'Pension Entitlements' is explained in detail and with examples in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
Pension entitlements are the monies that have been promised to employees who are guaranteed a pension by the company for which they work. The majority of newly issued pensions anymore come from Federal, state, and local government employees. Some companies still offer pension entitlements to their employees who serve a minimum number of years with the firm, such as from twenty to thirty years.
These companies are becoming fewer and farther between as more and more corporations switch over to matching 401K retirement plans that cost them far less money and entail significantly lesser liabilities every year. This is because with pre set limit matches to 401K contributions, companies can know for certain how much money they will have to come out of pocket, whereas with pensions, it has much to do with how long the retirees live.
Pension entitlements are at risk as they become larger every year. Many companies are struggling to keep up with their pension entitlements as their retiring employees live longer and longer. Because of the danger to failing pensions that many retirees count on, the PBGC was set up. This entity acronym stands for Pension Benefit Guarantee Corporation.
The government created this entity in the Employee Retirement Income Security Act in 1974. Today, it safe guards in excess of forty-four million American retirees and workers pensions, covering the pension entitlements against default from the companies underlying them. These are held in greater than twenty-nine thousand multi employer and private single employer defined benefit pension plans.
The PBGC does not derive money from the general tax revenues in protecting the pension entitlements. Insurance premiums that Congress sets are paid by the sponsors of defined benefit plans, assets from pension plans that PBGC trustees, investment income of the PBGC, and recoveries made from companies who are no longer handling their own plans.
As a result of the financial crisis of 2007-2010, many private pension funds have suffered disastrous losses. In 2008 alone, this amounted to tangible losses of in excess of twenty-six percent. Even though the markets recovered somewhat, many pension funds had locked in their losses by selling the underwater investments. As a result of these terrible financial events, even more pension entitlements in the United States are now under funded.
In order to help make up for these, businesses will have to make substantially larger contributions in the future. It remains to be seen if the Pension Benefit Guarantee Corporation will be able to keep up with and cover all of the unfunded pension entitlements that have been promised to retirees and workers. Some experts have speculated that the PBGC itself will require bailouts in the hundreds of billions of dollars in the near future.