PBGC Deficit Continues to Shrink

November 15, 2007 (PLANSPONSOR.com) - The Pension Benefit Guaranty Corporation's (PBGC) insurance program for single-employer pension plans reported a deficit of $13.1 billion in fiscal year 2007, according to the agency's Annual Management Report submitted to Congress.

As of September 30, the single-employer program reported assets of $67.2 billion and liabilities of $80.4 billion, according to a PBGC news release on the report.

“A robust economy, strong investment returns and higher valuation interest factors have combined to reduce PBGC’s current deficit,” said Interim Director Charles E.F. Millard, in the news release. “However, the annual deficit number is really just a snapshot. Much of the change in PBGC’s stated deficit is due to the fact that no large plans failed this year and that higher valuation interest factors resulted in a lower calculation of the Corporation’s liabilities.”

The decline in the deficit was due primarily to investment income of $4.7 billion and a $2.8 billion actuarial credit as a result of higher valuation interest factors. Total return on invested funds was 7.2%. The single-employer program posted income from employer premiums of about $1.48 billion in 2007, up slightly from $1.44 billion in 2006.

The deficit for 2007 is a $5 billion improvement over last year’s $18.1 billion shortfall (See PBGC Deficit Improved $4.7B for 2006 ) and an almost $10 billion improvement from the $22.8 billion deficit reported for fiscal year 2005 (See PBGC Financial Status Still Dire ).

In 2007, PBGC said no new large pension plans were classified as probable losses on its balance sheet. The Annual Management Report  also shows PBGC’s potential exposure to pension losses from financially weak companies decreased to $66 billion, compared to $73 billion in 2006. 

In fiscal year 2007, the single-employer program took in 110 newly terminated pension plans.  The program is responsible for the benefits of about 1.2 million workers and retirees in almost 3,800 pension plans, the news release said. Benefit payments increased to $4.3 billion in 2007 from $4.1 billion in 2006. 

PBGC’s separate insurance program for multiemployer pension plans did not improve in fiscal year 2007. The reported net deficit of $955 million for 2007 is an increase from the $739 million deficit reported for fiscal year 2006. Through its multiemployer program, the PBGC offers financial assistance to insolvent plans. In 2007 assistance totaled $71 million to 36 plans. The multiemployer program has about $1.2 billion in assets to cover about $2.15 billion in liabilities.

The PBGC’s single-employer program insures the pensions of 33.8 million Americans in about 28,900 ongoing plans, while the multiemployer program insures the pensions of more than 10 million Americans in 1,530 plans.