Pension & Benefits News PBGC single-employer and multiemployer programs’ financial conditions show improvement
Tuesday, December 11, 2018

PBGC single-employer and multiemployer programs’ financial conditions show improvement

By Pension and Benefits Editorial Staff

The Pension Benefit Guaranty Corporation (PBGC) has released its Fiscal Year (FY) 2018 Annual Report, showing that the single-employer insurance program has emerged from a deficit of $10.9 billion at the end of FY 2017 and now has a positive net position of $2.4 billion as of September 30, 2018. The deficit in the PBGC’s insurance program for multiemployer plans has dropped, decreasing to a deficit of $53.9 billion at the end of FY 2018 from a deficit of $65.0 billion at the end of FY 2017. The PBGC says that the improved financial position of the programs primarily due to higher interest rate factors, which reduced the value of the PBGC’s benefit liabilities.

“A financially strong pension insurance program that workers and employers can count on is a vital source of retirement security for millions of workers, retirees, and their families,” said PBGC Director Tom Reeder. “The continued improvement in the financial condition of the Single-Employer Insurance Program is a welcome result. The Multiemployer Insurance Program deficit has narrowed, but it clearly won’t keep the program from running out of money. PBGC continues to work with Congress and the multiemployer plan community to preserve the solvency of multiemployer plans and the Multiemployer Program.”

The Agency protects the pension benefits of nearly 37 million Americans in private-sector pension plans and the PBGC is currently responsible for the benefits of about 1.5 million people in failed plans who otherwise might have lost their pensions.

Single-employer program emerges from deficit. The positive net position of $2.4 billion in the single-employer insurance program reflects the program’s assets of $109.9 billion and liabilities of $107.5 billion as of September 30, 2018, representing a net improvement of $13.4 billion during FY 2018. In FY 2018, the PBGC paid $5.8 billion in benefits to more than 861,000 retirees, about the same as last year. The PBGC explains that the “improvement is consistent with PBGC’s recent projections and was accelerated by the continued strong economy, lower than expected claims, and higher interest rates.”

The PBGC assumed responsibility during FY 2018 for 28,000 current and future retirees in 58 trusteed single-employer plans that terminated without enough money to provide all promised benefits. The PBGC reports that it helped to protect about 52,000 people by working with eight companies to keep their plans ongoing upon emerging from bankruptcy. The PBGC also negotiated, under its Early Warning Program, over $550 million in financial protection for about 100,000 people in plans put at greater risk by corporate transactions.

Multiemployer program deficit reduced. The PBGC’s multiemployer insurance program’s deficit of $53.9 billion reflects liabilities of $56.2 billion and assets of $2.3 billion as of September 30, 2018, compared with $65.1 billion last year. The reduced deficit results mostly from higher interest rate factors used to measure the value of the PBGC’s future payments to insolvent plans.

During FY 2018, the Agency paid $153 million in financial assistance to 81 insolvent multiemployer pension plans, an increase from the previous year of $141 million paid to 72 plans. The PBGC expects that its obligations to provide financial assistance will increase rapidly in the coming years as more and larger multiemployer plans run out of money and need help to provide benefits at the guarantee level set be law. Without a change in law, the multiemployer plan program’s assets and future income are a small fraction of the amounts the PBGC will need to support the guaranteed benefits of participants in plans that are expected to become insolvent in the next decade, according to the PBGC. Despite the financial improvement, the PBGC expects that its multiemployer plan program will continue on the path toward insolvency, likely by the end of FY 2025.

SOURCE: PBGC News Release No. 18-08.

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