The report released Monday said that the agency’s assets amounted to $57.63 billion in 2005, up from about $40 billion in 2004, and its total liabilities came to $80.7 billion, up from about $63 billion in 2004.For single-employer and multi-employer programs, the PBGC reported a net loss of $23.1 billion as of September 2005, an improved position compared to the $23.5 billion loss for the year before. The agency attributes the upturn to a decrease in its liabilities because of increasing interest rates and strong investment returns.
The former chief of the PBGC, Bradley Belt echoed that reasoning in June when he made the claim that rising interest rates would help cushion the insurer’s liabilities. He said that growing interest rates would prompt employers to put less money aside to pay future pension benefits because they will expected a better return on their investments (See Former PBGC Head: Rising Rates Could Help Pension Underfunding ).
According to the annual report, the PBGC now insures the pensions of 44.1 million workers and retirees, with 34.2 million in single-employer plans and 9.9 million in multi-employer plans. For its single-employer plans, which make up the lion’s share of the agency’s assets, the assets were marked at $56.47 billion and the liabilities at $79.246 billion. For multi-employer plans, assets were $1.16 billion and liabilities came in at $1.495 billion for 2005.
In 2005, companies terminated 120 defined benefit plans, and the PBGC saw an 82% spike in the number of participants, bringing the total to 269,000 for the year, according to the annual report.
According to the report, the single-employer plans had a shortfall of $22.8 billion in 2005. The agency predicts that median claims over the next 10 years will amount to $1.4 billion per year, and the average claims are predicted to be higher at $1.7 billion per year.
The PBGC does not predict much of a fluctuation in the deficit for single-employer plans from 2005 to 2015, in which it forecasts a median deficit of $21.8 billion and an average deficit of $23.8 billion. Part of the reason that the PBGC expects the deficit to drop by 2015 is because it increased the premiums companies must pay for their plans to be insured from $19 to $30 per participant (See Senate Approves PBGC Premium Hike ).
According to the Executive Director’s section in the annual report, Belt, who stepped down in June, wrote that he thought the most “dramatic event of the year was United Airlines’ decision to turn its pension plans over to the PBGC, resulting in the largest corporate pension default in US history.” The airline was underfunded by about $10 billion, and retirees and workers forfeited more than $3 billion in earned pension benefits as a result.
The agency also absorbed the DB plans of Aloha Airlines in April (See PBGC To Absorb $117M of Aloha Airlines Pension Shortfall ).
While some groups have lamented that the agency’s ability to take on more plans is nearing saturation (See PBGC Financial Status Still Dire ), others like the American Benefits Council have argued that such a dismal forecast is overblown (See Report Says PBGC’s Crisis is Overblown).