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PBGC Releases Financial Results for Fiscal Year 2007

November 14, 2007

WASHINGTON- The Pension Benefit Guaranty Corporation's insurance program for single-employer pension plans reported a deficit of $13.1 billion in fiscal year 2007, according to the agency's Annual Management Report submitted to Congress today. The bottom line for 2007 represents a $5 billion improvement over last year's $18.1 billion shortfall.

"A robust economy, strong investment returns and higher valuation interest factors have combined to reduce PBGC's current deficit," said Interim Director Charles E.F. Millard. "However, the annual deficit number is really just a snapshot. Much of the change in PBGC's stated deficit is due to the fact that no large plans failed this year and that higher valuation interest factors resulted in a lower calculation of the Corporation's liabilities. Over the longer term, PBGC must exercise prudent stewardship of its assets, and will continue to seek a more complete array of financial tools, such as premium-setting authority, in order to meet our obligations to America's retirees."

As of September 30, the single-employer program reported assets of $67.2 billion and liabilities of $80.4 billion. ERISA, the federal pension law that established PBGC, explicitly states that the United States government does not stand behind these liabilities.

The decline in the deficit was due primarily to investment income of $4.7 billion and a $2.8 billion actuarial credit as a result of higher valuation interest factors. Total return on invested funds was 7.2 percent.

The single-employer program posted premium income of about $1.48 billion in 2007, up slightly from $1.44 billion in 2006. Congress currently has authority for setting the premium rates companies pay to PBGC. To help PBGC attain solvency and pay benefits to future retirees, the Administration has proposed granting the Corporation the ability to set premiums, just as private-sector insurers do.

In 2007, no new large pension plans were classified as probable losses on the PBGC balance sheet. The Annual Management Report also shows PBGC's potential exposure to pension losses from financially weak companies decreased to $66 billion, compared to $73 billion in 2006.

During the year, the single-employer program took in 110 newly terminated pension plans. The program is directly responsible for the benefits of about 1.2 million workers and retirees in almost 3,800 pension plans. Overall benefit payments increased to $4.3 billion in 2007 from $4.1 billion in 2006. The program insures the pensions of 33.8 million Americans in about 28,900 ongoing plans sponsored by private-sector employers.

PBGC's separate insurance program for multiemployer pension plans reported a net deficit of $955 million for 2007, up from the $739 million deficit reported a year earlier. The PBGC does not take in multiemployer plans, but instead offers financial assistance to insolvent plans. In 2007 such assistance totaled $71 million to 36 plans. Overall, the multiemployer program has about $1.2 billion in assets to cover about $2.15 billion in liabilities. It insures the pensions of more than 10 million Americans in some 1,530 plans.

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 2007 received an unqualified audit opinion for the 15th consecutive year. Clifton Gunderson LLP performed the audit under contract with the Corporation's Inspector General, who oversees the audit.

PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently insures the basic pension benefits of almost 44 million American workers and retirees in 30,460 private-sector defined benefit pension plans. The Corporation 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. 08-09