PBGC multiemployer program’s deficit continues to grow, single-employer program’s deficit drops

The Pension Benefit Guaranty Corporation (PBGC) has released its Fiscal Year (FY) 2017 Annual Report, showing that the deficit in the PBGC’s insurance program for multiemployer plans continued to grow, increasing to $65.1 billion at the end of FY 2017 primarily because of the ongoing financial decline of several large multiemployer plans that the PBGC expects to run out of money in the next decade. However, the single-employer insurance program’s deficit narrowed, dropping to $10.9 billion at the end of FY 2017, as compared to $20.6 billion at the end of FY 2016. The PBGC notes that this improvement is primarily due to premium and investment income, and increases in the interest factors used to measure the value of future liabilities.
The Agency protects the pension benefits of nearly 40 million Americans in private-sector pension plans and the PBGC is already responsible for the benefits of about 1.5 million people in failed plans who otherwise might have lost their pensions.

Deficit in single-employer program shrinks

The $10.9 billion deficit in the single-employer insurance program reflects the program’s liabilities of $117 billion and assets of $106 billion as of September 30, 2017, representing an improvement of $9.7 billion from the $20.6 billion deficit last year. In FY 2017, the PBGC paid $5.7 billion in benefits to almost 840,000 retirees, the same as last year.
The PBGC assumed responsibility during FY 2017 for more than 23,000 current and future retirees in 82 trusteed single-employer plans that terminated without enough money to provide all promised benefits. The PBGC reports that it helped to protect over 26,700 people by taking action in Chapter 11 cases to encourage companies to keep their plans ongoing upon emerging from bankruptcy. The PBGC also negotiated two agreements under its Early Warning Program that provided nearly $600 million in financial protection for more than 240,000 people in plans put at greater risk by corporate transactions.

Deficit for multiemployer program worsens

The PBGC’s multiemployer insurance program’s deficit of $65.1 billion reflects liabilities of $67.3 billion and assets of $2.2 billion as of September 30, 2017, compared with $58.8 billion last year. The increased deficit results from 19 plans newly classified as probable claims because they either terminated or are expected to run out of money within the next ten years, offset by the reclassification of one plan that is no longer a probable claim due to the implementation of benefit reductions under the Multiemployer Pension Reform Act of 2014.
In FY 2017, the Agency paid $141 million in financial assistance to 72 insolvent multiemployer pension plans, an increase from the previous year of $113 million paid to 65 plans. The PBGC expects that its obligations to provide financial assistance will increase 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. The multiemployer plan program’s assets and 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. The PBGC notes that, in its recent Projections Report, the Agency estimated that its multiemployer plan program is likely to run out of money by the end of 2025.

Source: PBGC News Release No. 17-10.
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