Your Benefit Your Choice - beneficiary

Your Benefit, Your Choice • Benefit Options from PBGC

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Before you begin to receive your monthly pension benefit from PBGC, you have an important decision to make:
How do you wish to receive your monthly benefit?
This question is complex and could be one of the most important financial decisions you will ever make. Your
decision affects the amount of your monthly benefit and how much your beneficiary will receive after your death.
The best option for you depends on your age, health, and other financial resources, as well as the age, health, and
financial needs of anyone for whom you wish to provide a benefit. If you are married, you should discuss this
choice with your spouse. You may also want to discuss this choice with other family members or friends and,
possibly, a financial advisor. The following information is designed to help you make an informed choice.
You may choose the plan’s “automatic” benefit form or one of the PBGC optional benefit forms, described below.
The plan’s “automatic” benefit form is the benefit form the plan would pay you if you do not make an election.
Your automatic benefit form may be the same as one of the PBGC optional benefit forms.
PBGC OPTIONAL BENEFIT FORMS
This section describes each of the benefit forms that PBGC offers you, with examples using a payee named Sam
who is applying for a benefit at age 65. We show what Sam and his beneficiary Carol would receive under each
benefit form.
Straight-Life Annuity
A straight-life annuity provides a fixed monthly benefit for the rest of your life only. No survivor benefit will be paid
upon your death.
Example: Sam elects a straight-life annuity, and he receives $500 a month for the rest of his life. No one
receives any benefits after Sam dies.
Certain-and-Continuous Annuities
A certain-and-continuous annuity provides a benefit for the rest of your life at an amount reduced from the straightlife benefit amount. If you die within 5, 10 or 15 years after the date your benefits are first payable (the Annuity
Starting (ASD) you choose on your benefit application in item 1) your designated beneficiary will receive the
benefit for the remainder of that “certain” period. If you die after the certain period, no survivor benefit is payable.
You may choose any beneficiary for your certain-and-continuous annuity, such as your spouse, another person,
an estate, a trust, a church or other organization, etc. You can change this beneficiary designation at any time. If
your beneficiary dies before you and before the end of the certain period, you should designate a new beneficiary.
The amount of your benefit is the same regardless of whom you designate as beneficiary.
Examples:
▪ 5-year Certain-and-Continuous Annuity: Sam receives $494 a month for the rest of his life. If Sam dies
within five years of his ASD, Carol receives $494 a month for the remainder of the five-year period. If
Sam dies after the 5 year period, Carol does not receive any benefits.
▪

10-year Certain-and-Continuous Annuity: Sam receives $477 for the rest of his life. If Sam dies within
ten years of his ASD, Carol receives $477 a month for the remainder of the ten-year period. If Sam
dies after the 10 year period, Carol does not receive any benefits.

▪

15-year Certain-and-Continuous Annuity: Sam receives $452 a month for the rest of his life. If Sam
dies within 15 years of his ASD, Carol receives $452 a month for the remainder of the 15-year period.
If Sam dies after 15 year period, Carol does not receive any benefits.

Your Benefit, Your Choice • Benefit Options from PBGC (continued)

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SUMMARY OF EXAMPLES
Benefit Form
A. The form your plan
would pay you
automatically, if different
from below
B. 5-year Certain-andContinuous Annuity
C. 10-year Certain-andContinuous Annuity

Sam’s
Benefit

Carol’s
Benefit

Additional Explanation

Benefit amounts depend on benefit form payable under the plan.
$494

$477

$494

$477

If Sam dies before the end of the 5-year, 10-year, or
15-year certain period (whichever he chooses), Carol
will receive benefits for the remainder of that period.
If Sam dies after the end of the certain period, Carol
will not receive any benefits.

D. 15-year Certain-andContinuous Annuity

$452

E. Straight Life Annuity

$500

$452
The certain period starts on the ASD chosen.

None

Carol will not receive any benefits after Sam’s death.

Information on federal tax withholding – Tax laws require that we withhold federal income tax from
your pension payments unless you instruct us to do otherwise. You have three choices. Please read them
carefully and make your selection on page 5 of the application. You may choose:
A) To have PBGC withhold no federal income taxes from your payments (not available if you live outside of the United
States).
B) To have PBGC follow IRS guidance and calculate your withholding.
If you choose this option, you need to tell us if you’re married and the number of allowances you claim. It is
possible that we will not withhold any federal income tax even if you choose this option – if, for example, your
benefit is low or if you claim a large number of allowances. You may increase the amount we withhold by claiming
fewer allowances, by having additional money withheld, or by electing option C.
C) To have PBGC withhold the amount or percentage you tell us to withhold each month.

What if not enough taxes are withheld based on your choice?
PBGC withholds taxes based on the election you make when you apply for your pension benefit. If you
have other income that would affect the amount of taxes you owe, you may need to pay additional taxes.
You may also need to pay penalties to the IRS. You may wish to consult a tax specialist or the IRS about
your decision.

Your Benefit, Your Choice • Benefit Options from PBGC (continued)

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What happens if you do not choose any option?
If you do not choose one of these options, we will withhold federal taxes as if you were a married individual
with three allowances. The amount we will withhold depends on your monthly pension.
What if you want to pick a different option later?
You may change your option at any time. To choose a different option, simply call PBGC's Customer
Contact Center at 1-800-400-7242. We will then send you a tax withholding form to complete. Depending
on when we receive it, we will make the change by the next month or the month after that.
What if you don't live in the United States?
If you live outside the United States, you cannot elect option A. You may be eligible for special tax
treatment under a tax treaty with the country you reside in. We will send you additional information after
you file your application.
When determining your federal tax withholding, you may find it helpful to read the IRS instructions for
completing the IRS Form W-4P (Withholding Certificate for Pension or Annuity Payments). You can print a
copy from the IRS Internet site under Forms, Instructions and Publications at www.IRS.gov.