PBGC Multiple Employer Insurance Program Deficit Increases
PBGC’s Multiple Employer Program secures the pensions of approximately 10.8 million Americans in 1,400 insured plans and is likely to become insolvent by fiscal 2025 and will almost certainly become insolvent by the end of 2026. Following the insolvency of the program, PBGC will only have incoming multiple employer premium income to assist insolvent plans. Such a trajectory could leave participants and beneficiaries with much less than the guaranteed level of PBGC benefits and could also leave them in doubt about their retirement security. As a result, PBGC is calling on Congress to come together and consider new legislation that could save the Multiple Employer Program.
By way of background, the PBGC defines a multiple employer plan as a pension plan sponsored by two or more unrelated employers under collective bargaining agreements with one or more unions. They are most often found in industries where workers move from one employer to another, such as trucking, food retailing, construction, mining, and the garment industries.
The “multiple employer” plan should not be confused with the “multiple employer pension plan” (MEPP). A “multiple employer” plan is defined as follows:
“A plan maintained by more than one employer that allows pooling of plan assets for investment purposes and reducing the cost of managing the plan. A multi-employer plan maintains separate accounts for each employer so that contributions provide benefits only for employees of the contributing employer. There are no collective bargaining agreements that require contributions in a multiple employer plan. “
“Multi-employer plans” are 401 (k) plans, so there is no role for PBGC and no potential liability for PBGC.
Factors causing PBGC deficiency
As of September 30, 2019, the Multiple Employer Program had liabilities of $ 68 billion with assets of $ 2.9 billion. These numbers equate to the fiscal year 2019 deficit of $ 65.2 billion. Although assets increased modestly from fiscal year 2018 to fiscal year 2019, it was not enough to offset total program liabilities, which increased from $ 56.2 billion to $ 68 billion. This leads to the question of what is the cause of the increase in program liabilities.
Fiscal year 2019 cites that the increase in the deficit is mainly due to changes in interest factors, “which resulted from decreases in market interest rates, actuarial charges related to the expected interest on the liability for benefits and the addition of new plans added to the inventory of probable insolvency of multiple employers “. “In this sense,” probable bad debt inventory “means plans that are beginning to have problems and will likely need assistance from the PBGC.
The Multiple Employer Program had losses of $ 11.7 billion for providing financial assistance to insolvent and probable plans. These losses include, “change[s] in interest factors of $ 10.6 billion for identified probable plans, charges of probable new plans of $ 1.9 billion, and expected interest charges on benefit liabilities of $ 1.5 billion. “In addition, fiscal year 2019 was 15 new plans with net claims of $ 2 billion, program administrative expenses of $ 40 million, as well as other aggravating factors.
Additionally, in fiscal year 2019, PBGC paid $ 160 million in financial assistance to 89 insolvent multi-employer plans. By the end of the year, 85 of the 89 insolvent plans for fiscal year 2019 are expected to continue to need financial assistance covering some 66,900 participants currently receiving guaranteed benefits. In addition, 27,300 more people are entitled to benefits once they retire. The other four plans were closed with annuity purchases.
The PBGC continues to follow the changes required by the Multiple Employer Pension Reform Act of 2014 (MPRA); Take advantage of the partition, transfer and merge options that are available for eligible declining and critical plans. Additionally, during fiscal year 2019, the PBGC conducted eight audits of multi-employer plans covering more than 10,000 individuals. These audits ensure that assets in terminated and insolvent plans are being used effectively and in compliance with laws and regulations. The PBGC also meets its three main goals, which are: to preserve plans and protect retirees, to pay timely and accurate benefits, and to maintain high standards of stewardship and accountability.
Single employer program
The Single Employer Program net position for fiscal year 2019 improved by $ 6.2 billion, resulting in a positive net position of $ 8.7 billion. Based on fiscal 2019, factors that contributed to the program improvement include “$ 14.8 billion gain in investment income, $ 6.4 billion in net premiums and other income, and $ 811 million in actuarial adjustment credits.” . The favorable factors were offset by “$ 12.3 billion in charges due to interest factors, which resulted from decreases in market interest rates, $ 3 billion in charges due to expected interest related to the liabilities of PBGC as of September 30, 2018, $ 502 million in administrative, investment and other expenses, and $ 91 million in losses from probable and complete terminations. “
The PBGC did not include anything in the Fiscal Year 2019 Report to suggest what they can do differently in the future to improve the Multiple Employer Program, although the PBGC did ask Congress to enact new legislation to save the Multiple Employer Program. .
