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About PBGC

Deficit FAQs

    • Q: Does PBGC have enough money to pay pension benefits?

      A: No. PBGC has enough funds to meet its obligations for years, but without changes in PBGC premiums, both the single-employer program and the multiemployer program will run out of money. The multiemployer program will, absent changes, become insolvent first: PBGC estimates that it will do so within 10-15 years. The single employer program will be able to continue to pay benefits for a much longer period (because we take over plans while they still have assets, and those assets can cover benefit payments for years). More information on these issues can be found in our recent Exposure Report.

    • Q: Where does PBGC get its funds?

      A: PBGC doesn't receive any taxpayer dollars. Our benefits are paid for by insurance premiums paid by private pension plans and by the assets and our other recoveries from companies that become bankrupt and whose plans fail.

      PBGC doesn't set its own rates. They are set by Congress in legislation and, unfortunately, they've always been set too low. That's why administrations of both parties have recommended that PBGC be allowed, within limits, to set its own premiums.

    • Q: Some business lobbyists claim PBGC's deficit isn't real. What do you say to that?

      A: We understand why business lobbyists claim our deficit isn't real — because they don't want to pay higher premiums — but their claims aren't true. PBGC's financial reports have been audited and accepted by independent accounting firms who have provided an unqualified opinion for 20 years.

    • Q: How accurate are PBGC's accounts?

      A: PBGC's financial statements are prepared in accordance with generally accepted accounting principles. For 20 years, our financial statements have received an unqualified ("clean") audit opinion by independent auditors retained by, and overseen by, our Inspector General.

    • Q: Are PBGC's liabilities overstated?

      A: We don't think so, and neither do our independent auditors. Long before most financial institutions were required to do so — as they now are — PBGC elected to account for its assets and liabilities on a "mark to market" basis. That means both our assets and our obligations ("liabilities") are valued under today's conditions, not those of the past or hoped for in the future. The discount rates used to determine our liabilities are derived from market quotes for annuities from companies that actually provide the same type of annuities that PBGC's benefits provide.

      On this basis, PBGC reports a very substantial deficit (i.e., our liabilities exceeded our assets). This past year it increased to $34 billion, as of September 30, 2012.

    • Q: Some business lobbyists suggest that PBGC use different accounting. Would that eliminate PBGC's deficit?

      A: No matter how PBGC's deficit is calculated, the agency's liabilities exceed its assets and that deficit has been growing.

      There are some who suggest that PBGC should use other methods to estimate its liabilities than the market test. We don't agree, but even if we did change to another method, PBGC would still have a very substantial deficit. For example, some have suggested that we use corporate bond rates, like employers with ongoing pension plans (even though we only get plans when they cannot go on); if we had, our FY 2012 deficit would still have been some $25-26 billion.

    • Q: Isn't the bulk of PBGC's deficit the result of historically low interest rates? Won't the deficit go away when interest rates rise?

      A: No matter how PBGC's deficit is calculated, the agency's liabilities exceed its assets. We cannot estimate our liabilities based on the average of past decades or on a hope that interest rates will rise.

    • Q: If PBGC has had a deficit for all but 6 of the 38 years it has been in existence, why should we care now?

      A: The 2012 deficit is the largest year-end deficit in PBGC's 38-year history. If PBGC's finances aren't reformed, the agency will eventually run out of money to pay benefits. We cannot ignore our own future financial condition any more than we would of the pension plans we insure.

    • Q: What happens if nothing is done to address PBGC's deficit?

      A: Deferring action now will require more drastic actions in the future. Without the tools to set its financial house in order and to encourage responsible companies to keep their plans, PBGC may face, for the first time, the choice between asking for taxpayer funds or running out of money and undoing the pension safety net. That's a situation no one wants to face.