Report Highlights Dramatic Multiemployer Insurance Deficit

The Pension Benefit Guaranty Corporation’s (PBGC) Fiscal Year 2017 Annual Report shows that the deficit in its insurance program for multiemployer plans rose to $65.1 billion at the end of FY 2017, up from $58.8 billion a year earlier.

According to PBGC, the increase was driven primarily by the ongoing financial decline of several large multiemployer plans that are expected to run out of money in the next decade.

At the same time, PBGC’s single-employer insurance program continued to improve, as the deficit dropped to $10.9 billion at the end of FY 2017, compared to $20.6 billion at the end of FY 2016. The primary drivers of the continued improvement include premium and investment income and increases in the interest factors used to measure the value of future liabilities.

PBGC Director Tom Reeder says his attention is focused on the “dire financial condition” of the multiemployer program.

“We are engaged with trustees of troubled plans to help them protect benefits and extend plan solvency,” he explains. “We will continue to work with the Trump administration, Congress, and the multiemployer plan community to create solutions so that PBGC’s guarantee is one that workers and retirees can count on in the future. The longer the delay in making the changes needed to improve the solvency of the multiemployer program, the more disruptive and costly they will be for participants, plans and employers.”

PBGC data shows the multiemployer program had liabilities of $67.3 billion and assets of $2.2 billion as of September 30, 2017. This resulted in a negative net position or “deficit” of $65.1 billion, up from $58.8 billion last year.

“The increase of $6.3 billion results largely from 19 plans newly classified as probable claims because they either terminated or are expected to run out of money within the next decade, offset by the reclassification of one plan that is no longer a probable claim due to the implementation of benefit reductions under the Multiemployer Pension Reform Act of 2014,” Reeder explains.

During FY 2017, PBGC reports, the agency provided $141 million in financial assistance to 72 insolvent multiemployer plans, up from the previous year’s payments of $113 million to 65 plans. In the coming years, the demand for financial assistance from PBGC will increase as more and larger multiemployer plans run out of money and need help to provide benefits at the guarantee level set by law. In the PBGC’s most recent projections, the agency estimated that, absent changes in law, its multiemployer program is likely to run out of money by the end of 2025, if not before.

The outlook on the single employer side is much healthier. That program had liabilities of $117 billion and assets of $106 billion as of September 30, 2017. This resulted in a negative net position or “deficit” of $10.9 billion and reflects an improvement of $9.7 billion from $20.6 billion last year.

For more information, visit www.PBGC.gov.