PBGC Deficit Back to 2005 Level

November 13, 2009 (PLANSPONSOR.com) - The Pension Benefit Guaranty Corporation (PBGC) ended fiscal year 2009 with an overall deficit of $22 billion, according to the agency's Annual Management Report submitted to Congress.

That is nearly double the $11.2 billion deficit recorded at September 30, 2008 (see PBGC Funding Deficit Narrows, But… ), and sets the pension insurer back to its 2005 deficit level after years of steady improvements (see PBGC Financial Status Still Dire ). However, it is better than the record deficit of $33.5 billion the agency reported in an interim report to Congress in May (see PBGC Funding Gap Ballooning as Plan Terminations Increase ).  

Single-Employer Pension Plans

The deficit in the PBGC’s insurance program for single-employer pension plans widened to $21.1 billion for the year, $10.4 billion more than the prior-year’s $10.7 billion shortfall. As of September 30, the single-employer program reported assets of $68.7 billion and liabilities of $89.8 billion. 

The main factors for the year-over-year decline in the single-employer program’s net position included a $10.6 billion charge due to an unfavorable change in interest factors, $4.2 billion in losses from completed and probable terminations, a $3.9 billion charge due to passage of time, and $383 million of administrative and other expenses. These amounts were offset by $6.3 billion in investment income, $1.8 billion in net premium income, and a credit of $573 million from actuarial adjustments.  The PBGC’s investment rate of return was 13.2%.

During the year, the single-employer program took in 144 newly terminated pension plans. The program is directly responsible for the benefits of almost 1.5 million workers and retirees in some 4,000 pension plans.  Overall benefit payments in 2009 totaled $4.5 billion, up from $4.3 billion a year ago. The program insures the pensions of 33.6 million Americans in about 27,600 ongoing plans sponsored by private-sector employers.

The Annual Management Report classified 27 large pension plans with total underfunding of $1.64 billion as probable losses on the PBGC balance sheet. The report also shows that the agency’s potential exposure to future pension losses from financially weak companies increased to about $168 billion from the $47 billion booked in fiscal year 2008.

According to the PBGC's Annual Management Report, the insurance program for multiemployer pension plans posted a deficit of $869 million, exceeding last year's $473 million shortfall by $396 million. The multiemployer plan program has about $1.5 billion in assets to cover about $2.3 billion in liabilities.

The PBGC does not become trustee of multiemployer plans, but instead offers financial assistance to insolvent plans. In 2009 such assistance totaled $86 million to 43 plans.

Overall, the multiemployer program insures the pensions of more than 10.4 million Americans in some 1,500 plans.

The 2009 Annual Management Report is here .