Breaking News: PBGC 2017 Deficits Announced

In a press release the Pension Benefit Guaranty Corporation (PBGC) just announced new deficit amounts for 2017:

  1. Single Employer Plans: $10.9 billion from $20.6 billion
  2. Multiemployer Plans: $65.1 billion from $58.8 billion

As for the reasons behind the numbers here is my explanation for (1) and PBGC’s for (2).

In a few minutes I will be on a conference call with a group of advisors to discuss taking over a Single Employer Defined Benefit Plan with 1,300 participants, a 95% SB funded ratio, and benefit accruals frozen since 2005. My estimate of their PBGC premium for 2017: $750,000.

As for multiemployer plans:

3 responses to this post.

  1. Posted by Tough Love on November 16, 2017 at 5:01 pm

    John, I have a very good working knowledge of how Final Average Salary DB Plans are supposed to work … actuarially.

    What has always confounded me is how Multi-employer Plans can even be called “DB” Plans in the classic sense. Sure, the Benefi is “defined”, but for them to work PROPERLY, the annual contribution requirement must involves an annual re-calculation of where the Plan stands (financially), calculate the ARC for that year, with the employer contribution being that Total less any worker contributions.

    But my understanding is that under Multi-employer Plans, the employer contribution is NOT what I stated above, but a rate (usually per employee-hour worked) determined by contract negotiations between the Union and the the Company managements.

    That never made ANY sense.

    *************************

    Of course Public Sector Plan procedures are not much better, where valuation assumptions (and sometime the contribution itself) are often set by Statute, and Governments (including the State of NJ) often have no requirement to pay the ARC determined by the Plan’s actuary.

    Reply

    • On the one ME I did decades ago it was called shortfall funding where what you got from the employers equaled what you had to put in as a contribution which essentially had the union determining their contributions when they bargained with employers. Not sure if still done but wuoldn’t be surprised if it is.

      Reply

  2. Posted by Anonymous on November 16, 2017 at 6:07 pm

    More meaningless legislation until the GOP screws up their current control on the HILL, then I’d say the Retardicans will be crying the BLUES!

    http://thehill.com/homenews/house/360713-dem-bill-aims-to-protect-threatened-pensions

    Reply

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