Information Center

Restrictions on Shutdown Benefits


Shutdown benefits are special benefits that some plans provide for workers at a plant or facility that closes. These benefits are especially important to workers who have not yet reached retirement age, but are not in a position to change careers or relocate for work. Shutdown benefits bridge the gap between the time when a plant closes and retirement age.

Under the new rules, a plan is prohibited from paying a shutdown benefit arising out of a plant shutdown that occurs during a year in which the plan is less than 60 percent funded. Plans must continue to pay shutdown benefits triggered by plant closings in prior years. An employer can avoid the shutdown benefit restriction by making contributions to the pension fund that either compensates for the increased cost of paying the benefits, or increases the plan’s funding level to more than 60 percent. Read about the limitations in PBGC protections of shutdown benefits that were also included in the Pension Protection Act of 2006.

Read about the other benefit restrictions:

Earning future pension benefits under the plan
Payment of lump sums and other “accelerated benefits”
Improvements in benefits
Return to the fact sheet on benefit cutbacks in single employer plans.

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