PBGC Deficit Improved $4.7B for 2006

November 15, 2006 (PLANSPONSOR.com) - The Pension Benefit Guaranty Corporation's (PBGC) insurance program for single-employer pension plans posted a deficit of $18.1 billion for fiscal year 2006, according to the agency's Annual Management Report.

The PBGC reported a deficit of $22.8 billion for fiscal year 2005 (See PBGC Financial Status Still Dire ). The agency attributes the $4.7 billion improvement to airline relief provisions in the Pension Protection Act of 2006, passed in August. According to a PBGC press release, the airline relief provisions contributed to a sharp reduction in the amount of “probable” liabilities reflected on its balance sheet.

As of September 30, 2006, the single-employer program reported assets of $60 billion and liabilities of $78.1 billion, the release said.  In addition, the reportshowed the PBGC’s potential future exposure to losses from pension plans sponsored by financially weak employers decreased to $73 billion, compared to $108 billion in 2005. The agency attributed this reduction in part to higher interest rates, and improved credit ratings and plan funding among some employers.  Total underfunding of insured single-employer plans decreased to approximately $350 billion, compared to an estimated $450 billion in 2005.

The single-employer program took in 94 terminated pension plans with a total of $600 million in assets and $1.1 billion in future benefit liabilities in fiscal 2006, according to the release. As in 2005, the PBGC was responsible for the pension benefits of 1.3 million workers. However, the amount of benefits paid increased to $4.1 billion from $3.7 billion, and is projected to rise to $4.8 billion for fiscal 2007.

Meanwhile, the PBGC’s reported its separate insurance program for multiemployer pension plans posted a net loss of $404 million in fiscal year 2006, versus a $99 million net loss in 2005 – increasing the program’s net deficit to $739 million from $335 million recorded a year earlier. Reasonably possible exposure to pension plans that may require financial assistance in the future declined to $83 million from $418 million in 2005. The agency estimated total pension underfunding in the multiemployer system at $150 billion in 2006, down from about $200 billion in 2005.

The Annual Management Report was submitted to Congress on Wednesday.