Fiscal Year 2008 Financial Statement Highlights

·    PBGC's combined financial condition improved by $2.92 billion, reducing the Corporation’s deficit from $14.07 billion as of September 30, 2007, to $11.15 billion as of September 30, 2008.
     

• PBGC’s portfolio incurred a return on investment of -6.5%, in a time of substantial market volatility.

·    The single-employer program’s net position improved by $2.43 billion, reducing the program’s deficit to $10.68 billion. The multiemployer program's net position improved by $482 million, reducing that program’s deficit to $473 million.

• The primary factors in the single-employer program’s net income included a credit of $7.56 billion due to a favorable change in interest factors, $1.43 billion in premium and other income, credits of $826 million from completed and probable terminations and $649 million in actuarial adjustments, which more than offset investment losses of $4.16 billion and a $3.40 billion actuarial charge due to passage of time.

• The primary reasons for the multiemployer program’s improved position included $271 million in credits from financial assistance (due to the favorable increase in interest factors and the deletion of nine plans from the multiemployer probables inventory, which was partially offset by the addition of five new plans), $121 million in investment income, and $90 million in premium income.   

    
·    Liability valuation interest factors increased by 135 basis points to 6.66% at September 30, 2008, from 5.31% at September 30, 2007.  This increase in PBGC’s interest factors resulted in a
      reduction to actuarial charges, due to change in interest rates, of $7.56 billion that more than offsets the actuarial charges for passage of time of $3.40 billion.  The FY 2008 favorable impact due to changes in interest rates was strongly influenced by the unprecedented increase in highly rated long-term corporate bond yields that occurred as a result of credit market volatility at year-end.  This caused a significant drop in PBGC’s Present Value of Future Benefits (PVFB) at September 30, 2008, but could easily reverse itself in the future if interest factors decline.

·    During FY 2008, 67 underfunded single-employer plans were terminated.  As a consequence of PBGC’s previous efforts to thoroughly evaluate its exposure to probable terminations, $148 million of the net claims for these plans had already been reflected in PBGC’s results as of the end of 2007.  The 67 plans had an average funded ratio of approximately 59% and resulted in an aggregate net loss to PBGC of $271 million (see Note 11).   
 

• Premium income decreased during FY 2008 by $65 million.  Higher per participant rates for the flat-rate premium generated an increase in income of $56 million over FY 2007.  Offsetting this additional income were reductions in the Variable Rate Premium (VRP) income by $117 million and in termination premiums by $4 million.  The net VRP income decline was primarily due to plan year 2007 filings reporting improved plan underfunding and an increase in the number of plans eligible for the variable-rate premium “full funding” exemption.  This exemption has been eliminated for plan years starting in 2008.  VRP estimates for plan year 2008 premiums reflect a modest $10 million increase in VRP over plan year 2007 levels.

·    No new large plans were classified as probable terminations in 2008 although twenty smaller plans were added as new probable terminations with underfunding of $233 million.  Probable terminations represent PBGC’s best estimate of claims for plans that are likely to terminate in a future year. 

• PBGC’s total benefit payments to participants increased to $4.29 billion in 2008 from $4.27 billion in 2007.

·    At year-end, PBGC’s estimate of its exposure from underfunding by plan sponsors whose credit ratings were below investment grade or who met one or more financial distress criteria totaled approximately $47 billion, down from $66 billion in 2007.  PBGC classifies these sponsors’ underfunded plans as reasonably possible terminations (see Note 8 and Note 16).

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