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Benefits in the News > By Subject >

Actuarial - PBGC reform


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2016 State-By-State Information on PBGC Payments to Retirees
"[This] state-by-state map shows how much PBGC pays in benefits to our participants, listing the dollars and number of people paid in each state. Some of the interesting information you can glean from the 2016 data is that Ohio ranks as the state with the most benefits paid, $557,021,996 to 78,929 retirees; next, in Pennsylvania, 79,687 retirees were paid $464,996,076 in benefits; while 57,874 retirees in Florida received $414,878,111 in benefits." (Pension Benefit Guaranty Corporation [PBGC])
[Guidance Overview] PBGC Walks Back Early Warning Program Expansion (PDF)
"[On] May 10, 2017, PBGC updated the guidance on its website regarding the Early Warning Program. PBGC removed credit deterioration and a downward trend in a company's financial metrics as risk identification factors ... However, PBGC made clear that, in analyzing a transaction under the Early Warning Program, PBGC generally considers a company's credit quality in its analysis.... PBGC clarified that the December guidance was not meant to expand the Early Warning Program and that PBGC has not 'changed the monitoring criteria or the processes involved' in the program." (Groom Law Group)
[Guidance Overview] PBGC Q&As on Rules for Risk Mitigation and Early Warning Program
9 Questions & Answers, updated May 2017. "Did PBGC's December 2016 updated content signify an expansion of the Early Warning Program to include credit deterioration? No. PBGC has not expanded the program or changed the monitoring criteria or the processes involved.... The monitoring criteria reference a participant count of 5,000 or more or an underfunding threshold of $50 million or more. Does PBGC apply these thresholds on a plan-by-plan basis or on an aggregate controlled group basis? PBGC applies the participant count and underfunding monitoring criteria on an aggregate controlled group basis.... Does PBGC use information provided in filings made under section 4010 of ERISA to open an Early Warning Program review? No." (Pension Benefit Guaranty Corporation [PBGC])
2015 PBGC Data Insurance Tables (PDF)
27 pages. "PBGC is now releasing data in groups, as they become available. The first release includes data in the Summary Tables, Claims Tables and Multiemployer Graphical Supplement [showing zone status changes over time, and distribution of administrative expenses]." (Pension Benefit Guaranty Corporation [PBGC])
Retiree-Employee Ratios Are Dooming the Multiemployer Pension
"Even as Congress has taken steps to solve the multiemployer pension problem, the plans continue to face a death spiral. In fiscal year 2016, 10 multiemployer plans went insolvent and requested financial assistance from the PBGC. The federal agency is now giving financial assistance to a record-high 71 multiemployer plans." (Bloomberg BNA)
[Opinion] American Benefits Council Letter to PBGC Urging Review of Early Warning Program
"Suggested changes to the program ... [1] Suspend the program for six months while it is evaluated and reformed.... [2] Reform the criteria for the program.... [3] Obtain board of directors approval for large plan involuntary terminations based on long-run loss determinations.... [4] Provide safe harbors from the Early Warning Program.... [5] Reform the 'sanctions' under the program.... [6] Preclude PBGC from intervening in company businesses without statutory authorization.... [7] Cease publicizing Early Warning Program agreements." (American Benefits Council)
[Opinion] Joint Trade Association Letter to House Speaker Paul Ryan, Opposing Increases in PBGC Premiums
"Congress has increased premiums four times over the past decade, going from $30/person in 2006 to a scheduled $80/person in 2019. The decision to increase these premiums has not been driven from sound pension policy, but rather a need for additional revenue to pay for other, unrelated government programs." (American Benefits Council and seven other employer and professional organizations)
