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News & Policy

PBGC Records $7.7 Billion Surplus Despite Sharply Higher Claims in 2001

April 08, 2002

In its Annual Report released today, the Pension Benefit Guaranty Corporation (PBGC) reports a surplus of $7.7 billion for the year ended Sept. 30, 2001, in its insurance program for single-employer defined benefit pension plans. This program protects the pensions of about 35 million people. This result closes out a challenging year marked by fluctuating financial markets and large claims presented by several major pension plans that terminated with significantly underfunded benefit liabilities. The Annual Report also describes PBGC's gains in productivity and customer service during the past year.

Secretary of Labor Elaine L. Chao, Chairman of PBGC's Board of Directors, said, "PBGC's record of accomplishment during a difficult year is encouraging and exemplary. American workers, retirees and their families can be assured that PBGC will continue to protect their interests with diligence and energy in the years ahead."

Also commenting on the results, PBGC Executive Director Steven A. Kandarian said that PBGC is well-positioned to meet future challenges. "The Corporation stands ready to protect the retirement security of American workers and the interests of our nation's private defined benefit pension system," he emphasized.

As of Sept. 30, 2001, PBGC's single-employer program had assets totaling nearly $21.8 billion and liabilities of about $14 billion. The program retained a positive net position of $7.7 billion despite a net loss of almost $2 billion for the year. The loss resulted from a combination of underfunded plan terminations, a loss on equity investments, and actuarial charges. Nevertheless, this marked the sixth consecutive year that the single-employer program reported a year-end surplus after more than 20 consecutive years of deficits that reached $2.9 billion in 1993. The surplus, though diminished, provides the Corporation with some financial cushion against the significant exposure that continues to exist from troubled companies with underfunded pension plans.

The Corporation's separate insurance program for multiemployer plans, which has reported a surplus since 1982, remained financially sound with a positive net position of $116 million despite a loss of $151 million. This program's loss was attributable to an increased allowance for probable losses from future financial assistance. At year-end the multiemployer program had assets of $807 million and liabilities of $691 million and covered about 9.4 million people in more than 1,700 insured plans.

Through its two insurance programs, PBGC paid more than $1 billion in total benefits to nearly 269,000 people during 2001, making this the first year in PBGC's history in which annual benefit payments topped $1 billion. The Corporation is responsible for the pensions of about 624,000 people, including those who will retire in the future, and 2,975 terminated pension plans.

During 2001 PBGC became trustee of 104 terminated single-employer plans covering nearly 89,000 people. While this was the largest one-year increase in the population of plan participants owed guaranteed benefits in the history of the insurance program, the record may not stand long. PBGC projects about 180,000 new participants in 2002, more than double last year's total, as a result of the termination of the pension plans of LTV Corporation and other terminations.

PBGC reported an overall investment loss of $748 million in fiscal year 2001. Unlike 2000, when both fixed-income and equity investments provided strong returns, the Corporation's equity investments in 2001 produced a loss of $2.5 billion compared to the gain of about $1.8 billion from fixed-income investments. Nevertheless, at a time when many ongoing pension plans reported investment losses of 10 percent or more, the PBGC investment loss was only 3.3 percent of total invested funds.

The Annual Report also describes PBGC's efforts to improve customer service. The Corporation took the first steps (including a complete redesign of its Web site) to establish fully electronic business transactions. PBGC also heightened efforts to improve customer satisfaction with other aspects of PBGC operations, in particular by markedly increasing production of benefit determinations and benefit estimates for participants in PBGC-trusteed plans.

The Annual Report includes the annual performance report required by the Government Performance and Results Act. This report details PBGC's progress in meeting the performance goals set under its five-year strategic plan.

PBGC's financial statements received an unqualified audit opinion for the ninth consecutive year. The audit was performed by PricewaterhouseCoopers LLP under the direction and oversight of PBGC's Inspector General.

PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by about 44 million American workers and retirees participating in private-sector defined benefit pension plans. PBGC insures more than 35,000 pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and investment returns.

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PBGC No. 02-17