The Pension Benefit Guaranty Corporation is an agency which guarantees the benefits payable by defined benefit pension plans when those plans fail or are terminated. When the plan has insufficient assets to pay all the benefits it owes, the PBGC actually steps in and directly pays those benefits to the retirees. In cases where the plan is deemed to have sufficient assets, the PBGC plays a much smaller role. In these cases, called “standard terminations”, it allows the plan to either pay out immediate lump sums or to buy an annuity with an insurance company to pay the retirees’ benefits when those retirees reach retirement age. In most of these cases, the PBGC relies on the employer’s records that it has paid out, or bought an annuity for, everyone who is vested under the plan.
What happens if the pension plan has made mistakes, if its records are incomplete, and fail to take into account everyone who is due a benefit under the terminating plan? Two of our recent cases illustrate just that point.
In one of the cases, a woman whose husband had died at age 49, years before he was eligible for a benefit and years before the plan was terminated, finally received a survivor benefit of almost $700 monthly after we worked on her case for close to a year and a half. In the second case, a 70-year-old Massachusetts man received his long-overdue benefit of just over $200 per month.
In both of these cases, we worked for months to figure out what had happened to the pension plans after a number of corporate changes. We ultimately found in both cases that a successor company had applied for a standard termination through the PBGC. We then spent months assembling the documentation showing that each of these clients had a vested benefit; that no pension benefit had been paid to the client at any time, either when the employment had ended, or at the time of the plan termination; and that no annuity had been bought for payment of the client’s benefit. We refer to these clients as “omitted participants”, because they were omitted from the information the plan provided to the PBGC.
The PBGC generally relies on the plans to provide accurate information that all vested participants have been taken into account. However, it does remain liable, as a matter of law, for anyone who has been improperly omitted. We have found that is a very steep uphill battle to get the PBGC to pay benefits to these omitted participants, as it assumes that everyone entitled to a benefit has been accounted for. We need to assemble a body of rock-hard evidence to succeed in these cases. Fortunately, our experienced staff understands the issues well, and knows the evidence the PBGC will require.
Kudos to Maureen Egan and to Kevin Medeiros, who handled these cases expertly, and got our clients the benefits they may never have received without Pension Action Center!