PBGC Adds Credit Deterioration, Cash Flow Decline to Early Warning Factors It Monitors
"The federal pension insurance agency has for more than 20 years monitored corporate transactions and events through its Early Warning Program (EWP). In December 2016, the PBGC updated the program's overview on its website and added 'credit deterioration' and a 'downward trend in cash flow or other financial factors' to its watch list.... The new additions may lead to a PBGC inquiry, even if none of the other corporate transaction warning signs listed is present." (Compensation.BLR.com)
[Opinion] U.S. Chamber of Commerce Comment Letter to PBGC on Alternative Methods for Computing Withdrawal Liability
"The Chamber believes that widespread implementation of the two-pool alternative withdrawal liability arrangements could be helpful in stabilizing the multiemployer pension system.... [It] would be helpful to highlight areas where requests have been deficient or highlighting information that is necessary for approval.... Moving away from a prescriptive list [of information required from plan sponsors] would minimize the burden of employers and plans having to provide information that is not necessary for the PBGC's determination." (U.S. Chamber of Commerce)
State-by-State PBGC Pension Plan Payments
"PBGC paid more than $5.6 billion (that's 'billion' with a 'b') to 840,000 retirees in 2015 ... This clickable map lists the total amount and number of people paid in each state, broken down by congressional district." (Pension Benefit Guaranty Corporation [PBGC] Blog: Retirement Matters)
[Opinion] Letter to Congressman Renacci Supporting Proposed Legislation to Move PBGC Premiums Off-Budget
"We believe that PBGC premiums should be increased only as needed to ensure retirement benefits are adequately protected.... This is not only an issue of protecting American's retirement benefits; it is also an issue of good governance. PBGC premiums are only used by the PBGC for their intended purpose. The premiums cannot be used to pay for other programs, although the increases have been used to 'pay' for other unrelated programs over the years. This double-counting of funds is simply an accounting gimmick and does nothing to address the deficits we face." (The ERISA Industry Committee (ERIC), ASPPA College of Pension Actuaries, and five other industry and employer organizations)
[Opinion] Letter to Congressman Renacci Supporting Proposed Legislation to Move PBGC Premiums Off-Budget
"We believe that PBGC premiums should be increased only as needed to ensure retirement benefits are adequately protected.... This is not only an issue of protecting American's retirement benefits; it is also an issue of good governance. PBGC premiums are only used by the PBGC for their intended purpose. The premiums cannot be used to pay for other programs, although the increases have been used to 'pay' for other unrelated programs over the years. This double-counting of funds is simply an accounting gimmick and does nothing to address the deficits we face." (The ERISA Industry Committee (ERIC), American Benefits Council, ASPPA College of Pension Actuaries, and four other industry and employer organizations Committee on Investment of Employee Benefit Assets Inc. National Association of Manufacturers The Society for Human Resource Management U.S. Chamber of Commerce WorldatWork)
[Opinion] Senate Takes Up Fight to Move PBGC Premiums Off-Budget
"[The Pension and Budget Integrity Act of 2017] would ensure that [PBGC] premiums are no longer counted in general fund revenue, eliminating the incentive for legislators to raise premium costs to pay for unrelated initiatives and programs. That change would help to stabilize single-employer pension plans and provides more certainty for America's companies and their employees." (The ERISA Industry Committee [ERIC])
PBGC Premiums in Their Historical Context -- Ouch!
