PBGC Projections

Today the Pension Benefit Guaranty Corporation (PBGC) released its FY 2017 Projections Report, an annual actuarial evaluation forecasting the future financial condition of PBGC’s Single-Employer and Multiemployer Programs noting, among other things:

This year’s projections for PBGC’s Multiemployer Program show a very high likelihood of insolvency during FY 2025 and near certainty of insolvency by the end of FY 2026. Compared to last year’s projections, the risk of insolvency decreases slightly prior to fiscal year 2024 but increases significantly starting in fiscal year 2025. These changes are primarily the result of the largest troubled plan transitioning to a 100% fixed-income portfolio, which eliminates most of the uncertainty of the timing of its projected insolvency date and thus eliminates most of the uncertainty about when the plan will require PBGC financial assistance.

That ‘largest troubled plan’ is Central States. Here are the other things of note:

Simulations of the Single-Employer Program show that improvements in the program’s net position remain likely during the coming decade. This year’s report shows a mean projected present value surplus of $20.1 billion for FY 2027, an increase of $10.5 billion from the prior report. If instead, we express it in nominal terms, the mean projected surplus in FY 2027 would be $26.4 billion. There is significant variation around this mean outcome. We also project an earlier median date for the program to emerge from a net position deficit. This accelerates the trend seen in the past several reports. (page 2)

Recent Form 5500 data show that the financial condition of the multiemployer universe as a whole has improved slightly. More plans are showing improvement in their zone status over the last few years. However, the data also show that, in aggregate, the multiemployer universe suffered a 12 percent decline in active participation over the last 6 years. Contributions to multiemployer plans are directly related to active participation. Continued decreases in active participation will have a devastating impact on troubled plans and their ability to recover. (page 8)

The PBGC’s Multiemployer Program is estimated to have a likelihood of insolvency of over 90 percent in 2025; the likelihood rises to 99 percent by the end of 2026, regardless of scenario. (page 8)

RECENT SINGLE-EMPLOYER PLAN TRENDS: Our projections do not assume that plans are terminated voluntarily by healthy companies, only by companies in distress. However, some healthy companies do close their pension plans by purchasing annuities and undertaking a standard termination. In these cases, PBGC’s current obligations are not affected, but those companies cease paying premiums altogether. PBGC is analyzing the effect of these actions and will attempt to incorporate them in future reports. (page 33)

9 responses to this post.

  1. Posted by PSDrone on May 31, 2018 at 6:33 pm

    PBGC insolvency – looks like a canary for the future of New Jersey’s public sector pension plans.

    Reply

  2. Posted by Tough Love on June 1, 2018 at 7:09 pm

    El gaupo,

    ANOTHER group of NJ Police arrested for bilking the Taxpayers.

    THESE guys are going to jail ……… and hopefully lose their pensions.\

    http://www.nj.com/middlesex/index.ssf/2018/06/5_edison_cops_facing_charges_of_official_misconduc.html

    Reply

    • Posted by El gaupo on June 1, 2018 at 8:31 pm

      The handsome one would never do something like that. Dead wrong and should lose pensions and be charged. I’m for good cops TL. Well paid and secure benifits for good cops. Like myself. Lol. As a human being , I couldn’t do that.

      Reply

      • Posted by Tough Love on June 1, 2018 at 8:44 pm

        With a small* change, we would be in agreement.

        Change …………. “Well paid and secure benefits for good cops.”

        to …………. “With Total Compensation (wages + pensions + benefits) EQUAL TO that typically granted Private Sector workers in jobs that require comparable experience, education, skills, and knowledge”
        ————————————–

        * “small” in words, but HUGE in the required reduction to your now-granted compensation

        Reply

      • Posted by Stanley on June 4, 2018 at 10:33 am

        You a good shovel leaner!

        Reply

    • Posted by NJ2AZ on June 2, 2018 at 5:16 pm

      Edison sounds like a very messed up local government/PD, even by NJ standards. they’ve been in the news on and off for years

      Reply

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