Compliance

PBGC Multiemployer Program Still Projected to Become Insolvent

However, the single-employer program is likely to eliminate its deficit within the next three to seven years.

By PLANSPONSOR staff editors@plansponsor.com | August 07, 2017
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The Pension Benefit Guaranty Corporation (PBGC) insurance program for multiemployer pension plans, which covers more than 10 million Americans, is likely to run out of money by the end of 2025, according to the agency’s FY 2016 Projections Report

This is the same projection for the multiemployer program as last year. However, projections for PBGC's insurance program for single-employer pension plans, which covers about 28 million people, show that its financial condition is likely to continue to improve. The program is highly unlikely to run out of money in the next 10 years, and is likely to eliminate its deficit within the next three to seven years.

The Projections Report is PBGC's annual actuarial evaluation of its future operations and financial status. The report provides a range of estimates of the future status of insured pension plans and their effect on PBGC's financial condition, based on hundreds of different economic scenarios.

The agency says, absent changes in law or additional resources, this year's report projects that the multiemployer program's FY 2016 deficit of $59 billion will increase, with the average projected deficit (looking across multiple economic scenarios) rising to almost $80 billion (in nominal dollars) for FY 2026.

Under the Multiemployer Pension Reform Act of 2014, multiemployer plans that project insolvency within the next 20 years must notify participants that the plan is running out of money.

More than 1.2 million people are now in about 100 “critical and declining” plans. As these plans become insolvent, participants’ benefits will be reduced to the amounts guaranteed by the PBGC under current law. In a recent insolvency, this resulted in benefit cuts of more than half for over 40% of the plan’s participants.

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