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News & Policy

PBGC Releases Fiscal Year 2002 Financial Results

January 30, 2003

The Pension Benefit Guaranty Corporation's insurance program for pension plans sponsored by a single employer swung from a $7.73 billion surplus at the end of fiscal year 2001 to a $3.64 billion deficit at the end of fiscal year 2002, according to the agency's HTML Text Only Version of 2002 Annual Report PDFAnnual Report released today. The $11.37 billion net loss is the largest in the federal pension insurer's 28-year history.

"The PBGC has sufficient assets to pay benefits to workers and retirees for a number of years," said Executive Director Steven A. Kandarian. "But given the amount of underfunding in pension plans sponsored by financially troubled employers, we must examine every available option to strengthen the pension insurance program for the long term."

The PBGC's single-employer program insures the pensions of 34.4 million Americans in 30,660 plans. Of the $11.37 billion in losses for 2002, completed and probable pension plan terminations accounted for $9.31 billion, or more than 80 percent, of the total. Another key factor was the decline in interest rates, which increased the program's liabilities by $1.65 billion. On the investment side, the program recorded a small gain from its portfolio of roughly two-thirds Treasury bonds and one-third stocks. Overall, the single-employer program had $25.43 billion in assets to cover $29.07 billion in liabilities. The previous year, the program had $21.77 billion in assets to cover $14.04 billion in liabilities.

Under generally accepted accounting principles, the PBGC recognizes as a loss both actual and probable pension plan terminations. During fiscal year 2002, $5.91 billion of the $9.31 billion in losses were from "probables." Since the close of the 2002 fiscal year, the agency has moved to assume responsibility for the pension plans of two companies-National Steel and Bethlehem Steel-that together account for $5.16 billion of the probable losses.

During the fiscal year, the PBGC also absorbed a $1.85 billion loss from the underfunded pension plans of LTV Corp. and another $396 million in losses from the pension plans of other steel companies. All told, the steel industry accounted for $7.57 billion of the $9.31 billion in losses from completed and probable pension plan terminations.

Despite record losses and continued exposure to a number of highly underfunded pension plans, the insurance program's $25.43 billion of assets assure that the PBGC will be able to continue paying benefits while it examines ways to improve the financial position of the single-employer program. The PBGC spent the first 21 years of its existence in deficit. For six years, from 1996 through 2001, the agency recorded a surplus.

Other key facts:

  • The PBGC became trustee of 144 pension plans covering 187,000 people, up from 104 plans and 89,000 participants the year before. This represented the largest one-year increase in the number of people owed guaranteed benefits by the agency. The PBGC projects another record number of participants in fiscal year 2003.

  • The total number of participants owed or receiving guaranteed benefits from the PBGC rose to 783,000 from 624,000.

  • The PBGC paid a record $1.5 billion in benefits, nearly 50 percent higher than the previous year.

  • The single-employer program recorded an investment gain of $170 million in fiscal year 2002, compared with a loss of $843 million the year before. The program's equity investments produced a loss of $1.9 billion in 2002 while its fixed-income investments produced a gain of $2 billion.

  • Under the PBGC's Early Warning Program, the agency monitors certain companies with underfunded pension plans to identify corporate transactions that put plan participants and the pension insurance system at risk and to arrange for suitable protections. In fiscal year 2002, the agency negotiated $454 million in contributions and security for pension plans covering 57,000 participants.

  • The PBGC's separate multiemployer program, covering 9.5 million participants in 1,661 plans, remained financially sound. With income of $42 million, the program's net financial position improved to $158 million from $116 million.

The PBGC's financial statements for fiscal year 2002 received an unqualified audit opinion for the 10th consecutive year. The audit was performed by PricewaterhouseCoopers LLP under the direction and oversight of the agency's Inspector General.

PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in about 32,500 private-sector defined benefit 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 by PBGC's investment returns.

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PBGC No. 03-20