PBGC Releases Fiscal Year 2005 Financial Results
FOR IMMEDIATE RELEASE
November 15, 2005
WASHINGTON-The Pension Benefit Guaranty Corporation's insurance program for pension plans sponsored by a single employer showed a deficit of $22.8 billion as of September 30, 2005. If events subsequent to the fiscal year had occurred prior to year-end, the deficit in the single-employer program would have been $25.7 billion.
As of September 30, the single employer program reported assets of $56.5 billion and liabilities of $79.2 billion, according to the agency's annual Performance and Accountability Report submitted to Congress today. Accounting standards also required the PBGC to disclose the change in net position that would have occurred as a result of subsequent events. In addition to on-balance-sheet liabilities, the report showed that PBGC's exposure to losses from pension plans sponsored by financially weak employers rose to $108 billion from $96 billion the year before.
"Unfortunately, the financial health of the PBGC is not improving," said Executive Director Bradley D. Belt. "The money available to pay benefits is eventually going to run out unless Congress enacts comprehensive pension reform to get plans better funded and provide the insurance program with additional resources."
For the fiscal year, the PBGC incurred $4.0 billion in losses from completed and probable pension plan terminations while collecting only $1.5 billion in premiums. The insurance program's finances were helped by $3.9 billion in investment income and a $2.3 billion reduction in liabilities due to higher interest rates, leading to an overall net gain of $529 million.
The single-employer program took in 120 terminated pension plans with a total of $10.5 billion in assets and $21.2 billion in liabilities, for an average funded ratio of 50 percent. All but $300 million of this liability was already reflected on the PBGC's balance sheet at the end of fiscal year 2004.
The pension insurance program's exposure to future losses remained high in 2005. Each year 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 2005 financial statements show PBGC's reasonably possible exposure reaching a record $108 billion, up from $96 billion in 2004 and $82 billion in 2003. The PBGC's estimate of the total shortfall in insured single-employer plans remained in excess of $450 billion.
The PBGC assumed responsibility for the pension benefits of an additional 235,000 workers and retirees in 2005, bringing the total number owed a benefit to 1.3 million. The amount of benefits paid increased from $3.0 billion in 2004 to $3.7 billion in 2005 and is projected to rise to $4.4 billion in 2006.
"Often overlooked in discussions of PBGC's finances are the workers and retirees whose benefits are at risk," Belt said. "The PBGC has added more participants to its rolls over the past three years than in the previous 27 years combined. These people may have lost benefits promised to them by their employers and now are counting on the insurance fund to at least pay the amounts guaranteed under law."
The PBGC's separate insurance program for multiemployer pension plans posted a net loss of $99 million in fiscal year 2005, resulting in a fiscal year-end deficit of $335 million compared to $236 million a year earlier. Overall, the multiemployer program has about $1.2 billion in assets to cover $1.5 billion in liabilities. The deterioration in the program's financial condition is due primarily to higher losses for future financial assistance the PBGC expects to provide to multiemployer plans ($204 million) offset by investment earnings ($79 million) and premium income ($26 million). In addition, the program faces $418 million in reasonably possible exposure to pension plans that may require financial assistance in the future, up from $108 million in 2004.
The multiemployer program covers 9.9 million participants in nearly 1,600 plans. The PBGC's estimate of total pension underfunding in the multiemployer system exceeded $150 billion in 2004 and exceeds $200 billion in 2005.
The PBGC's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The financial statements for fiscal year 2005 received an unqualified audit opinion. The audit was performed by Clifton Gunderson 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 30,300 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. 06-06