Risk Models Help PBGC ‘Understand What’s Out There’

May 4, 2010 (PLANSPONSOR.com) – Statistical risk modeling simulations by the nation’s private sector pension insurer show its multiemployer plan program averaged a $4-billion deficit in 2019 measured in 2009 dollars.

A news release from the Pension Benefit Guaranty Corporation (PBGC) said the series of multiemployer plan program risk simulations produced a median position of a $2.4-billion deficit in 2019 in 2009 dollars.  The projections come from the PBGC’s new Multiemployer Pension Insurance Modeling System (ME-PIMS), which tracks risk to the PBGC’s multiemployer pension insurance program.

According to the news release, the system produces hundreds of economic simulations, and from them generates a range of outcomes for multiemployer pension plans over the next 10 years.  While not predictions, the ME-PIMS results show the scale of the multiemployer program’s exposure to risk, the PBGC said.

“As the multiemployer program’s exposure to loss continues to grow, we are ramping up efforts to better monitor and manage risk,” said Acting Director Vince Snowbarger, in the news release. “This new modeling system will help us understand what’s out there.  It also will be a useful tool for Congress and other policymakers considering ways to strengthen our ability to protect the multiemployer pensions of almost 10 million Americans.”

In the PBGC’s fiscal year 2009 financial statements, released in November 2009, the multiemployer program posted a record $800 million deficit.  The program’s exposure to possible losses from future pension plan insolvencies soared to $326 million from $30 million in FY 2008.

Currently the PBGC gives assistance to 42 insolvent multiemployer plans, which cover approximately 94,000 workers and retirees.

Similarly, the median modeling outcome for the PBGC single-employer program was $25-billion deficit in 2019 (in present value terms). The agency’s reasonably possible exposure as of September 30, 2009, was $168 billion, compared to $47 billion for fiscal year 2008.

The PBGC’s two pension insurance programs posted a combined deficit of $22 billion as of September 30, 2009.

The agency’s report is here.