General Projections Report Questions
- The Projections Report provides multi-year projections of the financial condition of PBGC's single-employer and multiemployer insurance programs.
- The projections are estimates, not predictions — PBGC's computer models run hundreds of differing economic scenarios, resulting in a range of possible outcomes.
- The Annual Report shows PBGC's current financial position as of the end of the fiscal year.
- The Projections Report starts from the current financial position and then simulates PBGC's financial condition 10 years into the future and beyond under many different economic scenarios.
Multiemployer Plans / Program
- A multiemployer plan is a collectively bargained pension plan involving two or more unrelated employers, usually in a common industry, such as construction, supermarket chains, trucking, textiles or coal mining.
- Multiemployer plans vary in size from small local plans covering a few hundred participants, to large regional or national plans covering hundreds of thousands.
- Multiemployer plans typically involve only one union.
- Multiemployer plans are funded from:
- employer contributions;
- "withdrawal liability" payments from employers that leave the plan before their legal share of plan obligations has been funded; and
- investment earnings on plan assets.
- All multiemployer plans have benefited from an improving economy and most will recover from market losses and other factors that weakened multiemployer plans, but over 1 million participants are in plans that are severely underfunded and plan failure is now both more likely and more imminent.
- Troubled plans typically operate in declining or highly competitive industries and have a large number of retirees, but very few active workers.
- The plans have often lost many contributing employers, but owe the benefits of their employees.
- The burden of funding the benefits of those no longer working falls on the remaining employers and workers in these plans.
- Where plans are unable to further increase contributions or cut future benefits, plan assets are slowly drained.
- PBGC's maximum benefit guarantee is set by law. We guarantee only vested benefits, which are benefits that a person has earned a right to receive and that generally cannot be forfeited.
- PBGC's multiemployer guarantee program is complicated and difficult to summarize quickly. The guarantee sometimes is summarized as a maximum guarantee amount of $12,870 per year (payments are made monthly).
- But that is only a special case of the guarantee; it applies to people who worked exactly 30 years in jobs covered by the plan and have a moderately high promised benefit.
- If a person has:
- 10 years of service – PBGC's guarantee covers a benefit of up to $1,320 and partially covers benefits in excess of that level but cannot exceed $4,290 per year.
- 20 years of service – PBGC's guarantee covers a benefit of up to $2,640 and partially covers benefits in excess of that level but cannot exceed $8,580 per year.
- 30 years of service – PBGC's guarantee covers a benefit of up to $3,960 and partially covers benefits in excess of that level but cannot exceed $12,870 per year.
- The multiemployer program is more likely than not to run out of money within the next decade (i.e., by 2026).
- If the multiemployer program were to run out of money, PBGC would not be able to provide financial assistance to failed plans so that they can pay benefits at the current PBGC-guarantee level.
- Under current law PBGC would be allowed to ask Congress for additional premiums, but if Congress did not act, guarantees would be cut very significantly.
- Many retirees in failed plans would see their benefits reduced because PBGC's guarantees would be cut.
- The only money that PBGC could use to help failed plans would be premium payments from multiemployer plans.
Yes. Since there is still uncertainty as to how many or which plans will use MPRA provisions such as benefit suspensions or partitions, results in the report are shown two ways:
- Without regard to what will happen to PBGC’s financial position as a result of those MPRA provisions,
- Reflecting PBGC’s current estimates of how and when those options may be used.
The MPRA FAQs provide additional information on the options provided under MPRA
Single-Employer Plans / Program
- A single-employer plan is generally a pension plan sponsored by one company or a group of companies under common ownership. The plan may or may not be collectively bargained.
- In addition, "multiple employer plans" — that is, plans sponsored by two or more companies that are not under common ownership and that are not collectively bargained — are subject to many of the same rules as single-employer plans and are included in PBGC's Single-Employer Pension Insurance Modeling System (SE-PIMS) for the single-employer program.
- PBGC's maximum benefit guarantee is set each year by law. We guarantee only vested benefits, which are benefits that a person has earned a right to receive and that cannot be forfeited.
- The maximum guarantee that applies to a plan is fixed as of the year of the plan's termination date. A special rule applies, however, if the plan sponsor (usually the employer) filed a petition for bankruptcy protection on or after September 16, 2006.
- Under this rule, if the plan sponsor is still in bankruptcy when the plan ends, the maximum guarantee is fixed as of the year in which the plan sponsor filed for bankruptcy.
- The single-employer benefit guarantee for a plan participant also depends on the age when he or she begins receiving payments from PBGC and the form of payment he or she elects.
- For 2019 terminations (or bankruptcies if the above-noted rule applies), the guarantee can cover all or most of a 65-year-old retiree's benefit up to $67,295 per year.
- The guarantee is lower if a retiree begins receiving pension payments from PBGC before age 65 or if the pension includes benefits for a surviving spouse or other beneficiary.
- The guarantee can be higher if a retiree begins receiving payments from PBGC after age 65.
- There are other potential limits on pension benefits — see Benefits PBGC Guarantees.
- Risk transfer occurs, for example, when a plan offers to pay certain former employees a one-time lump sum now instead of a monthly benefit starting at a later date, or the plan transfers monthly payment obligations to an insurance company, which is then responsible for the payments.
- Risk transfer affects both future premium collections and future claims.
- The Projections Report has been updated to take into account routine risk transfers by companies in its assumptions, such as lump sum elections by participants who leave active employment in hybrid plans. However, PBGC is actively investigating the trend of non-routine risk transfers and intends to provide additional information on the sensitivity of the projections to this assumption.