Health Report on PBGC

The Pension Benefit Guaranty Corporation (PBGC) was created under the authority of the Employee Retirement Security Act (ERISA) in 1974, to protect the retirement incomes of over 30 million American workers across the private sector, who have defined benefit pensions.

The PBGC funds its pension safety net through premiums that the private companies pay. Additionally, investment income and recoveries from companies that were formerly responsible for the pensions can fill the gap after those individual plans are taken over.

For those who still have their company provided pension, this is the critical institution that will serve as the safety net, if your employer can no longer fulfill their fiduciary responsibility to pay your defined benefit pension check.

With that in mind, it is important to be in tune with the wellbeing of the PBGC.

In 2019, the PBGC held a total $63.7 billion deficit. In response, the federal government came to the rescue with the American Rescue Plan in 2021.

Within that plan, a Special Financial Assistance (SFA) program was created to use federal funds to strengthen multi-employer pension plans with the PBGC.

A massive $36 billion of this was for the underwater Teamster’s Union Central States Pension Fund. According to a statement from the White House, this influx of cash was used for “preventing drastic cuts to the hard-earned pensions of over 350,000 union workers and retirees.”

During certain years, the PBGC was struggling to keep up with influx of companies that were terminating their pension plans. From 2003-2005, over 600 pension plans were ended, yet during the same time frame, the PBGC was only able to take over around 75%, or 450, of those plans.

The same thing happened during 2008/2009, as the PBGC reported over 300 companies ending their pension plans, with the PBGC becoming the trustee of just 230 plans.

Based on a November 2023 PBGC report, it appears that its funding numbers are improved.

This Annual Report marks three consecutive years of positive net financial positions for both of the agency’s insurance programs,” said PBGC Director Gordon Hartogensis.

It outlines improving results of both the Multiemployer Program and Single-Employer Program.

The Multiemployer Program covers pension plans created between multiple employers and a union. According to the PBGC, these plans are typically run by a board of trustees with equal part employer and union trustees.

A Single-Employer plan is a pension plan set up for one company’s employees, such as AT&T or Verizon.

This is the umbrella we and our fellow retirees or future retirees would most likely be covered under, unless you are one of those who accepted a lump sum or received a pension annuity transfer.

The PBGC reports that 20.6 million Americans’ pensions currently remain insured under their Single-employer program.

In 2023, the PBGC Multi-Employer Program provided nearly $176 million in financial assistance to 100 plans covering 80,000 retirees. The Single-Employer Plan paid out over $6 billion in retirement benefits to nearly 920,000 retirees.

According to PBGC records, it assumed fiduciary control of 27 plans in 2023 from companies who terminated their pensions.

Since its inception, the PBGC has become the trustee for over 5,000 pension plans including for companies such as United Airlines, Sears, Brooks Brothers, MacGregor Golf Co., Lehman Brothers, Singer Corporation, and more.

The annual report shows that both of the Multi-Employer and Single-Employer programs reported a net positive position for 2023.

The Multi-Employer program ended the 2023 Fiscal year with just a $1.5 billion surplus, which is up from the year before at $1.1 billion. While the Single-Employment Program had an $8 billion increase from $36.6 billion at the end of 2022 to $44.6 billion in 2023.

Companies pay a premium to the PBGC for serving as their safety net. Depending on when the plan years began and other variables, in the Single-Employer plans, companies pay anywhere from $9 to $686 per participant. For the Multi-Employer Plans, it could be anywhere from $8 to $37 per participant.

Julie A. Su, acting Secretary of Labor and chair of the PBGC board said, “The PBGC Multiemployer Program improved during FY 2023 to a positive net position and is likely to remain solvent for more than 40 years.”