PBGC remains on GAO’s high-risk list

The financial portfolio of the Pension Benefit Guaranty Corporation (PBGC) is one of the largest of any federal government corporation, with more than $89 billion in assets but the PBGC’s financial future is uncertain, due in part to a long-term decline in the number of traditional defined benefit plans, according to a U.S. Government Accountability Office (GAO) biennial report. Through its single-employer and multiemployer plan insurance programs, the PBGC insures the pension benefits of more than 41 million American workers and retirees who participate in nearly 24,000 private sector defined benefit plans.

At the end of fiscal year 2014, the PBGC’s net accumulated financial deficit was $61.8 billion—an increase of over $26 billion from the end of fiscal year 2013—and the PBGC estimated that its exposure to future losses for underfunded plans was $184 billion. This dramatic increase in the PBGC’s deficit was attributable to a crisis in the multiemployer program, the smaller of its two programs: Since 2013, the deficit in the multiemployer program, composed of about 1,400 plans, had increased by over 400 percent. Meanwhile, the financial position of the larger single-employer program, composed of about 22,300 plans, had improved in recent years, but still accounted for $19.3 billion of the PBGC’s overall deficit. The GAO first designated the single-employer program as high risk in July 2003, and added the multiemployer program to the high risk list in January 2009.

Various laws have been enacted to strengthen the PBGC’s financial position and governance. To the extent that sponsors reduce contributions in the short term, they may increase plan underfunding and expose the PBGC to greater risk. However, prompted by the dramatic increase in the PBGC’s deficit, the Multiemployer Pension Reform Act of 2014 (MPRA), Division O of the Consolidated and Further Continuing Appropriations Act, 2015 (P.L. 113-235) was enacted in December 2014, with a number of provisions to enhance the long-term viability of the multiemployer program.

Source: GAO High Risk Report, February, 2015.

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