Unfortunately, yes. Defined benefit pensions, which promise a certain monthly pension benefit based on age and years of service, can be terminated. This often happens when there is a change in corporate management, after a period of declining corporate earnings, or when a pension plan is underfunded (i.e., the company has not set aside enough money to pay its expected pension benefits).
If a financially distressed company terminates its defined benefit pension plan, the Pension Benefit Guarantee Corporation (PBGC) steps in to provide coverage up to specified maximum limits.
We would like your feedback on this Personal Finance Frequently Asked Question.