Financial Condition of the Single Employer Pension Plan Insurance Program

T-HRD-87-8: Published: Apr 7, 1987. Publicly Released: Apr 7, 1987.

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GAO discussed the financial condition of the Pension Benefit Guaranty Corporation's (PBGC) Single Employer Pension Insurance Program, which generally guarantees workers' vested benefits when a private pension plan terminates. GAO noted that the program is in serious financial trouble because: (1) it had a reported deficit of $3.8 billion as of September 30, 1986; (2) the deficit could reach an estimated $8 billion by 1990; and (3) program benefit payments could render the program insolvent within 15 years. GAO believes that legislation enacted to ease the program's financial difficulties might not ensure the program's long-term financial viability. GAO also believes that Congress might wish to consider: (1) strengthening funding standards and lowering benefit guarantees to help control potential claims; and (2) raising the program's premium rate and the priority of claims in bankruptcy proceedings to better finance claims. GAO stated that it supports PBGC proposals to reduce the program's claims by tightening funding standards and to better finance program costs through a variable premium. GAO concluded that, while it supports the program's intent to protect participants' benefits, the establishment of affordable benefit guarantees might be an essential policy alternative to ensure the program's financial viability.

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