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Compliance November 6, 2013
PBGC Increases Maximum Benefit for 2014
The Pension Benefit Guaranty Corporation (PBGC) announced the yearly maximum guaranteed benefit for a 65-year-old retiree will increase next year to nearly $59,320 from about $57,500.
Reported by John Manganaro
The amount PBGC pays retirees is based on a formula prescribed by federal law. Yearly amounts are higher for people older than age 65, and lower for those who retire earlier or choose survivor benefits. Most retirees who get their pension from PBGC (more than 85%) receive the full amount of their promised benefit.
If a pension plan ends in 2014, but a retiree does not begin collecting benefits until a future year, the 2014 rates still apply. For plans that terminate as a result of bankruptcy, the maximum yearly rates are guided by the limits in effect on the day the bankruptcy started, not the day the plan ended.
The unrounded maximum yearly guarantee for a 65-year-old retiree is $59,318.16 in 2014. The increase is not retroactive.
The guarantee increase applies only to single-employer pension plans. The maximum guarantee limit for participants in multiemployer plans is $12,870 with 30 years of service, which has been in place since 2001.
The agency has a chart showing the 2014 annual and monthly maximum benefit guarantees for retirees from ages 45 to 75. The maximum amount is lower for retirees who begin getting benefits at ages below 65, reflecting the fact that younger retirees receive more monthly pension checks over a longer lifetime. The maximum amount is higher for benefits starting at ages above 65, because older retirees receive fewer monthly pension checks over their expected lifetimes.
The chart is here.