"The impact of recent premium increases is clear in the PBGC's latest annual report ... Commenting on it in a year-end review, Michael Moran of Goldman Sachs noted that while PBGC flat rate premium income jumped by 12% in 2016, variable-rate premium (VRP) income leapt up by 81%. Startling as that observation is, it perhaps does not do justice to just how big the increases are." (Russell Investments)
[Guidance Overview] PBGC Sticks Its Head Out of the Water and Issues RFI Regarding Hybrid (Two-Pool) Multiemployer Pension Plans
"The PBGC in its RFI is particularly interested in learning about the terms and conditions that apply to new and existing employers that enter into hybrid arrangements, including alternative benefit schedules, special withdrawal and mass withdrawal payment terms, alternative withdrawal liability arrangements, and the pros and cons of such hybrid arrangements for participants and the PBGC as the insurer of multiemployer plans." (Seyfarth Shaw LLP)
[Guidance Overview] PBGC Requests Information About 'Two-Pool' Alternative Method for Allocating Withdrawal Liability for Multiemployer Plans
"Comments must be received on or before February 21, 2017, to be assured of consideration.... PBGC is asking for answers to questions about the possibility that more plans will request approval of two-pool methods in the future, the nature of the relief granted employers transitioning to the new pool, other alternatives the trustees considered, the risk of loss to participants and the PBGC created by the two-pool arrangement, and what factors PBGC should take into consideration in assessing such risks." (Cheiron)
2016 Annual Report of the PBGC Participant and Plan Sponsor Advocate (PDF)
25 pages. "[N]otable themes emerge in the challenges participants and plan sponsors encounter with PBGC such as: [1] Interactions with PBGC are adversarial and defensive, rather than collaborative and businesslike, in working toward a mutually agreeable resolution; [2] There is a lack of transparency in working with PBGC to understand the corporation's assumptions, resulting in costly and time-consuming interactions with the agency which can go on for months and even years; [3] PBGC is unwilling to exercise judgment and discretion with participant claims and sponsor penalties, relying almost exclusively on automatic and mechanical-like approaches; and [4] PBGC demands documentation, costly analysis, and historical records that businesses, governmental entities, or participants rarely, if ever, retain." (Pension Benefit Guaranty Corporation [PBGC])
PBGC Updates Early Warning Program Information
"In an effort to increase transparency about PBGC's single-employer Early Warning Program, PBGC recently enhanced and reorganized the information available on its website. Under this program, PBGC works with certain employers to preserve their pension plans and protect the retirement security of their workers and retirees. The updated information can be found on PBGC's Risk Mitigation & Early Warning Program webpage. We're also inviting dialogue on the program and encouraging practitioners to send technical questions to webmaster@pbgc.gov, with the goal of posting a new set of Early Warning Program FAQs in early 2017." (Pension Benefit Guaranty Corporation [PBGC])
[Official Guidance] Present Value of PBGC Maximum Guarantee for 2017
"These values apply to benefits with annuity starting dates in 2017. The 2017 table was developed using the 417(e) segment rates for August 2016 (1.39%, 3.27% and 4.18% respectively) for plan years beginning in 2017 and the 417(e) applicable mortality table for 2017." (Pension Benefit Guaranty Corporation [PBGC])
[Opinion] ERIC Submits Comments on PBGC Missing Participants Rule
"[1] Support expansion of the program to all defined contribution plans and not limited to only terminated defined contribution plans; [2] Increase the fee waiver threshold from $250 to $1,000, or lower the $35 fee for balances between $251-$1,000 to encourage utilization of the program; [3] Maintain the voluntariness of the program; and [4] Encourage exploration of electronic rollovers to qualified individual participant accounts." (The ERISA Industry Committee [ERIC])
The Financial Condition of the PBGC Multiemployer Program
25 presentation slides. "Multiemployer plans have approximately $1 trillion in defined benefit (DB) pension liabilities covering 10 million private-sector employees in unionized industries ... [M]ost systems have significant underfunding.... Unfunded pension liabilities: burden public and private employers and their current employees; create uncertainty about benefits for beneficiaries; expose the federal government to losses from PBGC's insurance of private pensions. Underfunding has been exacerbated by: structural problems with the funding of pension plans ... employers' switching from defined benefit to defined contribution plans; a weak economy." (Congressional Budget Office [CBO])
PBGC's Single-Employer Pension Deficit Narrows, But Multiemployer Deficit Deepens
"The single employer deficit narrowed to $20.6 billion as of Sept. 30, the end of fiscal year 2016, from $24.1 billion a year earlier; while the multiemployer deficit rose to $58.8 billion from $52.3 billion a year earlier ... The improvement in the single-employer program was attributed primarily to investment and premium income and a low level of plan terminations during the year." (Pensions & Investments)
PBGC Annual Report 2016: Keeping Our Commitment to America's Workers (PDF)
144 pages. "[In FY2016, the PBGC]: [1] Paid $113 million in financial assistance to 65 insolvent multiemployer plans. [2] Through the Early Warning Program, negotiated almost $3 billion in financial assurance to protect more than 367,000 people in plans at risk from corporate events and transactions.... To pay timely and accurate benefits in FY2016, the [PBGC]: [1] Assumed responsibility for more than 46,000 people in 76 trusteed single-employer plans. [2] Started paying benefits to almost 35,000 retirees in single-employer plans. [3] Paid $5.7 billion to nearly 840,000 retirees from more than 4,700 failed single-employer plans." (Pension Benefit Guaranty Corporation [PBGC])
[Opinion] Too Underfunded for MPRA?
