Pension Plans:

Hidden Liabilities Increase Claims Against Government Insurance Program

HRD-93-7: Published: Dec 30, 1992. Publicly Released: Dec 30, 1992.

Additional Materials:

Contact:

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO reviewed the Pension Benefit Guaranty Corporation's (PBGC) pension plans and its vulnerability to unfunded liabilities, focusing on: (1) factors which cause hidden liabilities; (2) the impact on recent claims against the pension insurance program; and (3) PBGC ability to control these factors.

GAO found that: (1) PBGC exposure to private pension unfunded liability claims totalled $2.7 billion, which included $990 million in hidden liabilities; (2) when pension plans terminated with insufficient assets, PBGC frequently absorbed unfunded liabilities which were considerably greater than the plan reported; (3) 81 percent of the hidden liabilities increased because of pension plan liabilities and decreases in pension plan assets; (4) differing actuarial assumptions including interest rates, mortality rates, and retirement age accounted for 31 percent of discrepancies between the reported plan liabilities and PBGC calculations; (5) reasons for reductions in pension plan assets included lump sum payments, annuity purchases, unpaid contributions, market losses, inappropriate asset use, and asset overvaluation; (6) 25 percent of PBGC liability resulted from company pension plan shutdown benefits; (7) PBGC has few tools to control its exposure to unfunded liabilities, since PBGC guarantees worker pensions without regard to the amount of unfunded liability; (8) PBGC inability to restrict claims has created an institutional moral hazard for plan sponsors by giving them incentives to shift their liabilities onto PBGC; and (9) tools which could assist in controlling hidden liabilities could impose additional costs on plan participants, plan sponsors, and the government.

Feb 24, 2021

Jan 19, 2021

Oct 30, 2020

Sep 24, 2020

Aug 28, 2020

Aug 13, 2020

Jun 16, 2020

Feb 27, 2020

Jan 9, 2020

Dec 18, 2019

Looking for more? Browse all our products here