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When PBGC trustees a plan, we allocate plan assets to cover benefits promised by the plan in the following priority order established by Congress:
PC1 and PC2
Assets are first allocated to repay employee contributions to the plan (voluntary contributions fall in PC1, mandatory contributions in PC2).
PC3
Next, assets are allocated to plan benefits that were payable three years before the plan ended, or three years before the bankruptcy petition date if your plan ended in bankruptcy. These benefits are generally determined under the plan provisions in effect five years before the plan ended. Pension benefits in this priority category are “PC3 benefits". Benefits in PC3 may either be guaranteed by PBGC or nonguaranteed.
PC4
All other benefits guaranteed by PBGC that are not in higher priority categories are in PC4.
PC5 and PC6
Nonguaranteed benefits that are not in higher priority categories are in PC5 or PC6. They are in PC5 if they are nonforfeitable (vested) as of the plan’s termination date. Otherwise, they are in PC6.
The most typical scenario in which a participant may receive more from PBGC than his or her guaranteed benefit is a case in which all or much of the participant’s benefit is in PC3 and the plan’s assets cover all or most of the benefits in PC3.
