PBGC Single-Employer Program Deficit Decreased in 2008

September 1, 2009 (PLANSPONSOR.com) - The funding deficit for the Pension Benefit Guaranty Corporation's (PBGC) single-employer program decreased from $13.1 billion in 2007 to $10.7 billion in 2008, according to the agency's annual Pension Insurance Data Book.

In 2008, PBGC made periodic payments to almost 640,000 payees and lump-sum payments to 17,000 participants for a total of almost $4.3 billion – a similar amount as in 2007 (see PBGC Databook Offers Insights on Termination ). An additional 495,000 individuals are eligible for future PBGC benefit payments from its single-employer program.

There were 1,590 standard terminations during the year and 19 trusteed terminations. Claims totaled more than $150 million.

The 2008 Data Book includes two new tables with historical information on single-employer frozen pension plans. For 2006, the most recent data available, out of about 34 million insured participants, 2.8 million were in hard-frozen pension plans. Additionally, out of nearly 29,000 plans, 4,851 were hard-frozen.

PBGC explained that when a plan has been hard frozen, employees will receive the benefits they have earned, but no new benefits will be earned after the date that the plan has been frozen.

Information on hard-frozen plans is taken from the IRS Form 5500.

The Data Book includes an analysis of newly insured plans in 2006. The PBGC found the 1,662 newly insured plans could be divided into three groups. The first group consisted of 195 plans created before 2004 (Old Plans). The second group comprised 450 newly created plans that show ties to previous employer plans (New Plans With Ties). The third and largest group, with 1,017 plans, includes newly created plans that have no apparent ties to a previous employer plan (New Plans Without Ties).

A fairly large 18% of these plans were hybrid plans - a larger percentage than the 7.3% of all plans that PBGC insured at the beginning of 2006.

Most of the plans newly insured during 2006 were very small. Almost 60% had five or fewer participants, according to the report. Only 7% had as many as 100 participants.

However, several were quite large, including two in the 80,000-participant range, and the largest plans were New Plans With Ties. The 48 largest plans were in this group and covered 92% of the 405,614 participants of all newly insured plans.

The 450 New Plans With Ties covered 97% of all participants in these newly insured plans. This group of follow-on and spinoff plans included 87% of the plans with 100 to 999 participants and all the plans with 1,000 or more participants.

The 1,017 New Plans Without Ties, the plans most likely to cover new participants, covered just 2.2% of the participants in all newly insured plans. The 195 Old Plans tended to be small plans and covered only about 0.6% of the total. Only one Old Plan had more than 100 participants.

PBGC said the implication of these results is that relatively few additional workers were covered by newly created defined benefit plans.

The analysis found that two-thirds of the newly insured plans came from just three industrial sectors - services (which accounted for more than a third of all newly insured plans), construction (which accounted for 12.6%), and finance, insurance, and real estate (which accounted for almost 21%).

New Plans Without Ties were much more likely than existing plans to be in the construction and service industries and slightly more likely to be in the wholesale trade and finance, insurance, and real estate industries. While New Plans Without Ties generally averaged fewer than nine participants per plan, those of law offices averaged 82 participants.

The Data Book is available on PBGC's Web site atwww.pbgc.gov/docs/2008databook.pdf. Single copies of the publication may be obtained by writing to: PBGC Data Book, Room 12108, 1200 K Street NW, Washington, DC 20005-4026. Requests also may be submitted by FAX to (202) 326-4344. Email:Publications@PBGC.GOV.