The Pension Benefit Guaranty Corp.'s single-employer program will remain in the black over the next decade, while the multiemployer program could gain another year or two before insolvency, according the agency's latest projections report released Monday.
The report for fiscal year 2019 provides 10-year projections ended Sept. 30, under a range of financial scenarios. As of Sept. 30, 2019, the single-employer program had $46.3 billion in assets, while the multiemployer program had a deficit of $82.3 billion.
Last year's report projected that the multiemployer program would become insolvent by September 2024, while the latest report projects a very high likelihood of insolvency by September 2025 and near certainty by September 2026. PBGC officials attribute the slight improvement to enactment of the Bipartisan American Miners Act of 2019, which relieved financial pressure on the PBGC for the insolvent United Mine Workers of America 1974 Pension Plan.
“The one piece missing from the report is COVID,” said Joseph F. Hicks Jr., vice chairman of the American Academy of Actuaries multiemployer plan committee. “All of the plans in the multiemployer community are looking at how COVID is affecting their plans, and if they have to either shore up the funding status or remove risk.”
With a variety of industries sponsoring those plans, “each fund is having a difference experience with the pandemic,” Mr. Hicks said in an interview. “They are all impacted differently, and they are all going to come out differently.”
The single-employer program's financial picture is shaped mainly by low claims activity and increased premium revenue, the report said.
The PBGC model for the single-employer program was refined in this year's report, with employers' projected pension contribution behavior now assumed to vary based on the specific circumstances and incentives of each plan sponsor.
The projections report does not reflect the risk of corporate bankruptcies due to COVID-19, and while the PBGC single-employer program may look good, “look at the size of the premiums,” said Linda K. Stone, senior pension fellow with the American Academy of Actuaries, in the same interview. “The story on the single side is still the same issue: The size of the premiums is causing exits from the system.”