PROTECTING BENEFITS

The past year was marked by significant challenges and achievements. PBGC was faced with the terminations of some of the largest underfunded pension plans ever trusteed under the pension insurance program. The Corporation responded with one of its most productive years, issuing more final benefit determinations and providing benefit estimates faster and on a larger scale than in any previous year. The Pension Search Program located its 10,000th missing participant. The Congress increased the multiemployer plan insurance program's maximum benefit guarantee for the first time since establishing the program in 1980.

Single-Employer Program

Through its single-employer program, PBGC oversees terminations of fully funded plans and guarantees payment of basic pension benefits when underfunded plans must be terminated. The single-employer program covers about 35 million workers and retirees in about 33,500 plans.

During 2001 the Corporation processed or began processing the termination of 101 underfunded plans, the vast majority of which were involuntary terminations by PBGC. In most cases termination was necessary because the sponsoring employer had gone out of business, sometimes in earlier years. Terminations processed during the year included some of the largest plans in PBGC's 27-year history, such as Trans World Airlines (36,500 workers and retirees), The Grand Union Company (17,000 workers and retirees), Outboard Marine Corporation (10,000 workers and retirees), Bradlees Stores (8,000 workers and retirees), Northwestern Steel and Wire Company (4,000 workers and retirees) and Laclede Steel Company (4,000 workers and retirees). The end of the fiscal year did not bring a halt to these large terminations, as a Payless Cashways Inc. plan covering more than 6,500 people terminated in November.

After a plan has terminated, PBGC becomes trustee of the plan and administers benefits. In 2001 PBGC became trustee of 104 terminated single-employer plans covering nearly 89,000 people. This represented the insurance program's largest one-year increase in the population of plan participants owed guaranteed benefits.

By the end of the year, PBGC was responsible for a total of 2,944 trusteed plans, including 10 multiemployer plans. An additional 31 terminated single-employer plans were pending trusteeship as the year ended.

From all indications, the number of new participants owed guaranteed benefits is growing at a rate that may dwarf the Corporation's previous peak years of 1991 and 1992. During those two years, when PBGC trusteed the plans of Pan American World Airways and Eastern Air Lines, the Corporation took responsibility for the pensions of more than 140,000 people. In the 18 months since the summer of 2000, the Corporation has taken over the pensions of some 125,000 people, and the terminations of large underfunded plans show no sign of slowing up. To date PBGC has risen to meet this challenge with prompt and complete service to participants. Over the past decade, the Corporation has improved its procedures and automated systems. As a result, PBGC is better prepared to handle rapid workload increases than it was in the early 1990s, but the task that it faces will put these procedures and capabilities to the test.

Benefit Processing: By the end of the year, PBGC was responsible for the current and future pension benefits of about 624,000 participants from single-employer and multiemployer plans. These included 268,600 people who received benefit payments totaling more than $1 billion for the year. This marked the first time that the insurance program's annual benefit payments topped $1 billion. (Chart showing benefits paid annually by PBGC rising from $636 million in 1992 to more than $1 billion in 2001.)

By aggressively managing its workload and its processing of plan terminations and trusteeships, PBGC achieved extraordinary productivity and progress in 2001 even while absorbing the unexpected influx of large plan terminations. During the year, the Corporation issued more than 76,500 benefit determinations, a record number for one year. In reaching this mark, PBGC exceeded 60,000 determinations for the seventh straight year.

Due to the substantial number of new participants owed benefits, the number of outstanding determinations awaiting completion rose for the first time in seven years, leaving about 169,000 determinations to be completed. However, the number of over-aged determinations (those pending completion for more than three years) continued to fall. (Chart showing the number of outstanding benefit determinations falling from about 298,000 in 1992, of which about 144,000 were 3 years old or older, to about 169,000 in 2001, with only 23,400 3 years or older.)

PBGC has now completed virtually all benefit determinations for plans trusteed prior to 1998. The average age of unissued benefit determinations is down to 1.5 years, reflecting the fact that most pending determinations are for plans trusteed within the past two to three years. On average, in 2001 PBGC issued final benefit determinations 3.6 years after the date it had trusteed the participant's plan, meeting the performance goal of 3-4 years set for 2001 under PBGC's strategic plan. This was the least amount of elapsed time the Corporation has ever needed to produce final benefit determinations and a sharp reduction from the average of 5.95 years reported as recently as 1997.

As a sign that the pace of activity will continue unabated in coming months, PBGC also completed 250 plan valuations, another record number for one year. These valuations are a necessary precursor to completing benefit determinations; the quicker they are completed, the quicker the Corporation can issue its final determinations.

PBGC routinely pays benefits in estimated amounts until final determinations are completed. Ninety-four percent of PBGC's final benefit determinations during 2001 were within 10 percent of the estimated benefit provided earlier to participants, exceeding the Corporation's goal for accuracy under its five-year strategic plan.