"[T]he new administration will have to come to grips with the United Mine Workers of America 1974 Pension Plan, whose $4.1 billion in assets and $9.7 billion in liabilities makes it too severely underfunded to qualify for MPRA reductions.... About $2.3 billion out of the $3.8 billion that the plan supposedly had in assets as of June 30, 2015 was a guess." (Burypensions)
CRS Report: Multiemployer Defined Benefit Pension Plans -- A Primer and Analysis of Policy Options (PDF)
30 pages. "Congress established separate PBGC programs to insure single and multiemployer DB pensions. For example, PBGC becomes the trustee of terminated single employer DB pension plans. PBGC does not become the trustee of multiemployer DB pension plans; rather, it makes loans to insolvent multiemployer DB plans so the plans may continue to pay participants' guaranteed benefits. Although PBGC has sufficient resources to make loans to smaller multiemployer DB plans, the insolvency of a large multiemployer DB pension plan would likely result in a substantial strain on PBGC's multiemployer insurance program." [Report R43305, updated Nov. 3, 2016] (Congressional Research Service [CRS])
CRS Report: A Primer on the Pension Benefit Guaranty Corporation (PDF)
21 pages. "In FY2015, PBGC insured about 23,600 DB pension plans covering about 40 million people. It paid or owed benefits to 1.5 million people. PBGC is the trustee of 4,706 single-employer plans. PBGC provided financial assistance to 57 multiemployer pensions.... Most workers in single-employer plans taken over by PBGC and multiemployer plans that receive financial assistance from PBGC receive the full pension benefit that they earned." [Report 95-118, Nov. 3, 2016] (Congressional Research Service [CRS])
[Official Guidance] PBGC Guarantee Limit for Single-Employer Plans Increases for 2017
"[T]he guarantee limit for single-employer plans that fail in 2017 will be higher than the limit that applied for 2015 and 2016.... The increase is not retroactive; payments to retirees whose plans terminated before 2017 will not change.... Unlike the single-employer formula, the multiemployer guarantee is not indexed (i.e., it remains the same from year to year) and does not vary based on the retiree's age or payment form." (Pension Benefit Guaranty Corporation [PBGC])
Notes from Meeting of Actuaries 'Intersector Group' with PBGC, September 2016 (PDF)
4 pages. Topics include: [1] MPRA exclusion of certain contribution increases required by funding improvement and rehabilitation plans from withdrawal liability -- timing and scope of regulations ... [2] MPRA partitions -- evolution of PBGC philosophy on non-impairment provision ... [3] Policy on refunding premiums when sponsor learns a participant died with no spouse/beneficiary entitled to plan benefits several years in the past ... [4] 4010 filings ... [5] Viability of PBGC multiemployer program ... [6] Discussion issues raised by PBGC representatives. (American Academy of Actuaries, Conference of Consulting Actuaries, Society of Actuaries, and ASPPA College of Pension Actuaries [ACOPA])
PBGC Proposal Could Halt Plan Mergers, Grocers Say
"Attempts to save struggling multiemployer pension plans could be halted by proposed rules issued by the [PBGC], according to the grocery-chain Kroger Co. and a coalition of food and dairy companies. The proposed rules are intended to help plans that are in 'endangered,' 'critical' or 'critical and declining' status to merge with or transfer their assets to healthier plans to prevent -- or, in some cases, merely postpone -- insolvency. The rules would 'prevent mergers and transfers that are in the best interests of plan participants and that lessen the risk to the PBGC for guaranteed benefits,' the Cincinnati-based company said[.]" (Bloomberg BNA)
Options to Improve the Financial Condition of the PBGC's Multiemployer Program (PDF)
35 pages. "In 2014, lawmakers enacted changes ... [which] modestly improved the outlook for the multiemployer program, but claims for financial assistance are still projected to greatly exceed the program's resources over the next 20 years. Policymakers and others have proposed additional changes to improve the financial position of PBGC and the overall health of multiemployer pension plans. CBO analyzed the effects of several types of proposed changes[.]" (Congressional Budget Office [CBO])
