's length of service.
The 2016 annual maximum guaranteed benefit for a retiree at age 65 will stay at $60,136. The multiemployer guarantee structure has two tiers, providing 100% coverage up to a certain level, and 75% coverage above that level. For a retiree with 30 years of service, the current annual limit is 100% of the first $3,960 and 75% of the next $11,760 for a total guarantee of $12,870. This limit has been in place since 2001.
The PBGC maximum guarantee for people covered by single-employer plans is linked to a cost-of-living adjustment (COLA) for Social Security. There was no COLA for 2016, the Social Security Administration announced on Oct. 15; accordingly, there will be no increase in the guarantee for people covered by single-employer plans.
The published maximum insurance benefit represents the cap on what PBGC guarantees, not on what PBGC pays. In some cases, PBGC pays benefits above the guaranteed amount. This depends on the retiree's age and how much money was in the plan when it terminated.
The single-employer guarantee formula provides lower amounts for people who begin getting benefits from PBGC before age 65, reflecting the fact that they will receive more monthly pension checks over their expected lifetime. Amounts are higher for benefits starting at ages above 65.
The PBGC maximum guarantee for participants in multiemployer plans also is based on a formula prescribed by federal law. Unlike the single-employer formula, the multiemployer guarantee is not indexed and does not vary based on the retiree's age or payment form — instead, it varies based on the retiree's length of service.
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