The Pension Benefit Guaranty Corp.’s (PBGC) annual report for fiscal year ending Sept. 30, 2011, reported a record deficit, and the agency further warned of a nearly one-in-three chance that its multiemployer fund could become insolvent by 2030.
The PBGC’s deficit increased to $26 billion, a $3 billion increase from the $23 billion reported at the end of fiscal 2010. This is the largest deficit in the PBGC’s 37-year history. The agency said factors that contributed to the worsening numbers included lower interest rates used to measure benefit payment obligations and anticipated increases in multiemployer financial assistance.
The report is available at tinyurl.com/6oqrsa7.
The report said that, as a result of plan failures, the agency is responsible for the retirement benefits of about 1.5 million workers and retirees; its obligations (“liabilities”) for these and other purposes totaled $107 billion. The PBGC has $81 billion in assets on hand to cover these obligations, the bulk of which are benefits to be paid over many years. The deficit is expected to be covered by future premiums paid by pension plans for their insurance and from investment returns. President Barack Obama has proposed that PBGC premiums be raised, and that the PBGC’s Board of Directors be authorized to set premiums based on the circumstances of individual plans and their sponsors. The PBGC insures pension benefits of private pension plans covering some 44 million of America’s workers and retirees.
In 2011, the PBGC paid nearly $5.5 billion in benefits to 873,000 retirees whose plans had failed; 628,000 future retirees will receive benefits when they become eligible. In 2011, the agency assumed responsibility for the benefits of 57,000 people in newly failed plans.
The PBGC administers two pension insurance programs:
Single-employer pensions. The deficit in the program for single-employer pension plans widened to almost $23.3 billion, up from $21.6 billion in 2010. In 2011, 152 underfunded pension plans terminated, with the PBGC stepping in to cover their benefit promises. The report said the single-employer program’s potential exposure to future pension losses from financially weak companies increased to about $227 billion from the $170 billion reported in fiscal year 2010.
Multiemployer insurance program. The separate insurance program for multiemployer pension plans posted a deficit of nearly $2.8 billion.
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