PBGC Releases Fiscal Year 2004 Financial Results
FOR IMMEDIATE RELEASE
November 15, 2004
WASHINGTON-The Pension Benefit Guaranty Corporation's insurance program for pension plans sponsored by a single employer incurred a net loss of $12.1 billion in fiscal year 2004, according to the agency's financial statements released today. The program's fiscal year-end deficit increased to $23.3 billion from $11.2 billion a year earlier. For the first time, the total number of people owed benefits by the PBGC passed 1 million and the total amount of benefits paid passed $3 billion.
"The PBGC is committed to protecting pension benefits, and with $39 billion in assets we can continue to meet our obligations for a number of years," said Executive Director Bradley D. Belt. "But with more than $62 billion in liabilities, it is imperative that Congress act expeditiously so that the problem doesn't spiral out of control. The Administration proposed an initial set of pension reforms last year, and today's report highlights the need for comprehensive reforms that ensure pension plans are better funded."
The PBGC's single-employer program insures the pensions of 34.6 million Americans in 29,600 plans. Of the $12.1 billion net loss for 2004, the two biggest factors were a $14.7 billion loss from completed and probable pension plan terminations and a $1.5 billion charge for actuarial adjustments due to a change in mortality assumptions. Partially offsetting the single-employer program's losses were premium income of $1.5 billion and investment income of $3.2 billion. Overall, including the assets of terminated plans for which PBGC became trustee during the year, the single-employer program had $39.0 billion in assets to cover $62.3 billion in liabilities as of September 30, 2004.
In addition to losses booked, the PBGC calculates "reasonably possible" exposure, an estimate of the amount of unfunded vested benefits in pension plans sponsored by companies at greater risk of default. The 2004 financial statements estimated PBGC's reasonably possible exposure at $96 billion, up from $82 billion a year earlier.
"While the economy is improving, pressures on the pension insurance program are expected to continue," Belt said. "These challenges warrant prompt action. When Congress reconvenes, the Administration will submit a comprehensive proposal that strengthens the funding rules, rationalizes premiums, enhances transparency, and provides new tools to protect the insurance fund."
The PBGC's separate insurance program for multiemployer pension plans posted a net gain of $25 million in fiscal year 2004, resulting in a fiscal year-end deficit of $236 million compared to a deficit of $261 million a year earlier. The multiemployer program covers 9.8 million participants in nearly 1,600 plans. The improvement in the program's financial condition is due largely to a decrease in loss from future financial assistance to multiemployer plans and an increase in investment income. The multiemployer program has about $1.1 billion in assets to cover $1.3 billion in liabilities.
For both programs combined, the total number of participants owed or receiving PBGC benefits in 2004 reached 1.1 million, up from 934,000 the previous year. Total benefit payments rose to $3.0 billion from $2.5 billion. The number of underfunded plan terminations rose to 192 from 155.
The PBGC's financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP). The financial statements for fiscal year 2004 received an unqualified audit opinion. 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 for more than 44 million American workers and retirees participating in more than 31,000 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. 05-10