Text of PBGC Report to Congress on Sufficiency of Premiums Under MPRA
25 pages. "Projected premiums at the MPRA legislated rates ... become insufficient to pay average projected financial assistance obligations during FY 2024.... The range of potential [premium] increases is wide, ranging from 59 percent to 85 percent for 10 year solvency and from 363 percent to 552 percent for 20 year solvency.... A well designed [premium] increase may encourage additional contributions, encourage continued participation in plans, and strengthen the multiemployer system. A poorly designed premium increase may encourage employer withdrawals and accelerate plan insolvency with a resulting cost to plan participants and a need for even larger premiums." (Pension Benefit Guaranty Corporation [PBGC])
The Federal Insurance Fund Protecting Millions of Pensions Is Running Out of Cash
"The insurance fund for single-employer plans is financially stable, but the fund for multi-employer plans is woefully underfunded.... The thinking was that multi-employer plans would be able to turn to the other companies in the pension fund if one employer fell short in contributions or went out of business ... But over the past several years, multi-employer plans have faced financial challenges similar to those of the Central States fund ... Two severe market downturns over roughly 10 years left the plan without enough money to pay expected benefits. At the same time, many companies went out of business, leaving the plan with a smaller number of employers available to pitch in and cover that shortfall." (The Washington Post; subscription may be required)
Threatened Pensions Safe -- for Now
"The Central States decision forestalls pension cuts that would have taken effect this summer, but it does not resolve the problem. Plan administrators say it could be insolvent within a decade.... But the Treasury decision does not settle the matter. The plan could still refile its application to make cuts.... The Obama administration's 2017 budget proposes to solve the problem by raising $15 billion in higher [PBGC] premiums for multiemployer plans, and by giving PBGC the power to set rates without congressional approval." (Mark Miller, via Reuters)
[Guidance Overview] PBGC Proposes Relief for Penalties on Late Payment of Premiums
"Under the proposed regulation, the penalties are cut in half. Thus, the 1% self-correction penalty becomes 1/2 percent with a 25% cap, and the 5% penalty becomes 2-1/2% with a cap of 50%. The $25 dollar floor is eliminated.... The PBGC proposal does not change the requirement to pay interest on the late premium payments. The rate of interest is mandated by law and not subject to the discretion of the PBGC." (Cheiron)
[Guidance Overview] PBGC Proposes to Reduce Late Premium Penalties (PDF)
"Under the Proposed Regulation, if a sponsor self-corrects the missed payment, the penalty would be 0.5% per month with a maximum of 25% of the unpaid premium. If PBGC issues a written notice for the premium delinquency, the proposed penalty is 2.5% with a maximum of 50% of the unpaid premium. The Proposed Regulation also provides that penalties could be further reduced for sponsors with a history of timely paying their premiums." (Groom Law Group)
PBGC Director: Budget Proposal Passage Would Rescue Agency
"The multiemployer insurance program can remain solvent for at least 20 years, however, if the administration's budget proposal is enacted, [PBGC Director W. Thomas Reeder] said. The proposal would give the agency's board of directors the authority to increase premiums from plan sponsors to the aggregate tune of $15 billion over 10 years[.]" (Bloomberg BNA)
[Official Guidance] Text of PBGC Proposed Rule: Payment of Premiums; Late Payment Penalty Relief
12 pages. "[PBGC] proposes to lower the rates of penalty charged for late payment of premiums by all plans, and to provide a waiver of most of the penalty for plans with a demonstrated commitment to premium compliance. PBGC seeks public comment on its proposal." (Pension Benefit Guaranty Corporation [PBGC])
