Trouble for Detroit Pensioners?
With the recent bankruptcy petition filed by the city of Detroit, there have been concerns as to the potential impact on Detroit workers’ and retirees’ pensions. Many may ask, “Isn’t there some form of insurance to protect pension plans?” Those individuals are probably referring to the Pension Benefit Guaranty Corporation (PBGC), a U.S. Government Agency created by the Employee Retirement Income Security Act of 1974 (ERISA) to protect defined benefit pension plan benefits.
So what’s the concern if the PBGC was created for this very purpose? By law the agency doesn’t insure state, county or city plans; only private-sector plans are covered by the PBGC. Nevertheless, Detroit city workers have other legal avenues to challenge pension reductions.
Private-sector employees and retirees with defined benefit pension plans can find whether a particular plan is covered by the PBGC and the maximum guaranteed (insured) benefit here: www.pbgc.gov.
Interesting detail – the PBGC paid monthly benefits to nearly 887,000 retirees in 2012.
Payne Wealth Partners planning team is dedicated to helping families navigate these types of challenges in relation to their personal goals.
Authored by: Terry Prather, CFP®, ChFC® (Bio)
Direct Phone: 812-602-6307