Key Issues > Pension Benefit Guaranty Corporation Insurance Programs - High Risk Issue
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Pension Benefit Guaranty Corporation Insurance Programs - High Risk Issue

The Pension Benefit Guaranty Corporation (PBGC)—which insures the pension benefits of nearly 40 million American workers and retirees—has an uncertain financial future, due in part to a long-term decline in the number of traditional pension plans.

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PBGC's financial portfolio is one of the largest of any federal government corporation and, according to PBGC’s 2016 annual report, has almost $100 billion in assets. However, PBGC is High Risk because its financial future is uncertain, due in part to a long-term decline in the number of traditional defined benefit (pension) plans. Through its single-employer and multiemployer insurance programs, PBGC insures the pension benefits of American workers and retirees who participate in nearly 24,000 private sector defined benefit plans.

Since fiscal year 2013, PBGC's financial deficits have grown dramatically. At the end of fiscal year 2016, PBGC's net accumulated financial deficit was $79.4 billion—an increase of about $43.7 billion from the end of fiscal year 2013—and PBGC estimated that its exposure to future losses for underfunded plans was nearly $243 billion. The dramatic increase in PBGC's deficit since 2013 was attributable to a crisis in the multiemployer program, the smaller of its two programs. Since 2013, the deficit in the multiemployer program, composed of about 1,400 plans, had increased by over 600 percent. Meanwhile, the financial position of the larger single-employer program, composed of over 22,000 plans, had improved in recent years, but still accounted for $20.6 billion of PBGC’s overall deficit (see figure).

Figure: PBGC's Net Financial Position of the Single-Employer and Multiemployer Programs Combined

PBGC's Net Financial Position of the Single-Employer and Multiemployer Programs Combined

Various laws have been enacted to strengthen PBGC's financial position. For instance, the Pension Protection Act of 2006 strengthened pension funding requirements for plans. In 2012, the Moving Ahead for Progress in the 21st Century Act included measures to increase premium rates. Both the Bipartisan Budget Act of 2013 and Bipartisan Budget Act of 2015 increased premium rates further.

However, the Highway and Transportation Funding Act of 2014 included provisions that provided single-employer plan sponsors the ability to potentially reduce contributions to their defined benefit pension plans, and the Bipartisan Budget Act of 2015 further extended those provisions. To the extent that sponsors reduce contributions in the short term, they may increase plan underfunding and expose PBGC to greater risk. Prompted by the dramatic increase in PBGC's deficit, the Multiemployer Pension Reform Act of 2014 was enacted in December 2014, with a number of provisions to enhance the long-term viability of the multiemployer program.

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2015 Update to GAO's High Risk ListWednesday, February 11, 2015
  • portrait of Charles A. Jeszeck
    • Charles A. Jeszeck
    • Director, Education, Workforce, and Income Security
    • jeszeckc@gao.gov
    • (202) 512-7215