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PBGC Report Says Insurance Programs Healthier

The Pension Benefit Guaranty Corporation (PBGC) has released a report projecting that its Multiemployer Program Fund and single employer plans are in better financial shape and will be solvent longer than it had thought. The new projections are contained in the PBGC’s FY 2014 Projections Report, which was released on Sept. 28.

Multiemployer Program Fund

The Multiemployer Program Fund appears to be safe from insolvency for at least the next three years, the PBGC says. In fact, the fund may be solvent longer than that — the PBGC says it is more likely than not that the program's assets won’t be depleted until 2025. The report projects that the program’s fiscal year 2014 deficit of $42.4 billion will decrease to, on average, $28 billion (measured in present value) for FY 2024.

The PBGC attributes the fund’s improved prospects to the new premium revenues anticipated under the Multiemployer Pension Reform Act of 2014, as well as the PBGC’s best estimates of how and when plans will use the new options for benefit suspension and partition that law makes available.

Single Employer Plans

The PBGC projects that its insurance program for single-employer plan, which protects retirement funds of 31 million people in approximately 22,000 plans, will be solvent for the next decade and that its financial condition will continue to improve. None of the 5,000 simulations the PBGC modeled for this program showed insolvency during that period, nor even for 2025. The report projects that the program’s actual FY 2014 deficit of $19.3 billion will drop to an average of $4.9 billion by FY 2024, measured in present value.

A Caveat

While the new report’s projections show that the multiemployer program’s risk of running out of money has decreased, it does not suggest that solvency is permanent. The report still notes that it is still more likely than not that the program’s assets will be depleted in 2025 and that risk increases with time and stands at 92% by 2034. In addition, the projections for the single and multiemployer plans continue to show deficits, not surpluses, into the future.