With Boeing 737 Max 8 jets grounded worldwide, and the search to assign liability in full swing, worried Boeing retirees are asking what happens to their pensions if Boeing does not survive this tragedy . In the worst case scenario, Boeing’s pension plan would be taken over by the Pension Benefit Guarantee Corporation (PBGC). If this happens here’s what your maximum benefit would be.
For 2019, the PBGC’s guarantee limit for the single-employer plan is spelled out here and in the table below.
If your pension benefit is less than the PBGC’s guarantee limit, in all likelihood you will receive the same amount.
The numbers in the table are determined by a formula established by law about 40 years ago. Each year the guarantee limits go up, never down and they are set without regard to the financial condition of the plan.
Who Makes Up The Shortfall?
At the end of 2018, Boeing’s pension plan had assets of $50.4 billion and was underfunded by $15.3 billion, as measured under generally accepted accounting principles.
You may wonder, how the PBGC can pay the same benefits even though Boeing’s plans are underfunded. Who makes up for the shortfall?
In researching this question last year for General Electric’s pensioners, I spoke to an expert on the PBGC, on background, who explained that the shortfall is made up for by insurance premiums paid by pension funds that are still ongoing. PBGC receives no funds from general tax revenues. Like Fannie Mae and Freddie Mac, the PBGC is not backed by the full faith and credit of the U.S. government. No one knows who would pay if the PBGC couldn’t meet its obligations.
Bottom Line
If the PBGC took over Boeing’s pension plan, the financial condition of the Single-Employer plan would suffer, but payments (up to the amounts listed in the table above) would not stop for years to come.
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