5500 Day After – Central States

Another 5500 filing season has passed leaving some time, but little energy, for this blogging. Fortunately there were a lot of calendar year filings recently submitted for pensions in the news so it is the perfect time to do some updating – starting with the plan that is most likely to bring the PBGC (and the entire private pension system) down – Central States.

GE Freeze Warning

With a Defined Benefit plan that is over 100% funded why did General Electric (GE) announce that it was:

1. Freezing the U.S. GE Pension Plan for approximately 20,000 employees with salaried benefits, and U.S. Supplementary Pension benefits for approximately 700 employees.
2. Pre-funding approximately $4-5 billion of estimated minimum ERISA funding requirements for 2021 and 2022.
3. Offering a limited time lump-sum payment option to ~100,000 eligible former employees who have not started their monthly U.S. GE Pension Plan payments?

Part of the answer is in the SB Actuarial Certification forms for the last 10 years which show:

AAA on MPRA to DOT, PBGC, and DOL

On March 14, 2019 representatives form the American Academy of Actuaries (AAA) Multiemployer Plans Committee met for the third time with representatives from the Department of the Treasury (DOT), Pension Benefit Guaranty Corporation (PBGC), and Department of Labor (DOL) to discuss the MPRA application process and also “covered the topics of withdrawal liability, mergers and transfers, and possible multiemployer pension reform legislation.”

Excerpts from the notes of that meeting follow:

PBGC Multiemployer Program Continues on a Path Toward Insolvency

On August 6, 2019, the Pension Benefit Guaranty Corporation (PBGC) released its projections report for fiscal year (FY) 2018 and here are what Milliman considers the key takeaways as regards the financial condition of the Multiemployer Program.

Breaking News: Trump’s PBGC Pick Confirmed

They couldn’t get it done in January but yesterday Gordon Hartogensis was approved by the Senate* to serve as director of the Pension Benefit Guaranty Corp by a vote of 72-27. To get an indication of what this could mean for a multiemployer plan bailout I looked at one vote:

PBGC Primer – 2018 Update

The update came out last week and in summary:

In FY2018, PBGC insured about 25,000 DB pension plans covering approximately 37 million people.  PBGC became the trustee of 58 newly terminated single-employer pension plans and began providing financial assistance to an additional 6 multiemployer pension plans.  PBGC paid benefits to 861,371participants in 4,919 single-employer pension plans and 62,300 participants in 78 multiemployer plans.

Last year’s primer had those numbers at:

24,000 DB pension plans covering approximately 40 million people….82 newly terminated single-employer pension….an additional 7 multiemployer pension plans….benefits to nearly 840,000 participants in 4,845 single-employer pension plans and more than 63,000 participants in 72 multiemployer plans.

So why the 4% increase in the number of Defined Benefit Plans but the 7.5% drop in participants?

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):