Source below. Pension Plan Termination Types
- Distress termination
- Involuntary termination
- Standard termination
Source:
https://www.pbgc.gov/about/factsheets/page/termination
Distress termination
- PBGC stands for Pension Benefit Guaranty Corporation
- Even when a company is reorganizing in bankruptcy, PBGC works to keep employers that sponsor pension plans responsible for their own obligations; distress termination is a last resort.
- When a company cannot stay in business and fund pensions (and under some other circumstances – see below) it can file a distress termination
- PBGC steps i n and pays retirees the benefits they are owed, up to legal limits
Involuntary termination
- When PBGC is forced to take action to protect a pension plan or the pension insurance system, the agency initiates an involuntary termination
- As in a distress termination, PBGC becomes responsible to pay retirees the benefits they are owed, up to legal limits
Standard termination
- A pension plan can file a standard termination if it can pay all of the benefits owed.
- In a standard termination, PBGC reviews the termination to make sure that the plan administrator follows all required steps to ensure proper notification to workers and retirees and proper arrangements for payment
- PBGC does not become responsible for benefit payments.