PBGC Releases Fiscal Year 2003 Financial Results
FOR IMMEDIATE RELEASE
January 15, 2004
The Pension Benefit Guaranty Corporation's insurance program for pension plans sponsored by a single employer suffered a net loss of $7.6 billion in fiscal year 2003, according to the agency's Annual Report released today. As a result, the program's fiscal year-end deficit worsened to a record $11.2 billion, three times larger than any previously recorded deficit.
"The continued erosion of PBGC's financial condition underscores the need for comprehensive reforms to put pension plans on a path to better funding" said Executive Director Steven A. Kandarian. "While the PBGC has sufficient assets to pay benefits to workers and retirees for a number of years, the growing gap between our assets and liabilities puts at risk the agency's ability to continue to protect pensions in the future."
The PBGC's single-employer program insures the pensions of 34.5 million Americans in 29,500 plans. Of the $7.6 billion net loss for 2003, the two biggest factors were a $5.4 billion loss from completed and probable pension plan terminations, and a $4.3 billion loss due to declining interest rates.
Partially offsetting the single-employer program's losses were premium income of $948 million and investment income of $3.3 billion. Overall, including the assets of terminated plans for which PBGC took responsibility during the year, the single-employer program had $34 billion in assets to cover $45.3 billion in liabilities. The previous year, the program had $25.4 billion in assets to cover $29 billion in liabilities.
Single-Employer Program Exposure
In addition to losses already incurred, the PBGC calculates "reasonably possible" exposure, an estimate of the amount of unfunded vested benefits in pension plans sponsored by financially weak employers. The 2003 Annual Report estimates that PBGC's reasonably possible exposure is $85.5 billion, nearly two and a half times higher than the previous year's estimate of $35.4 billion. Two industries-air transportation at $23.4 billion and primary metals & fabricated metal products at $10.2 billion-account for nearly 40 percent of the total.
PBGC's Multiemployer Insurance Program
The PBGC's separate insurance program for multiemployer pension plans sustained a net loss of $419 million in fiscal year 2003, resulting in fiscal year-end deficit of $261 million. This was the program's first deficit in more than 20 years and its largest deficit ever.
The multiemployer program covers 9.7 million participants in more than 1,600 plans. The sharp reversal in the program's financial condition is due largely to a decline in interest rates and the recording of new probable losses for plans that are projected to become insolvent and require financial assistance from PBGC to pay benefits. The multiemployer program has $1 billion in assets and receives $25 million a year in premium income. PBGC estimates that total underfunding in multiemployer plans is roughly $100 billion.
"This underfunding prompts an additional concern for the multiemployer program because the underfunding is concentrated in mature, often declining industries," Kandarian said. "Given the limited size of the multiemployer program, the failure of a large, highly underfunded plan could overwhelm the program's financial capacity."
Other Key Facts from the FY 2003 Annual Report
- The PBGC became trustee of 152 pension plans covering 206,000 people, up from 144 plans and 187,000 participants the year before. This was the largest one-year increase in the total number of people owed guaranteed benefits by the agency.
- The total number of participants owed or receiving guaranteed benefits from the PBGC, including participants in multiemployer plans receiving financial assistance, rose to 934,000 from 783,000.
- The PBGC paid a record $2.5 billion in benefits, nearly $1 billion more than in 2002.
- Premium income rose to $973 million from $812 million the year before.
- PBGC's total return on invested assets was a positive 10.3 percent in 2003 compared with 2.1 percent in 2002.
The PBGC's financial statements for fiscal year 2003 received an unqualified audit opinion for the 11th consecutive year. The audit was performed by PricewaterhouseCoopers LLP under the direction and oversight of the agency's Inspector General.
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PBGC No. 04-20