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PBGC Releases Annual Management Report for Fiscal Year 2008

November 17, 2008

WASHINGTON- The Pension Benefit Guaranty Corporation ended fiscal year 2008 with its overall deficit reduced by nearly $3 billion, according to the agency's Annual Management Report submitted to Congress today.

The PBGC's insurance program for single-employer pension plans reported a deficit of $10.7 billion, a $2.4 billion improvement over last year's $13.1 billion shortfall. The deficit of the insurance program for multiemployer pension plans was cut in half to $473 million, a $482 million improvement from the $955 million deficit reported a year earlier.

"The PBGC's lower deficit is good news, although it is important to remember that the deficit number is only a snapshot of where we stood on September 30," said Director Charles E.F. Millard. "Successful negotiations with companies in bankruptcy protected workers' pensions and sliced hundreds of millions of dollars in liabilities off our books. Favorable interest rate changes reduced liabilities, and our careful stewardship of the PBGC's investments limited losses to 6.5 percent of assets.

Although the current turbulence in our economy will mean a challenging environment in 2009, the PBGC has the resources to meet its commitments to America's retirees for many years to come."

The decline in the deficit in the single-employer program was primarily due to a $7.6 billion actuarial credit from a favorable change in interest factors, $1.4 billion in premium income, credits of $826 million from completed and probable terminations and $649 million in favorable actuarial adjustments. These amounts were offset by investment losses of $4.2 billion and a $3.4 billion actuarial charge due to passage of time. Total return on invested funds was -6.5 percent.

As of September 30, the single-employer program reported assets of $61.6 billion and liabilities of $72.3 billion. The Employee Retirement Income Security Act of 1974 (ERISA), which established the PBGC, explicitly says that the United States government does not stand behind these liabilities.

The single-employer program posted premium income of about $1.40 billion in 2008, a slight decrease from $1.48 billion in 2007. Congress currently has authority for setting the premium rates companies pay to the PBGC. To help the 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 2008, no new large pension plans were classified as probable losses on the PBGC balance sheet. The Annual Management Report also shows the PBGC's potential exposure to future pension losses from financially weak companies decreased to $47 billion, compared to $66 billion in 2007.

During the year, the single-employer program took in 67 newly terminated pension plans. The program is directly responsible for the benefits of about 1.2 million workers and retirees in 3,850 pension plans. Overall benefit payments remained relatively flat at $4.3 billion from 2007 to 2008. The program insures the pensions of 33.8 million Americans in about 27,900 ongoing plans sponsored by private-sector employers.

PBGC's separate insurance program for multiemployer pension plans has about $1.3 billion in assets to cover about $1.8 billion in liabilities. The PBGC does not become trustee of multiemployer plans, but instead offers financial assistance to insolvent plans. In 2008 such assistance totaled $85 million to 42 plans. Overall, the multiemployer program insures the pensions of more than 10 million Americans in some 1,500 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 2008 received an unqualified audit opinion for the 16th 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 ERISA. It currently insures the basic pension benefits of almost 44 million American workers and retirees in more than 29,000 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. 09-05