Pension Benefit Guaranty Corp.'s single-employer program is improving, but the funding crisis for multiemployer pension plans is not, said the agency's fiscal 2013 projection report released Monday.
The report projects that the current $24.7 billion single-employer deficit will shrink to $7.6 billion by 2023, and is “highly unlikely” to run out of money in the next decade. PBGC officials credit strong market returns, rising interest rates and higher PBGC premiums.
For some multiemployer pension plans, market improvements are not enough to solve severe underfunding problems that are pushing the plans toward insolvency. Those troubled plans could cause the agency's current deficit of $8.3 billion to grow to $49.6 billion by 2023, according to the projection report. Nearly 1 million participants in those troubled plans “are likely to experience significant benefit reductions.” Benefits for all multiemployer plan participants could be cut even more if the PBGC runs out of money entirely in the multiemployer program, an event the agency said in a statement “is highly likely” in 10 years, without premium increases or other changes.
The report notes several uncertainties about its projections, including not knowing which plans will fail, its own premium income and market returns on PBGC assets. The projections represent a range of scenarios, from conservative to optimistic. The annual exposure reports based on actuarial evaluation are required by law. PBGC officials say also they intend to analyze how voluntary plan terminations by plan sponsors will impact its premium base.
In fiscal 2013, PBGC paid $89 million in benefits for 44 multiemployer plans and $5.4 billion in benefits for single-employer plans.
Deborah Forbes, executive director of the Committee on Investment of Employee Benefit Assets, which represents more than 100 of the largest U.S. corporate pension funds with more than $1.7 trillion in retirement plan assets, said the agency has had only five years without a deficit in its single-employer plan since the PBGC was started in 1974. “The real question is can (the PBGC) pay benefits? The answer is yes,” Ms. Forbes said in an interview.
The full report is available on the PBGC's website.