PBGC Opens up 2001 Data Book

June 27, 2002 (PLANSPONSOR.com) - At a time when the nation's pension insurer is being asked to step in in a growing number of situations, the Pension Benefit Guaranty Corporation (PBGC) has issued some interesting statistics about its operations.

According to the 2001 PBGC Data and Trends, the agency’s single-employer program was in deficit until 1996, with the highest reported deficit $2.9 billion in 1993. That deficit has since turned to a surplus status, reaching a historic high of $9.7 billion in 2000.

Since 1975, the PBGC’s first year of operation, 2,965 terminations of underfunded single-employer plans have resulted in total claims of nearly $7.7 billion. Total annual claims have varied widely during that period, ranging from $30 million in 1984 to more than $1.5 billion in 1991. 

Ten “Engine”

Firms representing the ten largest claims have accounted for more than half of all claims against PBGC from 1975 to 2001. There is also an industry “bias” in the problem category, with terminations by firms in the Primary Metals (28.2%) and Air Transportation (28.5%) industries accounting for over half of PBGC’s claims. An additional 15% of claims have come from sponsors in the Fabricated Metals, with 6.2% of claims, and Machinery industries, with 8.9% of claims. 

Not surprisingly, funded ratios – the ratio of plan assets to benefit liabilities – are often quite low for plans terminating and making claims against the PBGC. In fact, more than 60% of pension claims came from plans that were less than 50% funded, according to PBGC assumptions. Just $430 million of the $7.7 billion in aggregate claims made on the PBGC came from plans with a funded ratio of 75% or more.

Under Covered

Last year PBGC made periodic payments to more than 267,000 payees and lump sum payments to almost 18,000 participants, while an additional 246,000 individuals are eligible for future PBGC benefit payments. In 2001, PBGC paid out more than $1 billion in monthly pension and lump sum benefit payments to retired plan participants or their beneficiaries.

In 2001, PBGC insured about 33,500 single-employer defined benefit plans, down from an all-time high of 112,000 plans in 1985, a result that the PBGC attributes to a large number of terminations among small plans.

Although the total number of participants that the PBGC covers has grown, the percentage of these participants that are active workers fell from 78% in 1980 to 54% in 1999.

The report also offers insights on multiemployer defined benefit pension plans. Unlike the single-employer program, a multiemployer plan termination does not trigger the PBGC guarantee.  Instead a terminated plan continues to pay full plan benefits so long as it has sufficient assets to do so. A plan that does not have enough assets to pay full plan benefits is allowed to reduce, or suspend payment of, that portion of the benefit that exceeds the PBGC guarantee level.

Read more at the PBGC Web site .