[Opinion] The Fight to Move PBGC Premiums Off-Budget Goes to Capitol Hill
"The Pension and Budget Integrity Act of 2016 ... would ensure any future pension premium increases are only used towards retiree payments from the [PBGC] and not double counted for budget scoring purposes ... It removes a budget gimmick that will help to stabilize single-employer pension plans and provides more certainty for America's companies and their employees." (The ERISA Industry Committee [ERIC])
PBGC Reports Multiemployer Program Likely to Be Insolvent in 10 Years Without Large Premium Increases
"The multiemployer insurance program's deficit stood at $42.4 billion as of September 30, 2014, with assets of only $1.8 billion compared to liabilities of $44.2 billion.... [PBGC] found a greater than 50% chance that it would run out of money by 2025 and a 91% chance that it would run out of money by 2032. This is the result even if failing plans reduce benefits to the fullest extent allowed by MPRA." (Cheiron)
Study Finds Little Difference in Pension Guarantee Between PBGC and Annuities
"Annuities transacted as a result of corporate defined benefit derisking transfers are as safe and could be safer than the pensions would be remaining in retirement plans under ERISA and PBGC protection, suggests a study by the National Organization of Life & Health Insurance Guaranty Associations [NOLHGA].... 'One chief thrust of [statutory insurance company] regulation is to require that all insurers maintain -- at all times -- high-quality assets in amounts that comfortably exceed the value of their liabilities,' [Peter G. Gallanis, president of NOLHGA]. 'I do not suggest that solvency is not a concern of the regulatory system applicable to pensions -- clearly it is. But neither pension plans nor (more importantly) plan sponsors are regulated for solvency in the same comprehensive and constant manner.... An insurance company simply cannot be underfunded and continue to operate without regulatory intervention.' " (Pensions & Investments)
Employers Express Growing Concern Over PBGC Premiums
"Of the 66% of respondents who are changing their DB plans, about a third (32%) are considering higher contributions, while the same number (32%) are considering lump sum payouts. About one in five (17%) are considering partial pension risk transfer in the form of annuities." (PLANSPONSOR)
Proposed 'Exit Premium' Upon Withdrawal from an Underfunded Multiemployer Plan Would Penalize Employers Who Play by the Rules
"The Obama administration's fiscal year 2017 budget ... proposes that the [PBGC] impose an exit premium on employers that withdraw from unfunded multiemployer plans. This exit premium, along with a proposed variable-rate premium for underfunded multiemployer plans, is part of the administration's effort to increase revenue to the PBGC by $15 billion over the next decade." (Ogletree Deakins)
Obama Proposes Cadillac Tax, PBGC Premium Changes
"Under the proposal, in any state where the average premium for 'gold' coverage on the state's individual health insurance marketplace exceeds the Cadillac-tax threshold, the tax trigger would be set at the level of that average gold premium.... [T]he administration says it wants to hold the line on premiums employers pay the [PBGC] and shift to the agency's Board -- comprised of the secretaries of Labor, Treasury and Commerce -- the authority to set premium levels. Congress last year sharply raised PBGC single-employer premiums, but the administration says more hikes are not necessary." (Business Insurance; free registration required)
[Guidance Overview] PBGC Issues Final Partition Rule
"The PBGC discussion makes it clear that the application must contain sufficient documentation information to support the Trustees' conclusion, and the PBGC will make its own determination whether all reasonable measures have been exhausted. The PBGC's determination will be made after consultation with the Participant and Plan Sponsor Advocate. This raises the questions of the level of documentation needed to support the Trustees' conclusions and the consequences of a negative determination by the PBGC." (Cheiron)
Is the PBGC Worth Propping Up?
