GAO on PBGC

The United States Government Accountability Office (GAO) released a 60 page report this week that “provides an update on the nation’s fiscal health as of the end of fiscal year 2017 and describes its likely fiscal future if policies don’t change” where the Pension Benefit Guaranty Corporation (PBGC) and multiemployer plans got a mention:

Trumping PBGC

A couple of Senators sent a letter to President Donald Trump demanding an explanation of his sudden decision to replace Tom Reeder as Director of the Pension Benefit Guaranty Corporation (PBGC) that eschewed any introductory pleasantries.

They go on to claim that….

1. Under Mr. Reeder’s leadership, the single-employer program has seen its deficit halved, from a $20.6 billion deficit at the end of fiscal year 2016 to $10.9 billion at the end of fiscal year 2017.  Mr. Reeder has indicated that continued improvement is projected and the program could be out of a deficit position by 2022.
2. While the multiemployer program faces a $65 billion deficit and insolvency within the next decade, Mr. Reeder has repeatedly called on Congress to adopt bipartisan reforms and to raise the program’s premiums to delay insolvency.

What the senators may not be aware of:

Breaking News: New PBGC Director

W. Thomas Reeder Jr. became the 15^th director of the Pension Benefit Guaranty Corporation (PGGC) in October, 2015. This Thursday he will be the only witness at a hearing of the Joint Select Committee on the Solvency of Multiemployer Pension Plans to examine the state of the PBGC (which happens to be approaching bankruptcy). This could be Mr. Reeder’s last act as PBGC director.

PBGC Strategic Plan

The Government Performance and Results Act Modernization Act of 2010 requires federal agencies to develop a new strategic plan every four years. The Pension Benefit Guaranty Corporation (PBGC) just released its Plan for 2018-2022. Some excerpts:

EA18 (8) Highway to PBGC Premium Explosion

Per Pension & Investments:

Sharply higher Pension Benefit Guaranty Corp. [PBGC] premiums resulting from the new federal budget deal will push more employers to shrink or terminate their defined benefit plans, moves that also will further erode the agency’s shaky finances, industry observers said.

Two session at the 2018 Enrolled Actuaries meeting touched on that subject.

EA18 (5) PBGC Reaction to ‘Segal Blend’ Rejection

In a challenge to the use of different factors for calculating withdrawal liability for multiemployer plans than are used for funding, the U.S. District Court for the Southern District of New York ruled last month:

[T]he fund’s “use of the Segal Blend rate when assessing the Times’ withdrawal liability was, in this instance, improper, and the Arbitrator’s finding to the contrary is reversed.” Third, the fund’s calculation of the Times’ second partial liability was ruled to be improper. Lastly, the court ruled the Arbitrator “correctly determined that the Times was entitled to interest on overpaid withdrawal liability, and [the Arbitrator’s] conclusion as to the applicable interest rate has not been rebutted.”

At today’s ‘Dialogue with the PBGC’ session the first audience question was on this ruling and how the five panelists, all from the PBGC, expected the PBGC to react.

PBGC Primer

In FY2017, the Pension Benefit Guaranty Corporation (PBGC) insured about 24,000 DB pension plans covering approximately 40 million people. PBGC became the trustee of 82 newly terminated single-employer pension plans and began providing financial assistance to an additional 7 multiemployer pension plans. PBGC paid benefits to nearly 840,000 participants in 4,845 single-employer pension plans and more than 63,000 participants in 72 multiemployer plans.

All this according to PBGC: A Primer. More excerpts: