To read Christian Weller's report, Insuring Pensions: Making the System Work for the Retirees of Today and Tomorrow, in its entirety, click here.
Retirement income security has increasingly become more important, especially as our society is getting older, costs for retiree health care are rising, and the risks associated with private retirement savings are making daily headlines. There are corporate scandals that destroy the assets held in 401(k) plans, mutual fund scandals that cost small investors thousands of dollars in their hard earned money, and corporate bankruptcies that brought down large traditional defined benefit (DB) pension plans.
If there is a bright spot, it may be that most private sector DB plans are insured, meaning that most participants will receive all or most of their pension even after a plan sponsor's bankruptcy, as long as benefits are below $44,000 for workers retiring at 65. The government's Pension Benefit Guaranty Corporation (PBGC) acts as the insurance company for DB plans. It is funded by premiums from DB plans, it takes over pension plans of employers in financial distressand it pays out benefits from taken over plans. More…