If your employer goes out of business and terminates a defined benefit pension plan that's adequately funded (that is, the plan has enough assets to pay benefits), then your pension will be secure. The plan will purchase an annuity for you that will pay your benefits when due (some plans may also let you elect a lump-sum payment). But you'll only receive the benefit you've earned as of the plan's termination date, which could be far less than the full pension benefit you had counted on.

If, however, the plan is underfunded (that is, there aren't enough assets to pay all benefits earned to date), then the fate of your pension depends in part on whether or not your plan is insured by the Pension Benefit Guaranty Corporation (PBGC). Luckily, most defined benefit plans are covered (check with your plan administrator). When an underfunded plan terminates, the PBGC takes over responsibility for making pension payments. The PBGC guarantee applies only to "basic benefits"--normal and early retirement benefits, survivor annuities, and disability benefits--earned (and vested) before the plan terminates. If the plan terminates while your employer is in bankruptcy, the guarantee may be limited to benefits earned before the bankruptcy filing.

For plans that terminate in 2008, the maximum amount guaranteed by the PBGC is $51,750 per year for single life annuity benefits beginning at age 65. The limit is reduced if your payments start before age 65, if your benefit includes a survivor annuity, or if your plan was adopted (or amended to increase benefits) within 5 years of plan termination. In some cases you can receive more than the PBGC guaranteed amount (for example, when your plan has sufficient assets to pay nonguaranteed benefits).

According to the PBGC, 84% of retirees in recent years received the same benefit from the agency that they would have received from their pension plan. For more information, visit www.pbgc.gov.