PBGC Projections – 2019

Today the Pension Benefit Guaranty Corporation (PBGC) released its FY 2019 Projections Report, an annual actuarial evaluation forecasting the future financial condition of PBGC’s Single-Employer and Multiemployer Programs noting, among other things:

While last year’s report projected PBGC’s Multiemployer Program would become insolvent during FY 2025, this year’s projections show a very high likelihood of insolvency during FY 2026 and that insolvency is a near certainty by the end of FY 2027. This change is due primarily to the enactment of the Bipartisan American Miners Act of 2019, which provided federal funding for the United Mine Workers of America 1974 Pension Plan (“UnitedMine Workers Plan”).

Here are other things of note:

Out of roughly 1,400 insured multiemployer plans, 124 plans have reported that they will run out of money within 20 years. These plans are in “critical and declining” status under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. When these plans run out of money to pay benefits, they will call on PBGC to provide financial assistance to enable the plan to pay benefits at the guarantee level. As noted earlier, absent legislative changes, PBGC projects the Multiemployer Program will become insolvent during FY 2026 and will be unable to deliver financial assistance in amounts necessary to support benefits at the current guarantee level. The projections in this report estimate the program’s future financial assistance costs at the current guarantee level, rather than reducing guarantees to a level supported only by premiums. (page 5)

Questions have been raised about the effect of COVID-19 on a number of government programs, and PBGC continues to closely evaluate the resiliency of its two insurance programs. Market volatility and economic deterioration associated with COVID-19 are unlikely to have a material effect on the timing of the insolvency of the Multiemployer Program. Economic disruption caused by the pandemic could result in losses in the Single-Employer Program, particularly if unforeseen bankruptcy activity accelerates beyond those companies that were financially troubled prior to the pandemic. The duration and economic impact of COVID-19 is unknown. Because of the volatility and uncertainty, attempts to estimate how the pandemic could affect PBGC’s insurance programs, measured from an arbitrary point in time after the beginning of the projection period, may present an already outdated or inaccurate picture. The estimates of the economic impact of COVID-19 are not reflected in this report, which generally projects forward from the end of the previous fiscal year. (page 7)

In addition, many aspects of the individual plans and the complex rules that govern the private employer pension system in the United States are simplified or ignored to create a working model. The actual results that ultimately occur in future years will vary, potentially significantly, from the mean projections in this report. (page 8)

No scenario shows the Multiemployer Program remaining solvent beyond FY 2027 under current law. (page 10)