"General president of the Laborers' International Union of North America [Terry O'Sullivan] thinks the half-million union members he represents at $35 billion LIUNA are headed for disaster. That's because, as insured members of the [PBGC], they're paying into a mandatory program with a whopping $52.3 billion deficit.... He wants a wholesale exit from the PBGC and asserts that his union can take care of participants who fall victim to employer bankruptcies without help from the troubled federal agency." (Institutional Investor)
Text of PBGC Participant and Plan Sponsor Advocate 2015 Annual Report (PDF)
30 pages. Participant Issues: [1] Complex benefit entitlement and omitted participant cases; [2] Consultation with the Participant Advocacy Groups and PBGC; and [3] Interagency coordination and participant benefit entitlements. Plan Sponsor Issues: [1] PBGC must improve relations with plan sponsors; [2] Premiums and premium penalties need a fresh look; [3] PBGC's early warning program; and [4] Reportable events regulations. (Pension Benefit Guaranty Corporation [PBGC])
[Opinion] What Happens When PBGC Premium Increases Break the Current System?
"[W]hy a headcount premium? Given that PBGC's exposure is based on benefits up to a certain limit, shouldn't the flat-rate premium be based on the total insured benefits in a plan? ... [It's] understandable that PBGC would like to go to a 'variable' variable-rate premium, with lower premiums for financially strong companies and higher premiums for financially weak ones. With these dramatic premium increases, that policy is being implemented in a crude way -- all the financially strong companies will fund and only financially weak companies will remain." (PLANSPONSOR)
Moody's Predicts PBGC Premiums Will Become Unaffordable
"Moody's predicts that despite current and potential future premium increases, there will come an inflection point where plan sponsors will not be able to afford premiums and the PBGC will run out of money. The PBGC estimates there is a greater than 50% chance it will be insolvent by 2025, and extrapolates a 90% chance of insolvency by 2031." (PLANSPONSOR)
[Opinion] Industry Questions Wisdom of Latest PBGC Rate Hikes
"[Art Scalise, Managing Actuary at Cammack Retirement Group,] has been in his role at Cammack for nearly three years, after spending 16 years working at Aon Hewitt ... Throughout that time the PBGC has slowly shifted from being perceived as an ally of the DB system to a major obstacle to its survival....  'What's going to happen when interest rates start to rise for real and the liability the PBGC is reporting starts to dwindle significantly?' he asks. 'What happens if rates rise enough to get plans close to 100% funding, what are you going to do with any excess monies? Do they refund it? Do they give credits to the plans somewhat? We don't know what they will do.' " (PLANSPONSOR)
PBGC Posts Record Deficit for FY2015
"The deficit racked up by the federal agency that insures pensions for about 40 million Americans has increased 23 percent to $76.4 billion. The agency's program for so-called multi-employer pension plans continues to account for a large share of the deficit, $52.3 billion.... The deficit reported Tuesday for the year ended Sept. 30 was the widest in the 41-year history of the Pension Benefit Guaranty Corp. It has now run shortfalls for 13 straight years." (The Washington Post; subscription may be required)
PBGC Annual Report: Nearly $6 Billion in Pension Benefits Paid to Retirees in FY 2015
"The [PBGC] released its Annual Report, showing the agency paid $5.7 billion to more than 800,000 people in failed pension plans, similar to the amount of payments PBGC made in FY 2014. PBGC also continued its high standard of customer service with a retiree satisfaction score of 91.... PBGC's multiemployer insurance program reported a negative net position or 'deficit' of $52.3 billion, compared with $42.4 billion last fiscal year-end. The larger deficit is due to changes in interest factors that increased multiemployer program liabilities.... The single-employer program deficit increased to $24.1 billion, up from $19.3 billion reported in the previous year." (Pension Benefit Guaranty Corporation [PBGC])
[Opinion] The Pension Coalition Fights to Stop PBGC Premium Increases
"[On Nov. 17,] a letter with signatures from more than 100 companies, including members of the Pension Coalition, was sent to Congress, expressing outrage and concern over recent increases to PBGC premiums. The letter urges lawmakers to protect job-creators, workers, retirees, and their retirement security by opposing any further increases in premiums paid to the PBGC by sponsors of single-employer defined benefit plans." (The ERISA Industry Committee [ERIC])
