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So I understand that "Defined Benefit Plans" are NOT fully protected from employer bankruptcy.

No, they are fully protected from creditors claims from bankruptcy, unlike deferred comp which has no protection. This protection, often referred to as 'Antialienation' meaning the fund's assets are not attachable by anyone except former spouses through a Qualified Domestic Relations Order, by Fed Statute. What they are limited to is insured coverage by the PBGC. This has nothing to do with the employer, plan funding or creditors.

And you're right about the American Airline bankruptcy pension crisis. The problem there were the very generous plan benefits that were so much greater than the maximum insured benefit. We had a CFP student/former pilot at Seattle U who had a $110K pension he'd been drawing on for 2 years (I thought it was from Delta...but can't remember) that was cut, if I remember his numbers right, to about $30K, and he had to pay part of his already received benefit back! I couldn't believe it! What I cannot understand is why the Airline Pilots Union allowed this to happen. Those people know what the insurance caps are and the risk the pilots were taking. They should have offered a tandom MPP or profit sharing plan holding only target date funds, as the vested balance of that plan would be fully protected from creditors and not subject to any insurance caps.

And while on the topic of pension disasters, Multi-Employer plans offered through organized labor are another crisis in process. The PBGC insurance caps on these plans is much lower than fully insured employer pension plans, and there are at last count from PlanSponsor, about 125 such union plans in various stages of severe underfunding that are expected to be taken over by PBGC within 20 years or so.

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