The Pension Benefit Guaranty Corporation's insurance program for single-employer pension plans posted a deficit of $18.1 billion in fiscal year 2006, down from $22.8 billion shortfall recorded a year ago, the agency said.
The $4.7 billion net improvement is attributable mainly to the airline relief provisions in the Pension Protection Act that led to a sharp reduction in the amount of "probable" liabilities reflected on the agency's balance sheet.
"The PBGC's financial condition appears to have stabilized for the time being," says Interim Director Vince Snowbarger. "Our current assets can cover pension payments coming due for a number of years into the future, and our exposure to additional losses has declined."
As of September 30, the single-employer program reported assets of $60 billion and liabilities of $78.1 billion. In addition to on-balance-sheet liabilities, the report showed the PBGC's potential future exposure to losses from pension plans sponsored by financially weak employers decreased to $73 billion, compared to $108 billion in 2005. Higher interest rates, and improved credit ratings and plan funding among some employers were factors for the reduced risk of claims. Total underfunding of insured single-employer plans decreased to approximately $350 billion, compared to $450 billion estimated in 2005.
During the year, the single-employer program took in 94 terminated pension plans with a total of $600 million in assets and $1.1 billion in future benefit liabilities, for an average funded ratio of about 50 percent. All but $200 million of this liability was already reflected on the PBGC's balance sheet at the end of fiscal year 2005. The program insures the pensions of 34 million Americans in about 28,800 plans.
The PBGC was responsible for the pension benefits of 1.3 million workers and retirees in 2006, reflecting no net change from 2005. The amount of benefits paid increased from $3.7 billion in 2005 to $4.1 billion in 2006 and is projected to rise to $4.8 billion in 2007.
The PBGC's separate insurance program for multiemployer pension plans posted a net loss of $404 million in fiscal year 2006, versus a $99 million net loss in 2005, increasing the program's net deficit to $739 million from the $335 million recorded a year earlier. The $305 million increase in net loss is due primarily to a projected $257 million increase in loss from providing financial assistance to multiemployer plans, partially offset by a $32 million increase in premium income.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits for 44 million American workers and retirees participating in over 30,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by PBGC's investment returns.