PBGC Update

Tom Reeder, Director

National Press Foundation

Fall 2018
 History

• Employee Retirement Income Security Act of 1974 = ERISA

o Federal law that sets minimum standards for employee retirement
plans
o Administration and enforcement divided among three agencies –
PBGC, Labor, Treasury

• PBGC was created as part of ERISA

• Title IV contains the PBGC-administered plan termination

insurance program

2
 Overview

Mission:
• Encourage the continuation and maintenance of voluntary private-sector defined
benefit pension plans
• Provide timely and uninterrupted payment of pension benefits to participants and
beneficiaries
• Maintain premiums at the lowest level necessary to meet PBGC’s obligations

Self-financed:
• Receives no taxpayer dollars
• Financed by insurance premiums, investment income, and assets and recoveries
from failed single-employer plans

Two insurance programs, which are operated and financially separated by law:
• Single-Employer Program
• Multiemployer Program

3
 Number of People Covered by US
Defined Benefit Plans (in millions)

76
80

60
43

37 39 Inactive
40 Active

18 25
20
33
19
14
0
Public Private Total

Source: Public Plan data: EBRI 2009/2010 databook. Private Plans: PBGC calculations
4 based on plan filings as of FY 2016. Data likely includes some duplication.
 Plans vs. Active Participants
Single-Employer Plans

# of plans # of active participants – in millions

2.8
18,494
28%
67%

Small
Medium 2.1 4.8
Large 21% 49%
6,650
Jumbo
27%
211 0.2
1% 722 2%
3%
Plan size based on total participant count
Small: 1-99
Medium: 100 – 4,999
Large: 5,000 – 24,999
5 Jumbo: 25,000 or more
Source: Most recent premium filing submitted as of November 2016.
 Plans vs. Active Participants
Multiemployer Plans

# of plans # of active participants – in thousands

1,075
77% 903
23%
Medium
Large 2,450
554 63%
Jumbo
212 14%
34
15%
3%
74
5%
Plan size based on total participant count
Small: 1 – 99
Medium: 100 – 4,999
Large: 5,000 – 24,999
6 Jumbo: 25,000 or more
Source: Most recent premium filing submitted as of November 2016.
Status of Insurance Programs
 Program Comparison as of 9/30/2018

Single-Employer Multiemployer
FY 2018 PBGC financial position
• Liabilities
$107.5 billion $56.2 billion*
(includes “probable” losses)
• Assets $109.9 billion $2.3 billion
• Net position $2.4 billion ($53.9 billion)
Insurable event Plan Termination Plan Insolvency
FY 2018 premium income $5.5 billion $292 million
$67,295
for age 65 retiree, $12,870**
2019 guaranteed annual benefit for retiree with 30 years of
regardless of
service service, regardless of age

Number of plans 23,400 1,400

Number of participants in
26.2 million 10.6 million
plans
• All but $2B is for “probable” insolvent plans.
• **Two-tier guarantee: 100% of the first $3,960, 75% of the next $11,880. Not indexed.

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 PBGC Net Position –
Both Insurance Programs FY 2000-2018

($ in billions)

$20
$10
$0
-$10
-$20
-$30
-$40
-$50
-$60
-$70

Single-employer Multiemployer

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 Multiemployer System Less Well Funded
Than Single-Employer

System Funding -- Estimated Market Basis

1980

1985

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015
180%

162% 160%

144%
140%

123% 123% 120%

Average funded level

116% 103% 106% 105%
101% 100%
87%
88% 89%
77% 77%
80%
74% 79%
62% 72%
49%
60%

43%
40%
41% 41%

20%
Multiemployer System Funding Single-Employer System Funding
0%

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Multiemployer Program
 What is a Multiemployer DB Plan?

• Collectively bargained & sponsored by more than one employer

• Administered by Board of Trustees comprised of employer and employee

reps
Employer
A

Employer F Employer
B

Multi DB
Plan
Employer
Employer E C

Employer
D

• Facilitates continued benefit accruals when employee moves from

employer to employer (but sticks with union)

• Prevalent in Construction, Trucking & Transportation, Retail Trade and

Services, Mining, Manufacturing and Entertainment Industries

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 PBGC-Insured Participants and Plans
Multiemployer Plans Only

40 140

35 120
Participants, in millions

30

Plans, in thousands
100
25
80
20
60
15
40
10
2 7
5 6 20
4
0 0

Active Participants Inactive Participants Plans

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 1.3 Million Participants are in Critical and
Declining Zone Status Plans

Number of People in
Multiemployer Plans by Zone Status Critical and Declining
Zone Status

0 1 2 3 4 5 6 7 8 9 10
# of participants – in millions

Not in Distress Endangered/Seriously Endangered Critical

*Source: 2015 Form 5500 and zone status certifications

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 Projecting Claims at Average Levels,
PBGC Multiemployer Fund Still Drained in 2025

PBGC Assets, Average Assistance Payments and Premiums by Fiscal Year

Reflecting Assumed MPRA Suspensions / Partitions
(Projected in Nominal $ Amounts)
$4,500

