Can defined benefit pension plans be terminated by employers?

Personal Finance February 24, 2013 Print Friendly and PDF

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.

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