Underfunded Pension Plans:

Stronger Funding Rules Needed to Reduce Federal Government's Growing Exposure

T-HEHS-94-191: Published: Jun 15, 1994. Publicly Released: Jun 15, 1994.

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Pursuant to a congressional request, GAO discussed its ongoing study of current pension plan funding rules and the impact of proposed pension reform legislation on underfunded plans insured by the Pension Benefit Guaranty Corporation (PBGC). GAO noted that: (1) in 1992, underfunding in PBGC-insured single-employer plans increased to over $50 billion; (2) continued underfunding increases PBGC liability, exposes plan participants to the risk of losing benefits not guaranteed by PBGC, increases premiums for well-funded plans, and could result in a taxpayer-assisted bailout should PBGC become insolvent; (3) current law provides for an offset that either completely eliminates or significantly reduces the number of sponsors subject to the additional funding requirement; (4) S. 1780 would eliminate the offsets provided for in current legislation, increase the number of sponsors required to make additional contributions, and increase the contribution amount; (5) a solvency rule, actuarial restrictions, and increased deficit reduction contributions could increase contributions for underfunded plans; and (6) S. 1780 should be strengthened further to ensure that more sponsors of underfunded plans make additional contributions.

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