Deficit of federal agency that insures defined benefit pensions for 44 million workers doubles to $23.3 billion US, and things are expected to get worse
The federal agency in the United States that insures the pension of more than 44 million workers said its deficit has more than doubled to $23.3 billion (all figures US) this year, and things will only get worse as it expects more plans to fail in the near future.
Pension Benefit Guaranty Corp. (PBGC) said its insurance program for pension plans sponsored by a single employer incurred a net loss of $12.1 billion for fiscal year 2004, increasing the total deficit to $23.3 billion.
For the first time, the total number of people owed benefits by the agency passed one million and the total amount of benefits paid passed $3 billion.
“The PBGC is committed to protecting pension benefits, and with $39 billion in assets we can continue to meet our obligations for a number of years,” said executive-director Bradley Belt. “But with more than $62 billion in liabilities, it is imperative that Congress act expeditiously so that the problem doesn’t spiral out of control.”
More pension plans going under
The PBGC’s single-employer program insures the pensions of 34.6 million Americans in 29,600 plans. Of the $12.1 billion net loss for 2004, the two biggest factors were a $14.7 billion loss from completed and probable pension plan terminations and a $1.5 billion charge for actuarial adjustments due to a change in mortality assumptions.
Partially offsetting the losses were premium income of $1.5 billion and investment income of $3.2 billion. Overall, including the assets of terminated plans for which PGBC became trustee during the year, the single-employer program had $39 billion in assets to cover $62.3 billion in liabilities as of Sept. 30, 2004.
Possible exposure increasing
In addition to losses booked, PBGC calculates “reasonably possible” exposure, an estimate of the amount of unfunded vested benefits in pension plans sponsored by companies at greater risk of default.
The 2004 financial statements estimated its “reasonably possible” exposure at $96 billion, up from $82 billion in 2003.
Belt is calling on the government to take action to strengthen the funding rules, rationalize premiums, enhance transparency and provide new tools to protect the insurance fund for the future.
Multiemployer pension plans
The PBGC’s separate insurance program for multiemployer pensions plans posted a net gain of $25 million in fiscal year 2004, resulting in a fiscal year-end deficit of $236 million compared to a deficit of $261 million in 2003.
The multiemployer program covers 9.8 million workers in nearly 1,600 plans. The improvement in the financial condition for this program was due largely to a decrease in loss from future financial assistance to multiemployer plans and an increase in investment income. The multiemployer plan has about $1.1 billion in assets to cover $1.3 billion in liabilities.
1.1 million workers receiving $3 billion in benefits
For both programs (single employer and multiemployer) combined, the total number of participants receiving PBGC benefits in 2004 reached 1.1 million, up from 934,000 in 2003.
Total benefit payments rose to $3 billion from $2.5 billion. The number of underfunded plan terminations rose to 192 from 155.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 in the United States. It currently guarantees payment of basic pension benefits for more than 44 million American workers and retirees participating in more than 31,000 private-sector defined benefit pension plans. The agency receives no funding from general tax revenues. Its operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by its investment returns.
Pension Benefit Guaranty Corp. (PBGC) said its insurance program for pension plans sponsored by a single employer incurred a net loss of $12.1 billion for fiscal year 2004, increasing the total deficit to $23.3 billion.
For the first time, the total number of people owed benefits by the agency passed one million and the total amount of benefits paid passed $3 billion.
“The PBGC is committed to protecting pension benefits, and with $39 billion in assets we can continue to meet our obligations for a number of years,” said executive-director Bradley Belt. “But with more than $62 billion in liabilities, it is imperative that Congress act expeditiously so that the problem doesn’t spiral out of control.”
More pension plans going under
The PBGC’s single-employer program insures the pensions of 34.6 million Americans in 29,600 plans. Of the $12.1 billion net loss for 2004, the two biggest factors were a $14.7 billion loss from completed and probable pension plan terminations and a $1.5 billion charge for actuarial adjustments due to a change in mortality assumptions.
Partially offsetting the losses were premium income of $1.5 billion and investment income of $3.2 billion. Overall, including the assets of terminated plans for which PGBC became trustee during the year, the single-employer program had $39 billion in assets to cover $62.3 billion in liabilities as of Sept. 30, 2004.
Possible exposure increasing
In addition to losses booked, PBGC calculates “reasonably possible” exposure, an estimate of the amount of unfunded vested benefits in pension plans sponsored by companies at greater risk of default.
The 2004 financial statements estimated its “reasonably possible” exposure at $96 billion, up from $82 billion in 2003.
Belt is calling on the government to take action to strengthen the funding rules, rationalize premiums, enhance transparency and provide new tools to protect the insurance fund for the future.
Multiemployer pension plans
The PBGC’s separate insurance program for multiemployer pensions plans posted a net gain of $25 million in fiscal year 2004, resulting in a fiscal year-end deficit of $236 million compared to a deficit of $261 million in 2003.
The multiemployer program covers 9.8 million workers in nearly 1,600 plans. The improvement in the financial condition for this program was due largely to a decrease in loss from future financial assistance to multiemployer plans and an increase in investment income. The multiemployer plan has about $1.1 billion in assets to cover $1.3 billion in liabilities.
1.1 million workers receiving $3 billion in benefits
For both programs (single employer and multiemployer) combined, the total number of participants receiving PBGC benefits in 2004 reached 1.1 million, up from 934,000 in 2003.
Total benefit payments rose to $3 billion from $2.5 billion. The number of underfunded plan terminations rose to 192 from 155.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 in the United States. It currently guarantees payment of basic pension benefits for more than 44 million American workers and retirees participating in more than 31,000 private-sector defined benefit pension plans. The agency receives no funding from general tax revenues. Its operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by its investment returns.
