Deficit for Federal Agency Ensuring Pensions Grows to $58.8 Billion
The Pension Benefit Guaranty Corp., which ensures that retirees receive benefits even if their pensions become insolvent, reported that its multiemployer plan deficit grew to $58.8 billion in fiscal year 2016 and will likely run out of money before the end of 2025, the government agency announced.
As of Sept. 30, 2016, PBGC’s multiemployer program had liabilities of $61.0 billion and assets of only $2.2 billion, resulting in a deficit of $58.8 billion, up from $52.3 billion one year ago, according to an annual report released Nov. 16.
During the past fiscal year, the PBGC wrote that it provided $113 million in financial assistance to 65 insolvent multiemployer plans, a year-over-year increase from $103 million paid to 57 plans.
The multiemployer plan covers about 10 million retirees in the United States, including the Central States Pension Fund with more than 200,000 active retirees.
“It is clear that more reform is needed to stabilize multiemployer pension plans and to extend the solvency of PBGC’s multiemployer program,” PBGC Director Tom Reeder said. “First and foremost, we need to protect the promises that have already been made to workers and retirees. We are committed to working with Congress on long-term solutions that include increasing multiemployer premium revenues and reforming the premium structure.”
The agency added that its obligations to provide financial assistance will increase dramatically in the coming years, when larger multiemployer plans, such as Central States, run out of money. But if the PBGC were to become insolvent before the Teamsters’ troubled pension plan, retirees would receive only a fraction of their benefits.
Income for the multiemployer program totaled $425 million, made up of $282 million in premium revenue and $143 million in investment income, the report stated. But in contrast, multiemployer program liabilities increased by $6.8 billion due to “a drop in interest factors used to measure the value of PBGC’s future financial assistance payments” and 11 new pension plans that failed or signaled that they will fail within a decade in the past year.
PBGC’s larger single-employer insurance program showed improvement; its deficit narrowed to $20.6 billion in fiscal year 2015 as compared with $24.1 billion one year ago. The agency credited the improvement on investment and premium income and a low level of plan terminations during the year.
