By Jeannine Aversa, Associated Press
Rocky Mountain News
Wednesday, December 6, 2006
WASHINGTON - The federal agency that insures private pension
plans for millions of Americans announced Tuesday that the
maximum annual benefit for plans taken over next year will
be $49,500 for workers who wait until 65 to retire. The
figure represents a 3.9 percent increase from $47,659, which
is this year's maximum annual benefit for those who wait
until 65 to retire.
Workers who retire before they are 65 get smaller benefits,
while those who work longer get larger benefits, said the
Pension Benefit Guaranty Corp.
Each year, the benefit figure is arrived at based on a
formula set in law that takes into account such factors as
growth in the benefit base.
The maximum annual pension of $49,500 next year for someone
retiring at 65 translates into a maximum monthly payment of
$4,125, the agency said.
The PBGC insures pensions for 44 million workers and
It was created in 1974 as a government insurance program for
traditional, defined benefit pension plans. Those plans
give retirees a fixed monthly amount based on salary and
years of employment. Companies that sponsor these
traditional pension plans pay insurance premiums to the
agency. If a company cannot support its pension
obligations, the agency takes over the plan and pays
promised benefits up to certain limits.
More than 90 percent of the participants in pension plans
taken over by the PBGC face no reduction in benefits due to
the legal limits set on coverage, according to analysis done
by the agency.
The PBGC logged a deficit of $18.1 billion this year, an
improvement from last year, thanks to a new pension law
designed to help shore up the nation's troubled pension
system. Supporters hope the changes will help prevent a
multibillion-dollar taxpayer bailout of the agency.
In recent years, an explosion of ailing companies have
jettisoned their pension liabilities to the PBGC. The
problem has been especially pronounced in industries such as
steel and the airlines, which are heavily unionized.