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Good News, Bad News in PBGC 2014 Deficit Figures

The Pension Benefit Guaranty Corporation (PBGC) on Nov. 17 released its 2014 annual report, which had good news and bad news for the agency that protects pension benefits for millions of Americans in private-sector pension plans.

The good news: the deficit of the PBGC’s single-employer program, which insures the pensions of nearly 31 million workers and retirees in about 22,300 private-sector single-employer pension plans, fell by nearly 30% to $19.3 billion from 2013’s $27.4 billion. The PBGC assumed responsibility for about 53,000 people in 97 trusteed single-employer plans in FY 2014. Even better news: the program's potential exposure to future pension losses from financially weak companies was estimated in 2014 to be about $167 billion, $125 billion less than 2013’s $292 billion.

The bad news: the deficit for the PBGC’s multiemployer program grew to $42.4 billion, a sharp increase from 2013’s $8.3 billion. The PBGC paid $97 million in financial assistance to 53 multiemployer plans covering 52,000 retirees in FY 2014.

The PBGC attributed the five-fold jump to the expectation that several more large multiemployer plans will become insolvent in the next 10 years. The program insures the benefits of more than 10 million workers and retirees in approximately 1,400 plans. The report says that the program’s assets would meet the needs of plans that are now insolvent, but will not meet the demands they are likely to face in the near future.

Mitigating the bad news about the multiemployer program to a degree is the fact that the PBGC does not itself assume responsibility for administering insolvent multiemployer plans, as it does for single-employer pension plans; rather, it pays benefits out of premiums multiemployer plans pay.

Still, there are consequences to the failure of multiemployer plans. The program could be drained of assets, which in turn would render the PBGC unable to pay guaranteed benefits. And the problem compounds, because the PBGC would then have to rely on premiums from remaining plans in order to support current benefits for beneficiaries of insolvent plans. The end result would be deeper cuts to benefits.

The 2014 report is consistent with projections the PGBC made in its FY 2013 Projections Report. The agency said in that report that it expected the 2014 deficit to be around the levels reported and that the insolvency of some multiemployer plans would be more likely and more imminent.