[Guidance Overview] Future DB Plan Costs to Rise (PDF)
"While required funding has declined in recent years, sponsors are simply delaying payments. Continuing to take advantage of funding relief measures will likely lead to higher ultimate plan costs due to heavier PBGC premiums, tax payments, and future plan funding.... By 2019, PBGC flat-rate premiums will increase almost 22% from 2016 levels and variable-rate premiums will increase more than 26% over the same period." (Lockton)
[Guidance Overview] Increased PBGC Premiums on the Horizon for DB Plans
"Prior to some last minute haggling ... the proposed budget being discussed already provided for an increase in the PBGC premium rates. However, lobbyists for the farming and agriculture industry were able to negotiate the removal of a cap on the amount of insurance provided for crop insurance, requiring revenue to be raised somewhere else.... [T]he additional revenue came on the backs of defined benefit plan sponsors by means of an additional increase in the PBGC premium rates." (McDonald Hopkins)
[Opinion] Wall Street and Corporate Execs Turn the Screws on American Workers
"This is the new pension normal. CEO compensation which includes lavish pensions is soaring to obscene levels while companies are looking to slash pension costs, offloading them to insurers or employees, or if they go belly up, pensions become the problem of some cash-strapped government pension agency which backstops pensions and slashes benefits.... In the U.S., there's a dangerous shift in pension policy which will come back to haunt the country as social welfare costs skyrocket and pension poverty soars, placing more pressure on an ever growing debt problem." (Pension Pulse)
[Opinion] Budget Deal Raises DB Premiums Without Regard for Sound Policy
" 'PBGC's recent Fiscal Year 2014 Projections Report confirmed that the financial condition of the single-employer pension program has significantly improved and has ample assets to pay benefits well into the future. The irony is that by continually increasing premiums -- including on fully-funded plans -- Congress and the President are compelling more and more employers to exit the system which shrinks the premium base on which the PBGC relies,' [American Benefits Council President James A. Klein] noted." (American Benefits Council)
[Guidance Overview] CRS Insight: Brief Description of Pension Provisions in the Bipartisan Budget Act of 2015 (PDF)
2 pages. "[T]he Bipartisan Budget Agreement of 2015 contains a number of provisions that would affect [1] the premiums that pension plan sponsors pay to the [PBGC] and [2] the amount of contributions that the sponsors of defined benefit (DB) pension plans are required to make on an annual basis. These provisions would result in an increase in revenues to the U.S. Treasury and offset provisions in the bill that are unrelated to pension plans." [CRS Insight IN10385, Oct. 28, 2015] (Congressional Research Service [CRS])
[Opinion] Budget Deal Hikes Pension Premiums Again
"It's at least ironic -- some stronger words come to mind -- that the same Congress and presidential administration that have taken numerous steps aimed at improving retirement savings now support an action that would only hasten the trend of pension plan sponsors freezing or closing their plans.... By law, the premiums that pension-plan sponsors pay to the PBGC cannot be used for anything but PBGC programs. Yet the [CBO] records the premium increases as general revenues. Put simply, it's an accounting trick on the level of one that would get a publicly held corporation busted by the [SEC]." (CFO)
You're About to Get Too Expensive for Your Employer's Pension Plan
"[E]very person in a [defined benefit plan covered by the PBGC] will get more expensive at the stroke of a pen. Employers are already deeply concerned about the extent and uncertainty of future pension liabilities and are trying to shed them. The proposed increase in the budget legislation would push even more pension plans to manage costs any way they can, including reducing participant head count[.]" (Bloomberg)
[Opinion] The Debt Ceiling Deal -- This Is Just Sad
"PBGC's 'deficit' (itself a questionable index of PBGC's financial condition) is not, and for 10 years has not been, the product of underwriting losses (that is, inadequate premiums vs. claims). The deficit is the result of: [1] the failure of PBGC to hedge against declines in interest rates ... and [2] a chaotic, incoherent and constantly changing investment policy.... The actual result of these premium increases is that premium revenue will go down, as sponsors bail out of the DB system because of ... premium increases." (money vs. time)

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