PBGC Reports First Financial Surplus
FOR IMMEDIATE RELEASE
March 31, 1997
For the first time, the Pension Benefit Guaranty Corporation (PBGC) reports a yearend financial surplus in the 1996 Annual Report sent to the President and the Congress today. Insurance premium revenue for underfunded pension plans and investment gains, along with an absence of major plan terminations, enabled the agency to reverse a history of deficits.
"PBGC's financial results capped a year of important accomplishments. We are building a sound pension insurance system to keep retirement secure. But, we must remain vigilant against any weakening of the insurance program or pension funding in the future," said Cynthia A. Metzler, Acting Secretary of Labor and Chairman of PBGC's Board of Directors.
PBGC reported a positive net position, or surplus, of $869 million in its single-employer plan insurance program at the end of 1996, based on assets of more than $12 billion and liabilities of nearly $11.2 billion. Contributing to the improved financial condition was investment income exceeding $900 million and premium income of more than $1.1 billion. Premium income reflected the combined effect of increased pension underfunding and higher premiums paid by underfunded plans as a result of the Retirement Protection Act of 1994.
The single-employer program had reported a deficit every year since PBGC's creation in 1974. By 1993, the deficit had grown to $2.9 billion.
"We are building a financially strong, well-managed insurance program. At the same time, we will continue to provide the best possible service to workers, retirees, and employers," said John Seal, Acting Executive Director of PBGC.
The separate multiemployer plan insurance program remained strong with a net surplus of $124 million. The multiemployer program covers about 8.6 million people and the single-employer program covers about 33 million people.
The agency reported a number of major accomplishments for 1996. PBGC paid about $792 million in benefits to nearly 200,000 people, an increase of about 10 percent over fiscal year 1995. In all, the agency was responsible for the pensions of about 441,000 people and 2,348 terminated pension plans.
PBGC's enforcement efforts and Early Warning Program continued to generate additional funding and security from employers to protect the pensions of workers and retirees in underfunded plans. In 1996, PBGC negotiated 11 settlements valued at more than $1 billion. At the end of the year, the agency was involved in 81 active litigation cases in state and federal courts and 788 bankruptcy cases.
The agency also advanced in technology, with automated systems for premium accounting and management of participant and legal caseloads that significantly upgraded operations and customer service. A new communications network began linking PBGC's field benefit offices with the centralized systems, and a World Wide Web Home Page expanded public access to PBGC publications, information, and regulations.
This year's financial improvement marks a new stage in the agency's financial management. PBGC has corrected problems in its financial management, resulting in clean audit opinions in each of the past four years, including 1996. Both GAO and OMB removed the agency from their high-risk lists in 1995.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by more than 42 million American workers and retirees participating in private-sector defined benefit pension plans. PBGC insures about 50,000 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 investment returns.
Growth of PBGC Assets, Liabilities, and Deficit (or Surplus)
1975 - 1996 (Single-Employer Program)
(Dollars in millions; deficit in parentheses)
* Deficit for 1975 reflects combined results of single-employer and multiemployer programs; all other years reflect single-employer program only.
** In 1986, PBGC temporarily reported a deficit of $3.826 billion, based on assets of $1.74 billion and liabilities of $5.566 billion, which reflected the short-term inclusion of three underfunded LTV Steel plans restored to LTV administration in the next year.
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PBGC No. 97-22R