PBGC deficits rise in fiscal year 2015, annual report says
Published: November 17, 2015 - Pensions & Investments
Deficits in both single-employer and multiemployer pension programs increased
for the fiscal year ended Sept. 30, the Pension Benefit Guaranty Corp. reported
in its annual report released Tuesday.
The single-employer program deficit increased to $24.1 billion, up 25% from
fiscal year 2014, while the multiemployer insurance program deficit was $52.3
billion, up 23% from the previous fiscal year.
The increase in the single-employer deficit was largely due to changes in
interest rates that caused larger liability values, since PBGC officials use
interest rates based on the cost of buying annuities for a terminated plan.
“When the discount rate changes, the dollar impact is bigger,” said a PBGC
official during a background news conference call.
The larger multiemployer program deficit was also due to changes in the
interest rates used to measure the value of future benefit payments, as well as
17 additional multiemployer plans that were terminated in fiscal year 2015 or
are projected to run out of money within the next 10 years.
Out of the $5.7 billion the PBGC paid out in fiscal year 2015, $5.6 billion
covered benefits for participants in failed single-employer plans that the PBGC
took over, up from $5.5 billion total paid out the previous year. The PBGC took
on 65 more single-employer plans in fiscal year 2015, but did not incur any
large losses, the official said on the call.
Multiemployer plans cost that program $103 million.
The PBGC annual report provides a snapshot of what has happened to date,
while its projections report issued in the fall tries to look ahead 10 years.
The fiscal 2014 projection report released in September gave the multiemployer
pension plan program three more projected years of grace before running out of
money in 2025, primarily due to increased premiums. The single-employer program
projections showed continued improvement, with solvency for the next 10 years.
Projection reports are based on a range of estimates of the future status of
insured pension plans and their effect on the PBGC’s financial condition, using
hundreds of different economic scenarios.
“We do not see anything that would cause us to significantly change that
projection,” the PBGC official said during the call Tuesday.
Not factored in the latest annual report is how the Multiemployer Pension
Reform Act of 2014 will affect the PBGC’s finances if more troubled plans take
advantage of PBGC financial assistance for partitions and mergers, or
conversely, if plans are allowed to reduce benefits.
“The multiemployer program continues to rise in importance, and we have a lot
of work to do around it,” said the official, who added that final rules for
distressed multiemployer plans to apply for partitions or for facilitated
mergers could be out by December or January.