Plans With Unfunded Benefits

HRD-87-15BR: Published: Oct 22, 1986. Publicly Released: Oct 22, 1986.

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In response to a congressional request, GAO provided information on: (1) the extent to which single-employer defined-benefit pension plans are underfunded; and (2) the effect that underfunded plan terminations have had on the government insurance program's financial viability.

GAO found that: (1) 3,351 of the 14,581 plans were underfunded by about $21 billion, while the other plans had assets that exceeded the value of participants' vested benefits by about $71 billion; (2) about 47 percent of the underfunded plans had assets covering less than 75 percent of the value of the vested benefits and 31 percent had unfunded vested benefits of at least $1 million; (3) the manufacturing industry plans accounted for almost 84 percent of the total unfunded benefits; and (4) although the total number of underfunded plans decreased by about 30 percent between 1981 and 1983, the net amount of unfunded vested benefits increased substantially. GAO believes that, since the contingent liability to the Pension Benefit Guaranty Corporation's insurance program has grown significantly, the program could be in jeopardy if the recent trend in the termination of plans with large amounts of unfunded benefits continues.

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