PBGC: Single-Employer Program Deficit Gone by 2022
There’s good news and bad news, says the Pension Benefit Guaranty Corporation (PBGC). In its latest projections report, the PBGC says that the deficit its single-employer program has registered likely will end in the near future; however, the results for the multiemployer program are likely to be very different.
In its FY 2016 Projections Report
, the PBGC says it expects that its single-employer program, which it says covers 28 million people, will have no more deficit in the next three to seven years. However, it also says that the multiemployer program, which covers 10 million, is on course to insolvency by 2025.
The single-employer program currently has a $21 billion deficit. But. The PBGC says that the program’s condition is improving and “shows some acceleration in the improving trend noted in last year's report,” according to a press release
. The PBGC expects that the program’s condition is “likely to improve over the next decade” and that its current estimates project that it is likely that the program will have a surplus by 2022.
The PBGC does include a caveat in the report, saying that even with the single-employer program, “a wide range of outcomes remains possible, ranging from large deficits to surpluses.”
The multiemployer program is a different story. “The multiemployer insurance program is in serious trouble and is likely to run out of money by the end of fiscal 2025,” says the PBGC. The report says that unless there are changes in the law or additional resources are directed toward the program, the program’s current deficit of $59 billion will continue to worsen, and could amount to nearly $80 billion by fiscal year 2026.
“The increasing demand for financial assistance from insolvent plans will accelerate the depletion of PBGC’s Multiemployer Program assets,” says the PBGC. If it does become insolvent, says the PBGC, “the people who rely on PBGC guarantees will receive only a very small percent of current guarantees — most participants would receive less than $2,000 a year and in many cases, much less.”
While the report says 2025 is the likely timing for insolvency absent action, the exact timing is not certain and depends on when the multiemployer plans that are in the greatest amount of distress run out of money.
The PBGC issues the projections report each year to provide an actuarial evaluation of its future operations and financial status. The report provides estimates of the future status of insured pension plans and their effect on the PBGC's financial condition, based on hundreds of different economic scenarios.