The Pension Protection Act Blog

Mike Spector wrote a short article in the Wall Street Journal today about What Happens to Your Benefits After Bankrupcy. The article discusses the general differences between 401(k), defined benefit and cafeteria plans when the plan sponsor files for bankruptcy, providing this example:

“Here’s what to consider if your company is facing the possibility of bankruptcy:

Retirement plans. The Pension Benefit Guaranty Corp. — a federal agency created under the Employment Retirement Income Security Act, or Erisa — guarantees your pension payments, but only up to a maximum amount, which means you might have to take a cut. For pension plans canceled in 2008, the maximum monthly guaranteed payment for a 65-year-old retiree receiving regular payments with no survivor benefits is $4,312.50. The PBGC doesn’t insure assets in 401(k) plans. But Erisa requires pension and 401(k) accounts to be adequately funded and kept separate from the company’s business assets.”

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