PBGC coverage applies when which condition occurs?

PBGC coverage applies when which condition occurs?

• A. When a defined benefit pension plan terminates with insufficient funds
• B. When a company files for bankruptcy
• C. When a 401(k) ends
• D. When an employee is laid off

Answer: (A)

PBGC coverage is triggered when a defined benefit pension plan terminates and there aren’t enough assets to pay the promised benefits. The PBGC is the government-backed insurer for most defined benefit plans, stepping in to pay a guaranteed portion of retirees’ and participants’ benefits up to statutory limits when a plan ends underfunded. This protection does not extend to defined contribution plans like 401(k)s, and simply having a company file for bankruptcy or employees being laid off doesn’t by itself create PBGC coverage—the plan itself must terminate and be underfunded for the PBGC to step in.

PBGC coverage is triggered when a defined benefit pension plan terminates and there aren’t enough assets to pay the promised benefits. The PBGC is the government-backed insurer for most defined benefit plans, stepping in to pay a guaranteed portion of retirees’ and participants’ benefits up to statutory limits when a plan ends underfunded. This protection does not extend to defined contribution plans like 401(k)s, and simply having a company file for bankruptcy or employees being laid off doesn’t by itself create PBGC coverage—the plan itself must terminate and be underfunded for the PBGC to step in.