September 257, 2022
PBGC Fiscal Year 2021 Projections Report Shows Improvements in Single Employer, Multiemployer Programs
On September 9, the Pension Benefit Guaranty Corporation (PBGC) released its Fiscal Year (FY) 2021 Projections Report, in which it provides estimates regarding PBGC’s financial condition as of the end of fiscal year 2031. The report reveals an improved financial outlook for both the multiemployer insurance program and the single-employer insurance program.
In a news release, PBGC Director Gordan Hartogensis said that the report shows “both insurance programs are headed in the right direction,” crediting the Special Financial Assistance (SFA) program enacted as part of the American Rescue Plan Act of 2021, which provides eligible plans with additional funds that enable them to pay benefits at plan levels.
According to the report, the net financial position of the Single-Employer Program is projected to have a surplus of $53.3 billion by the end of 2031, as compared to $30.9 billion estimated in 2021. While this is a large projected surplus, it is important to note that the PBGC uses extremely low interest rates to value its liabilities, far lower than the ones applicable to private plans. The surplus would be even larger if the interest rates applicable to private plans were used. In addition, it is noteworthy that PBGC’s reasonably possible liabilities, which generally do not materialize, have dropped very precipitously, indicating strongly that the current surplus is unlikely to dissipate.
As we reported in the November 17, 2021, Benefit Byte, the 2021 annual report showed a surplus in the multiemployer plan program for the first time in many years. The 2022 projections report show further improvement, suggesting that the program will remain solvent through the agency’s 40-year projections. As the agency notes, the projected FY 2031 net financial position of the multiemployer program is positive in 65% of model scenarios, with a median value of positive $4.1 billion but a mean net position of negative $5.1 billion.The PBGC attributes these gains to the SFA as well as favorable plan asset returns in 2021.
As always, the Council continues to guard against legislative efforts to raise PBGC premiums. The positive figures provided by the agency’s FY 2021 report help to reduce the policy impetus for such proposals.