$4,000

$3,500

$3,000
Millions of Dollars

$2,500

$2,000

$1,500

$1,000

$500

$0
2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037

Assets at Start of Year Financial Assistance Partition Assistance Premiums

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 Fiscal Risks

Timeline of Projected Fiscal Risks for Certain Federal Programs

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 About 1/3 of Retirees Experienced Benefit Cuts of Over
50 Percent in a Recent Multiemployer Plan Insolvency

CUT BACKS TO MULTIEMPLOYER GUARANTEE LIMIT

- Recent Teamsters Plan Insolvency -
ANNUAL BENEFIT
$60,000

$50,000

Non-Guaranteed Annual Benefit

$40,000 Annual Benefit Preserved by Guarantee

$30,000

$20,000

$10,000

$0
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800

RETIRED PARTICIPANTS

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 Multiemployer Pension Reform
Act of 2014 (MPRA)

New tools for some plans:

• Benefit Suspensions

• Plan Partitions

• Facilitated Mergers

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 Benefit Suspensions

• Suspension = Reductions

• Treasury approval required

• Treasury must consult with PBGC and DOL

• Plan must show that:

• Without suspensions, projected insolvency within 20 years
• Suspension will prevent insolvency (alone or in conjunction with
other tools)
• Other PPA tools won’t prevent insolvency (“exhaustion of
reasonable measures, forestalling insolvency”)

• Participant vote required (special rule for largest plans)

• Limits on reductions
• Resulting benefits no less than 110% of PBGC guarantee
• No reduction for certain participants (e.g., disabled, over 80)
• Equitable distribution required

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 Plan Partitions

PBGC may approve partition only if:

• Plan has taken all reasonable measures to avoid insolvency
(including maximum benefit suspensions, if applicable)
• Partition will reduce PBGC liability for the plan and is
necessary for the plan to remain solvent
• PBGC certifies that its ability to meet existing obligations to other
plans will not be impaired (including plans projected insolvent
within 10 years)

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 Facilitated Mergers

PBGC financial assistance allowed only if:

• One or more of the plans is Critical and Declining

• Is necessary to avoid / postpone insolvency of a plan

• Will reduce PBGC’s expected long-term loss

• Is necessary for the merged plan to become or remain solvent

• No impairment to PBGC’s meeting existing obligations to other

plans

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 Joint Select Committee on Solvency of
Multiemployer Pension Plans

Improve the solvency of multiemployer pension plans and PBGC’s

Multiemployer Pension Program

• Bipartisan Budget Act of 2018

• Membership: 16 members split evenly between House and Senate,

and between Democrats and Republicans

• Held six public meetings (hearings)

• Report: Requires vote of five Republicans and five Democrats

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Single-Employer Program
 PBGC-Insured Participants and Plans
Single-Employer Plans Only

40 140

35 120
Participants, in millions

30

Plans, in thousands
100
25 6
80
20 17
21 60
15
40
10

5 9 20

0 0

Active Participants Inactive Participants Plans

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 Top 10 Single-Employer Plan Claims

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 Early Warning Program

• The Early Warning Program monitors the 1,500 or so pension plan

sponsors that represent the bulk of the agency’s liability exposure (plans
covering over 5,000 participants or more than $50M in underfunding).

• The goal is to identify transactions with the highest chance of gravely

impairing a sponsor’s ability to maintain its pension plan(s), putting
promised benefits and premium payers at risk.

• Engagement with these sponsors often leads them to continue plans they
may have considered terminating or to maintain the health of their plans.

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Missing Participants Program
 Expanded Missing Participants Program

• Some changes to DB program

• Program now includes terminating:

• Defined Contribution plans
• Small professional services DB plans that aren't insured by PBGC
• Multiemployer DB plans

• Basic structure is the same - plan may either:

• Send information, or
• Transfer responsibility for paying benefits

• Key differences between plan types

• Mandatory for PBGC-insured plans (including multis)
• Voluntary for other plans (DC and non-insured DB)

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 Missing Participants Program

• The program is now available for DC plans that terminate on or

after Jan. 1, 2018.
• Highlights of DC program expanded program
• Voluntary
• Centralized search directory
• Periodic active searches by PBGC
• One-time low administrative fee
• Benefits earn interest and are protected against investment
losses

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Resources
 Data Sources

PBGC.gov Resources
• FY 2018 Annual Report: https://www.pbgc.gov/sites/default/files/pbgc-annual-
report-2018.pdf
• PBGC Pension Insurance Data Tables: https://www.pbgc.gov/prac/data-books
• Open Gov: https://www.pbgc.gov/open/index
• Pension Insurance Modeling System (PIMS):
https://www.pbgc.gov/about/projections-report/pension-insurance-modeling-
system
• Projections Report: https://www.pbgc.gov/about/projections-report
• What’s New Updates: https://www.pbgc.gov/prac/whatsnew

Other Resources
• DOL’s Private Pension Plan Bulletin Historical Tables and Graphs 1975-2015:
https://www.dol.gov/sites/default/files/ebsa/researchers/statistics/retirement-
bulletins/private-pension-plan-bulletin-historical-tables-and-graphs.pdf

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 Thank You!

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