The Pension Benefit Guaranty Corporation (PBGC) yin and yang continued in 2019, the agency reports. As in recent years, its annual report has good news and bad news — it all depends on which program you’re talking about.
The news, contained in the PBGC’s Fiscal Year 2019 Annual Report, shows continued progress and solvency for the single-employer program. At the same time, it also shows continued problems — and then some — for the multi-employer program.
“We should not neglect the fact that the PBGC’s financial position is a tale of two programs,” wrote Secretary of Labor Eugene Scalia. “The Single-Employer Program continues to improve, but the Multiemployer Program remains in deep deficit.” Scalia, who serves as Chair of the PBGC Board of Directors, adds in the opening statement to the annual report that “The Board is exceedingly concerned with the looming insolvency of the Multiemployer Program and is ready to work with Members of Congress and all stakeholders on a comprehensive and lasting solution to preserve the federal backstop and safeguard pension benefits.”
“The Corporation is in a difficult financial position today,” wrote PBGC Director Gordon Hartogensis. “The Single-Employer Program continues to see improvement; however, it still faces considerable risk. The Multiemployer Program faces a crisis that threatens the retirement security of millions of American workers, retirees, and their families,” he said.
Single-Employer Program
Just two years ago, the PBGC said that it expected that the single-employer program deficit would be eliminated by 2022. But they did that four better and in just one year more than accomplished that goal. As of Sept. 30. 2018, the single-employer program was in the black by $2.4 billion — a $13.3 billion in improvement in just one year. That program had a deficit of $10.9 billion at the end of FY 2017.
And the news got better in 2019, with the single-employer program buttressing its solvency. Its assets at the end of FY 2019 stood at $128.1 billion, and its liabilities amounted to $119.4 billion. The net is +$8.7 billion, $6.3 billion more than the positive balance at the end of FY 2018.
Still, the PBGC is guarded about the good news. “The improvement in the Single-Employer Program is consistent with PBGC’s recent projections, but the program remains exposed to a considerable amount of underfunding,” it writes.
Through the single-employer program, the PBGC paid more than $6 billion benefits to just under 1 million retirees in FY 2019. It also reports that during FY 2019, it became responsible for 51 single-employer plans with more than 103,000 current and future retirees.
Multiemployer Program
While the single-employer program’s ink became blacker, that of the multiemployer program became even more red in FY 2019. The program’s deficit worsened by $11.3 billion and completely reversed all the progress that had been made from 2017 to 2018.
Multiemployer Program Deficit, 2017-2019
| Year | Deficit | Change in Deficit from Previous Year |
| 2017 | $65.1 billion | -- |
| 2018 | $53.9 billion | -$11.2 billion |
| 2019 | $65.2 billion | +$11.3 billion |
The PBGC attributes the worsening of the deficit primarily to lower interest factors used to measure the value of future payments to failed plans; it adds that “the ongoing financial decline of a number of multiemployer plans newly classified as probable insolvencies because they either terminated or are expected to run out of money within the next decade also contributed to the program’s deterioration.” But there is a glimmer of good news, the PBGC says, noting that plans that are no longer probable claims partially offset new liabilities for probable insolvencies.
And the plans served and benefits paid have been consistently growing, and FY 2019 was no exception.
Multiemployer Program Benefits, 2017-2019
| Year | Assistance Paid | Change in Assistance Paid from Previous Year | Multiemployer Plans Helped |
Change in Plans Helped from Previous Year |
| 2017 | $141 million | -- | 72 | -- |
| 2018 | $153 million | +$12 million | 81 | +9 |
| 2019 | $160 million | +$7 million | 89 | +8 |
Another thing that has not changed concerning the multiemployer program is the PBGC sounding the alarm. Says the PBGC, “In the coming years, the demand for financial assistance from PBGC will increase rapidly as more and larger multiemployer plans run out of money and need help to provide benefits at the guarantee levels set by law. Absent a change in law, the assets and future income of PBGC’s Multiemployer Program are only a small fraction of the amounts the agency will need to support the guaranteed benefits of participants in plans that are currently insolvent as well as those expected to become insolvent in the future.”
“Without reforms, our Multiemployer Insurance Program — the backstop that is the last resort for retirees when a plan fails — is very likely to become insolvent in 2025, leaving participants and beneficiaries with significantly less than the level of benefits guaranteed by the PBGC. The alarm bells are ringing, and legislative changes are necessary,” Hartogensis warns.
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