Improving Financial Condition of the Pension Benefit Guaranty Corporation and Insured Pension Plans

HEHS-99-37R: Published: Dec 18, 1998. Publicly Released: Dec 18, 1998.

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Pursuant to a congressional request, GAO provided information on: (1) the Pension Benefit Guaranty Corporation's (PBGC) projections of its financial condition and assumptions used to prepare these projections; and (2) the funding status of the plans it insures and its strategy for investing its assets.

GAO noted that: (1) PBGC uses different methodologies to forecast the financial condition of its single-employer and multiemployer insurance programs; (2) PBGC relies on extrapolations of its past claims experience and past economic conditions to develop forecasts for the single-employer program; (3) the optimistic and intermediate forecasts project surpluses at the end of fiscal year (FY) 2007 of $8 billion and $6.9 billion, respectively, while the pessimistic forecast projects a deficit of $17.1 billion; (4) PBGC uses plan-specific historical data in projecting whether multiemployer plans will become insolvent and require its assistance; (5) PBGC projects that the multiemployer program should remain financially strong and that the program's surplus, $219 million in FY 1997, should continue to grow; (6) the funding status of many single-employer plans has improved; (7) between 1980 and 1995, the proportion of fully funded single-employer plans (plans with assets equal to or exceeding benefits earned by participants) increased from 58 percent to 65 percent; (8) overall, funding among multiemployer plans has improved since 1980, and in 1995 about 60 percent of multiemployer plans were fully funded; (9) at the end of FY 1997, PBGC reported having about $15.6 billion in assets available for investment; and (10) in accordance with its investment policy, these assets are invested primarily in equities and fixed income securities.

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