Final answer:
A. Traditional defined benefit pension plan
PBGC insurance coverage is required for traditional defined benefit pension plans. This insurance serves as a safeguard, ensuring that employees receive their promised pension benefits even if an employer goes bankrupt. Defined contribution plans, such as 401(k)s and 403(b)s, are not covered by PBGC.
Step-by-step explanation:
The Pension Benefit Guaranty Corporation (PBGC) insurance coverage is mandated for certain types of pension plans. Among the options provided, the PBGC directly insures traditional defined benefit pension plans, where employers are committed to paying their employees a specific retirement benefit amount, which is calculated through a formula involving years of service and salary history.
As defined benefit plans, employers offering these pensions must pay premiums to the PBGC, designed as a safety net that provides pension benefits to workers if a company faces bankruptcy and cannot fulfill its pension obligations. Other retirement plans, such as defined contribution plans like 401(k)s and 403(b)s, are not covered by the PBGC. These plans involve employers contributing a fixed amount into an individual retirement account, which the employee can invest and which is portable across jobs. Defined contribution plans are more common in today's workplace than defined benefit plans, offering different advantages like flexibility and portability.