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PBGC Priority Levels

This overview explains the Pension Benefit Guaranty Corporation (PBGC) priority levels applicable to pension benefits, focusing on the distinctions between mandatory and voluntary contributions. It details benefits for individuals based on their age and service duration, especially for those retiring or eligible to retire within the last three years. Furthermore, it includes specific accrual examples illustrating how benefits are calculated based on age, service years, and final average earnings (FAE), ensuring clarity in understanding pension entitlements.

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PBGC Priority Levels

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  1. PBGC Priority Levels • Priority 1 – Mandatory Contributions – Not applicable here • Priority 2 – Voluntary Contributions – Not applicable here • Priority 3 – Anyone who is or could have retired within the last 3 years (would be anyone over age 53 since 50 is earliest retirement age) • Priority 4 – Anyone under age 53. • Priority 5 & 6 are any other benefits due after 1 – 4 are paid P1 and P2 P3 P4 P5 and P6

  2. Current Plan Accrual Pilot A – age 59 (1/1/03) Service – 25 years (60% of FAE – 2.4% x 25) FAE $15,000 mo. Accrued Benefit: $9,000 per month at age 60 Plan Termination Accrual at date of plan termination (assuming 1/1/03) Age 56 (59 – 3 years) Service 22 years (25 – 3)= 52.8% of FAE FAE at 1/1/00 (3 years prior) $12,000 Priority 3 Benefit - $5,575 per month no matter when it’s taken Plan Termination Examples

  3. Current Plan Accrual Pilot B – age 57 (1/1/03) Service – 20 years (48% of FAE – 2.4% x 20) FAE $15,000 mo. Accrued Benefit: $7,200 per month at age 60 Plan Termination Accrual at date of plan termination (assuming 1/1/03) Age 54 (57 – 3 years) Service 17 years (20 – 3)= 40.8% of FAE FAE at 1/1/00 (3 years prior) $12,000 Priority 3 Benefit - $3,867.84 per month no matter when it’s taken Plan Termination Examples

  4. Current Plan Accrual Pilot C – age 55 (1/1/03) Service – 17 years (40.8% of FAE – 2.4% x 17) FAE $15,000 mo. Accrued Benefit: $6,120 per month at age 60 Plan Termination Accrual at date of plan termination (assuming 1/1/03) Age 52 (55 – 3 years) Service 14 years (17 – 3)= 33.5% of FAE FAE at 1/1/00 (3 years prior) $12,000 Priority 3 Benefit - $2,693 per month no matter when it’s taken. Plan Termination Examples

  5. Current Plan Accrual Pilot D – age 50 (1/1/03) Service – 15 years (36% of FAE – 2.4% x 17) FAE $15,000 mo. Accrued Benefit: $5,400 per month at age 60 Plan Termination Accrual at date of plan termination (assuming 1/1/03) Age 47 (50 – 3 years) Service 12 years (15 – 3)= 28.8% of FAE FAE at 1/1/00 (3 years prior) $12,000 ($3,456 accrued) Priority 4 Benefit - $2,382 per month at age 60, $1,649 at 55, $1,282 at 50 – you decide when you take it. Plan Termination Examples

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