Appeals Processing: PBGC's Appeals Board reviews appeals of certain PBGC determinations. Most of the appeals are from people disputing PBGC's determination of their benefit entitlement. As in other years, about 2 percent of PBGC's benefit determinations in 2001 were appealed. During the year, the Appeals Board received 1,165 appeals and decided 1,502 cases, reducing its open case inventory by almost 10 percent. PBGC also began looking at ways to re-engineer its appeals process to improve organizational efficiency and customer service.

Standard Terminations of Fully Funded Plans: The marked decline in standard terminations continued, with only 1,565 submitted to PBGC in 2001 as compared to the 1,882 submitted in the prior year. About three-fourths of the fully funded plans terminated in 2001 had 50 or fewer participants.

As a result of the continued high level of compliance with the legal requirements for standard terminations and PBGC's flexible approach to resolving administrative errors, only one termination had to be canceled for failure to comply with legal requirements.

PBGC audits a statistically significant number of completed terminations to confirm compliance with the law and proper payment of benefits. These audits generally have found few and relatively small errors in benefit payments, which plan administrators are required to correct. The errors arise primarily from use of incorrect interest-rate assumptions in valuing lump-sum distributions to plan participants. Due to PBGC's audits in 2001, some 1,460 participants (about 1.1 percent of all participants in audited plans) received more than $1.1 million of additional benefits. This is lower than in previous years, indicating a higher degree of plan administrator conformance to benefit payment requirements.

Pension Search Program: PBGC's Pension Search Program consists of three separate, coordinated efforts to locate missing people owed a pension by a terminated defined benefit plan. Historically, PBGC has conducted extensive searches for people missing from underfunded pension plans for which the Corporation has taken responsibility. Since January 1996 PBGC also has provided a "missing participants clearinghouse" to assist employers terminating fully funded plans; if an employer is unable to locate a former employee, PBGC will accept payment for the benefit and continue searching for the person to allow the employer to complete the termination. As a last means of finding people who have not been found in all previous searches by either their former employer or by PBGC, the Corporation has maintained a Pension Search listing on the Internet since December 1996. These efforts have helped PBGC locate thousands of people who were unaware they were owed a pension benefit.

During 2001, 351 companies asked the clearinghouse to find 5,453 missing participants, some 3,979 of whom were due benefit payments totaling more than $14.7 million. The other 1,474 people were covered by annuity contracts that will pay their benefits when they are found. PBGC was able to confirm addresses for 5,200 missing people in the clearinghouse and to pay 1,372 of them a total of about $4.9 million in benefits.

Additionally, the Pension Search listing on the Internet helped PBGC find 3,700 other people who were owed about $14 million. Over the past five years, the program has helped PBGC locate more than 10,300 people owed about $34 million from terminated plans. As of the end of the year, the total Internet list, which included people PBGC was unable to find through the clearinghouse, included another 13,300 people still to be found who were owed about $43 million in pension benefits. To assist Spanish-speaking users of the Pension Search site, PBGC now offers Instrucciones en Español on its Web site. (The Corporation also provides a Spanish version of its booklet, Finding A Lost Pension.) The Internet listing is found at search.pbgc.gov. During September 2001, PBGC's Internet listing was featured on the Web site FirstGov.gov, along with Internet links for five other federal agencies, under the heading "Government May Owe You Money." FirstGov.gov is the official site for U.S. Government information, services, transactions and forms.

Multiemployer Program

The multiemployer program, which covers about 9.4 million workers and retirees in more than 1,700 insured plans, is funded and administered separately from the single-employer program and differs from the single-employer program in several significant ways. The multiemployer program covers only collectively bargained plans involving two or more unrelated employers. For such plans, the event triggering PBGC's guarantee is the inability of a covered plan to pay benefits when due at the guaranteed level, rather than plan termination as required under the single-employer program. PBGC provides financial assistance through loans to insolvent plans to enable them to pay guaranteed benefits.

The past year saw the first increase to PBGC's maximum benefit guarantee for participants in multiemployer plans since the insurance program was radically reformed in 1980. A provision of the Consolidated Appropriations Act, 2001, signed into law on December 21, 2000, more than doubled PBGC's annual benefit guarantee. For a worker with 30 years of service under a PBGC-insured plan, the maximum annual guarantee increased from $5,850 to $12,870. This change will apply to any multiemployer plan that had not received financial assistance from PBGC during the one-year period prior to the enactment of the law.

Financial Assistance: The multiemployer program received two new requests for financial assistance during 2001. These requests raised to 29 the total number of plans that have received financial assistance from PBGC, out of the more than 1,700 insured plans. Since 1980 PBGC has provided assistance with a total value of approximately $154 million net of repaid amounts. In 2001, 22 plans received financial assistance totaling about $4 million..

Back to Annual Report Index | Back to WWW.PBGC.GOV | PDF version of PBGC's 2001 Annual Report