A 4022(c) benefit is an additional payment PBGC may provide to participants of a terminated single-employer pension plan, based on the agency’s recoveries from the plan sponsor.
A 4022(c) benefit is a special payment the Pension Benefit Guaranty Corporation (PBGC) may distribute to participants in a single-employer pension plan that PBGC has taken over. It is funded by PBGC’s recoveries from the plan’s former sponsor, specifically for unfunded benefit liabilities.
This article explains what a 4022(c) benefit is, how it works, when it applies, and what participants can realistically expect.
Understanding the 4022(c) Benefit in Simple Terms
When a single-employer pension plan fails, PBGC steps in to take over and continue paying benefits, up to legal limits. However, not all promised pension amounts are guaranteed. If the plan had unfunded benefit liabilities — benefits earned but not backed by assets — PBGC attempts to recover money from the plan sponsor and certain related parties.
A 4022(c) benefit is the portion of these recoveries that PBGC may distribute to participants whose benefits are not fully guaranteed. In other words, it’s an extra payment that may help cover part of the gap between the guaranteed amount and the full benefit a participant should have received.
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How PBGC Recovers Money
When PBGC takes over a pension plan, it usually files claims against:
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the plan sponsor (the employer), and
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any other financially liable entities.
These claims represent the plan’s unfunded benefit liabilities — the shortfall between what the plan owes and what it actually has in assets.
If PBGC succeeds in recovering money, those recoveries may be used to pay 4022(c) benefits.
Three Factors That Determine a Participant’s 4022(c) Benefit
A participant’s potential 4022(c) benefit depends on three main elements:
1. PBGC’s total recoveries
The more PBGC recovers from the plan sponsor, the more funds are available to distribute. If PBGC recovers nothing, there typically is no 4022(c) benefit.
2. Whether the participant has a nonguaranteed benefit
Participants whose benefits exceed the PBGC guarantee limits or fall into non-guaranteed categories may be eligible. If all your benefits are already fully guaranteed, you typically won’t receive a 4022(c) payment.
3. The priority categories process
PBGC follows a strict legal order to allocate plan assets and recoveries. Participants in higher priority categories may receive more or recover earlier, depending on how underfunded the plan is.
How the Calculation Works
The 4022(c) benefit calculation differs depending on the scale of the plan’s underfunding.
For plans with large underfunding (over $20 million)
The 4022(c) benefit is based only on the recoveries specifically tied to that plan.
This means:
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If recoveries for that plan are high, payments may be higher.
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If there are few or no recoveries, participants may receive little or nothing.
For all other plans
The amount available is based on a rolling five-year average of PBGC’s recoveries across all trusteed plans.
This approach smooths out yearly differences and creates a more predictable distribution for plans with smaller shortfalls.
Real-Life Example
Imagine a company pension plan fails and PBGC takes it over. You were promised $3,000 per month, but PBGC can only guarantee $2,400 based on legal limits.
If PBGC later recovers substantial funds from the company:
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You might receive a 4022(c) payment each year that reduces the $600 gap.
If PBGC recovers little or nothing:
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Your payment remains at the guaranteed $2,400 with no additional recovery-based benefit.
This illustrates why 4022(c) benefits vary widely across plans.
Final Takeaway
A 4022(c) benefit is essentially a recovery-based supplement for participants in a PBGC-trusteed single-employer pension plan. It helps bridge the gap between what the plan promised and what PBGC guarantees, but the amount depends heavily on PBGC’s recoveries, the participant’s nonguaranteed benefits, and the priority allocation rules.
For participants, it’s helpful to view the 4022(c) benefit as a potential bonus — not a guaranteed one — that may provide additional financial protection when a pension plan terminates underfunded.
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