Question

A company that has been providing generous defined benefit pension plans to all its retirees for the past 50 years is now facing bankruptcy and is unable to pay the pension amount. Which of the following statements is true of the given scenario?a. The PBGC will pay the retiree benefits from the solvency fund.
b. The company must decrease the amount of pension payments based on the available amount of money in the pension fund.
c. The employees will have to forfeit their pension benefits.
d. The company can suspend pension payments until the pension fund has been fully recovered.

Answer 1

The PBGC will pay the retiree benefits from the solvency fund is true of the given scenario.

Option a

Explanation:

PBGC was established to provide basic benefits such as pension pay-out to the participant of the private sector in case the employer-defined becomes insolvent. PBGC only cover defined benefit plans; that’s is it covers plans sponsored by employers which can be calculated with a formula.

The basic benefit includes pension during retirement, most early retirement benefits, disability payments and etc. Benefits differ and with retirement, there are fewer benefits for early retirement and more when one retires after the age of 65 years.