On November 4, the Pension Benefit Guaranty Corporation (PBGC) in the United States signed a memorandum of understanding (MOU) with the Pension Protection Fund (PPF) and The Pensions Regulator of the United Kingdom to encourage and enable best practices in protecting retirement benefits. Under the MOU, agencies will share nonconfidential information that seeks to improve the financial security of defined benefit (DB) plans sponsored by private-sector companies in their respective countries.

The agreement reflects the mutual interests of these agencies and the global reach of corporate entities that sponsor pension plans in their respective jurisdictions. As rising bankruptcies and stock market losses in both countries have left an increasing number of employers in financial difficulty, the MOU signatories indicated the need for regulating agencies to keep pace with how employers and pension providers manage their retirement obligations to help safeguard pension promises.

In the United States, the PBGC protects the pension benefits of workers and retirees covered by qualified private-sector DB pension plans in the event a plan sponsor files for bankruptcy or when a pension plan is terminated. The PBGC receives its funding from insurance premiums (paid by companies whose pension plans are insured), investments, assets of pension plans taken over by the PBGC as trustee, and from the recovery of assets of companies formerly responsible for terminated plans. In the United Kingdom, the PPF, modeled on the PBGC, pays compensation to members of eligible DB plans when a plan sponsor becomes insolvent or is unable to pay benefits. The Pensions Regulator supervises private-sector DB plans in order to reduce the risk of claims for compensation from the PPF.

The MOU is available online at http://www.thepensionsregulator.gov.uk/pdf/MoUTPR-PPF-PBGC.pdf.

This article was extracted from the United States Social Security Administration publication International Update, December 2009.

Source: "PBGC Expands Cooperation with UK's Pensions Regulator and Pension Protection Fund," States News Service, November 3, 2009; "US and UK Pension Regulators in New Pact," Financial Times, November 4, 2009; "UK and US Industry Bodies Link Up," Professional Pensions, November 5, 2009; "PBGC and UK Agencies Sign Memorandum of Understanding to Share Information," CCH Pension, November 24, 2009; "PBGC Expands Cooperation with United Kingdom's Pension Regulator, Pension Protection Fund," US Fed News, November 29, 2009.