Pension Plans: Government Insurance Program Threatened by Its Growing Deficit
HRD-87-42
Published: Mar 19, 1987. Publicly Released: Apr 30, 1987.
Skip to Highlights
Highlights
Pursuant to a congressional request, GAO assessed the: (1) causes of large claims against the Pension Benefit Guaranty Corporation's (PBGC) insurance program; and (2) potential effects of the Single Employer Pension Plan Amendments Act (SEPPAA).
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Given the uncertainties associated with the long-term effects of SEPPAA on the program's financial condition, Congress may wish to consider additional changes to enhance the program's viability. To help control potential claims against the program, such changes could include: (1) raising the minimum contribution requirements to reduce plans' unfunded benefits; (2) requiring employers to make contribution payments to their plans sooner than 8-1/2 months after a plan year ends; and (3) reducing benefits guaranteed by the program, for example, eliminating coverage of any benefit improvements that become effective within 5 years of plan termination. | Legislation, P.L. 100-203, was signed into law on December 22, 1987. It requires employers with underfunded plans to increase their contributions to plans and for pension plan contributions to be made quarterly. Consideration was given to reducing benefits guaranteed by the program; however, this action was not included in the legislation. | |
| Given the uncertainties associated with the long-term effects of SEPPAA on the program's financial condition, Congress may wish to consider additional changes to enhance the program's financial viability. To enhance the financing of claims that do occur, possible changes include raising: (1) the priority of PBGC claims against employers that are in bankruptcy proceedings; and (2) the premium rate again to provide the revenue needed to retire the program's deficit and pay for projected unrecoverable claims. | P.L. 100-203 was signed into law on December 22, 1987. It requires an employer's unpaid contributions to pension plans be afforded the status of a tax claim, and gives it greater priority in bankruptcy proceedings. It also changed the current PBGC flat-rate premium of $8.50 per participant to a variable rate with a base of $16 that can be increased to a maximum of $50 per participant. |
Full Report
Public Inquiries
Topics
BankruptcyContingent liabilitiesFunds managementInsurance premiumsPension plan cost controlProgram managementPension claimsPensionsTax administrationInsurance claims