PBGC's Annual Report Shows First-Ever Surplus
FOR IMMEDIATE RELEASE
March 31, 1997
TODAY, PRESIDENT CLINTON ANNOUNCED THAT THE PENSION BENEFIT GUARANTY CORPORATION (PBGC), WHICH INSURES THE PENSIONS OF MORE THAN 42 MILLION WORKERS IN ABOUT 50,000 PENSION PLANS, HAS REACHED FINANCIAL SOLVENCY. No major terminations of underfunded pension plans and significant income from premiums and investments in 1996 have resulted in a surplus for the first time in PBGC's 22-year history in its largest insurance program -- the single-employer program.
- With assets of $12.04 billion and liabilities of $11.17 billion, PBGC ended fiscal year 1996 with a surplus of $869 million.
- PBGC erased a $3 billion deficit in just three years.
- Premium revenue of $1.17 billion -- up 36% -- and investment income of $927 million contributed to the improved financial condition.
PBGC IS A FEDERAL AGENCY CREATED BY THE EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA) OF 1974 TO GUARANTEE PAYMENT OF BASIC PENSION BENEFITS EARNED BY WORKERS.
- PBGC has two insurance programs covering private-sector defined benefit pension plans -- the traditional pension that promises a specific benefit at retirement, often based on a combination of salary and years of service. The single-employer program covers about 34 million people. The multiemployer program, which covers about 8.6 million people, has had a surplus since 1982.
- The agency receives no funds from general tax revenues. Operations are financed by insurance premiums paid by pension plan sponsors, investment returns, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the trusteed plans.
- PBGC pays benefits according to the provisions of each individual single-employer pension plan up to the limits of PBGC's maximum guarantee, which for plans taken over in 1997 is $2,761 per month ($33,136 annually) at age 65. Most workers in plans taken over by PBGC receive the full benefit they would have received under the plan.
BECAUSE OF THE REFORMS OF THE RETIREMENT PROTECTION ACT OF 1994, WORKERS AND RETIREES CAN REST ASSURED THAT THEIR PENSIONS ARE PROTECTED BY A STRONG INSURANCE AGENCY. The law strengthened funding rules for underfunded plans; PBGC's compliance authority was enhanced; underfunded plans that pose the greatest risk now pay the most for protections; and workers in underfunded plans now get an easy-to-understand notice about their plan's funding level and PBGC guarantees.
PBGC IS NOW RESPONSIBLE FOR PENSIONS OF 440,000 PEOPLE IN 2,300 PLANS IT HAS TAKEN OVER AND PAID $800 MILLION IN BENEFITS TO ABOUT 200,000 OF THESE PEOPLE IN 1996.
- PBGC had reported annual deficits since it was created in 1974, ranging from $12 million in 1975 to $2.9 billion in 1993. Questions had been raised about the ability of the agency to meet its future obligations.
- Today, there are sufficient assets to meet all guaranteed benefits. PBGC's early warning program has prevented pension loss and added over $14 billion in protection to underfunded pension plans as corporations restructured.
- Vigilance continues against any weakening of the insurance program or pension funding in the future.
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PBGC No. 97-22r