Pension Benefit Guaranty Corporation PBGC

When the Studebaker automobile company closed its South Bend, Indiana, plant in 1963, thousands of workers lost most of the pensions they had been promised, a case that helped build pressure for reform. The Employee Retirement Income Security Act, known as ERISA and signed on September 2, 1974, set federal standards for private pensions and created the Pension Benefit Guaranty Corporation to insure them. The PBGC is a wholly owned government corporation within the Labor Department, governed by a board made up of the Secretaries of Labor, the Treasury, and Commerce, and led by a Director confirmed by the Senate.

The PBGC insures traditional defined-benefit pensions, which promise a set monthly payment in retirement, but not 401(k)-style accounts. Its single-employer program takes over plans when a company cannot pay, as it did with Bethlehem Steel in 2003 and United Airlines in 2005, and pays benefits up to a legal maximum. Its multiemployer program supports union plans covering workers at many companies. It is funded by insurance premiums paid by plan sponsors, assets of the plans it takes over, and investment income, not by general tax revenue, and it protects benefits for tens of millions of workers and retirees.

By the late 2010s many multiemployer plans, especially in trucking, were heading toward insolvency and would have exhausted the PBGC's multiemployer fund. The American Rescue Plan Act, signed on March 11, 2021, created a Special Financial Assistance program through which the PBGC has sent tens of billions of dollars to troubled plans, including more than 35 billion dollars to the Central States Teamsters fund. Supporters say the aid prevented deep cuts to retirees' pensions, while critics called it a costly bailout without enough reform to keep plans from failing again.