PBGC Single-Employer Program Shows Positive Balance

Those served by the Pension Benefit Guaranty Corporation’s (PBGC) single-employer program have something to smile about — the PBGC has reported that the program now shows a positive balance.

The news, contained in the PBGC’s Fiscal Year 2018 Annual Report, shows progress at a much faster rate than the PBGC itself had anticipated. In 2017, the PBGC released a report in which it said that it expected that the single-employer program’s deficit would be eliminated by 2022.

While it does not show a positive balance like its single-employer orogram counterpart, there nonetheless also was some good news for the PBGC’s multiemployer program. It too made progress in FY 2018, the PBGC reports, its condition improving from a deficit on Sept. 30, 2017 of $65 billion to a FY year end deficit of $53.9 billion one year later.

The PBGC attributes the gains that the programs made primarily to higher interest rate factors, which the PBGC says reduced the value of its benefit liabilities. “A strong economy and the absence of new large claims also contributed to the financial improvement,” the PBGC adds.

Singularly Positive

The PBGC reports that as of Sept. 30. 2018, the single-employer program was in the black by $2.4 billion. This marks a dramatic $13.3 billion in improvement in just one year — the program showed a deficit of $10.9 billion at the end of FY 2017.

The PBGC also reports that in FY 2018 through the its single-employer program :

• paid $5.8 billion in benefits to more than 861,000 retirees;
• became responsible for 58 single-employer plans that cover 28,000 current and future retirees  and that terminated without enough money to provide all promised benefits;
• protected the pension benefits of about 52,000 people by working with eight companies to maintain their pension plans as the companies emerged from bankruptcy; and
• negotiated more than $550 million in financial protection, for about 100,000 people in plans put at risk by certain corporate events and transactions. 

Multiple Problems

Progress notwithstanding, the PBGC still says that the multiemployer program “unfortunately continues on the path toward insolvency, likely by the end of FY 2025.” This, the PBGC says, is because the demand for its financial assistance “will increase rapidly as more and larger multiemployer plans run out of money and need help to provide benefits at the guarantee levels set by law.”

The PBGC says that unless the law changes, “the assets and future income of PBGC’s Multiemployer Program are only a small fraction of the amounts PBGC will need to support the guaranteed benefits of participants in plans that are currently insolvent as well as those expected to become insolvent during the next decade.”
During FY 2018, the PBGC provided $153 million in financial assistance to 81 insolvent multiemployer plans. In FY 2017, it had furnished $141 million to 72 plans.

From the Director

Said PBGC Director Tom Reeder in a press release, “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. 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.”