Find out If Your Pension Benefits Are Guaranteed

Elderly couple looking at pension information
•••   Peter Cade/Getty Images 

If you have the good fortune to have a pension plan, it can provide a source of guaranteed income to you in retirement. The word guaranteed is used loosely, however, since plenty of cases have arisen where pension plans got into a financial mess and the companies were forced to reduce benefits being paid out to existing employees. So how do you know if your pension ​plan is guaranteed?

The Safety of Your Pension

A form of insurance from an organization called the Pension Benefit Guarantee Corporation (PBGC) exists to protect your pension benefits. Find out if your company participates in the PBGC. If they do, most likely at least a portion of your pension benefit has been insured.

How Much of Your Pension Is Safe

The amount of monthly income insured by the PBGC has a cap. In 2018, for a pension recipient age 65 whose company plan was covered by PBGC, and who is taking a joint life payout with 50 percent that would be paid to a survivor, the maximum amount of benefit covered by insurance is $4,878.41 a month. 

For a single life payout, the maximum amount of insured benefit at age 65 is $5,420.45. If your pension benefit is greater than the cap, the excess amount is not insured. These insured amounts apply to what is called single-employer plans. For insured amounts for multi-employer plans see PBGC's Multi-Employer Plan fact sheet.

Important: If you have not yet reached age 65, your full pension benefit may not be insured even if it is less than the cap. The allowable insured amount of pension benefits are the lowest in the first years of insurance coverage, which starts at age 45.

The coverage increases by a certain factor for each year you grow older, with the maximum insured amount available for those age 75 or older. You can see the exact amount of monthly payment that is insured based on your age by visiting the ​​PBGC Maximum Monthly Guaranteed Tables.

Not All Pensions Are Insured

Private pension plans offered by large companies typically participate in PGBC, however, pension plans offered by states and city governments do not. You can find out more about pension plans by using the Is My Plan Insured - Single Employer or Is My Plan Insured - Multi-Employer FAQ features of the PBGC website.

Speak with your union, plan administrator, employer, or pension plan sponsor directly to see what insurance amounts apply to your pension. You can also ask them if your pension is insured by the PBGC.

How Divorce Impacts Your Pension

Regardless of a divorce, the safety of the pension is still protected by the government's efforts with the Employee Retirement Income Security Act of 1974 (ERISA) and the Pension Protection Act of 2006.

However, your stake in the pension will be determined by how proficient your family lawyer was. If you are entitled to pension benefits after a divorce a legal document called a qualified domestic relations order (QDRO) must be drawn up and provided to the pension plan administrator.

The QDRO document legally binds the plan administrator to pay out benefits to a former spouse. Without a QDRO document, a pension plan cannot make the payment, regardless of what the divorce decree says.