Pension Insurer Deficit Hits Record High of $61 Billion

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The Pension Benefit Guaranty Corporation (PBGC) said Monday its deficit had ballooned to $61.7 billion for fiscal year 2014.

The PBGC is a government agency that guarantees pension benefits to members of private defined-benefit pension plans.

More from Business Insurance:

The deficit in the PBGC’s insurance program for single-employer plans fell to $19.3 billion, down from $27.4 billion in fiscal 2013. But that decline was more than offset by a huge rise in the deficit in the agency’s insurance program covering multiemployer plans, which jumped to $42.4 billion, up from $8.3 billion in fiscal 2013.

“The program’s increased deficit is largely due to the fact that several additional large multiemployer plans are expected to become insolvent within the next decade,” the PBGC said in statement.


Numerous reasons have been advanced for the financial woes of multiemployer plans, especially a provision in a 1980 federal law that requires employers withdrawing from the plans to pay a share of the plans’ promised but unfunded liabilities.

The fear of withdrawal liability is so great that underfunded plans have found it difficult to attract new employers to the plans, leading to a “death spiral,” experts say.

So far, though, there has been no broad-based move by federal lawmakers to address the plans’ problems.

While multi-employer plans remain a large problem for the agency, single-employer plans are becoming less of a burden on the agency’s bottom line, even if challenges remain. From Business Insurance:

On the single-employer side, the PBGC’s news is better. During fiscal 2014, the PBGC took over 97 plans from financially ailing or failed employers, down from 111 in 2013 and 155 in 2012. It paid about $5.5 billion to participants in failed single-employer plans, about the same as in fiscal 2013.

In addition, the agency said its potential exposure to future pension loses from financially weak companies was about $167 billion in fiscal 2014, down from $292 billion in fiscal 2013.

Still, there are challenges facing the PBGC’s single-employer program. One that has emerged in recent years is the move of employers to reduce the size of their pension plans by offering certain participants the option to convert their monthly annuity to a cash lump-sum payment and/or transferring benefit obligations to an insurer through purchasing a group annuity, as Motorola Solutions Inc. and Bristol-Myers Squibb Co. earlier announced.

The PBGC guarantees pension benefits to about 1.3 million people.


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