PBGC Killing the Premium Goose

The Pension Benefit Guaranty Corporation (PBGC) is projecting that their multiemployer (union) program will be insolvent by 2025 but a possible bailout could keep it alive indefinitely whereas the PBGC’s Single Employer program just turned a profit primarily due to extortionate premiums that may eventually lead to its demise, as legislators were told yesterday by the head of the U.S. Government Accountability Office (GAO) in his written testimony (page 12):

The primary drivers of the government’s fiscal exposure related to PBGC’s deficit are the collective financial risk of the many underfunded pension plans insured by PBGC and the long-term decline in the number of participants covered by traditional DB plans. Since 1985, there has been a 78 percent decline in the number of plans insured by PBGC and more than 13 million fewer workers actively participating in PBGC-insured plans. There has also been a recent trend of single-employer plan sponsors transferring the liability for some of their participants to insurance companies via group annuity “buy-outs,” further reducing the number of participants in PBGC-covered plans. As a result of these trends, even though PBGC premium rates have increased significantly in recent years, PBGC’s premium base has been eroding over time as fewer sponsors are paying premiums for fewer participants.

P&I highlighted this trend in an article on four companies (with links to their latest 5500 filings) that decided it was cheaper to pay insurance companies for annuities than the PBGC for token protections:

  1. Lockheed Martin Co.
  2. Weyerhaeuser Co.
  3. Allegheny Technologies, Inc.
  4. Sherwin Williams Co.

More to follow.

 

One response to this post.

  1. Posted by PS Drone on February 8, 2019 at 6:34 pm

    This is called No Sh-t Sherlock. What an incentive to maintain a DB plan after ERISA was made the law of land: pay a government agency mafia-style “protection”. Yet another example of government overreaction to isolated incidences of corporate non-feasance.

    Reply

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