Chapter 12: Pension Benefit Guaranty Corporation

Pension Benefit Guaranty Corporation Introduction and Overview

Introduction

The Pension Benefit Guaranty Corporation (PBGC) is a federal government agency that was established in 1974 to protect the benefits of participants in private-sector defined benefit pension plans.  The PBGC runs two insurance programs: a single-employer program and a multiemployer program.  Single-employer pension plans are plans to which one employer makes contributions. Multiemployer pensions are collectively bargained pension plans to which more than one employer contributes.  The single-employer program is the larger of the two insurance programs.

The PBGC oversees the termination of single-employer defined benefit pension plans and pays the benefits to participants in those terminated plans which do not have assets sufficient to pay 100% of promised benefits.  There is a statutory maximum benefit which the PBGC is allowed to pay ($59,318 per year for a worker in a pension plan terminated in 2014 who receives a single-life annuity beginning at age 65).  Most participants in terminated pension plans receive the full benefit earned at the time of plan termination. 

The PBGC does not pay benefits to participants in multiemployer pensions.  Rather, the PBGC provides insolvent multiemployer plans with financial assistance, in the statutorily-required form of loans, which PBGC indicates are rarely repaid, sufficient to pay PBGC guaranteed benefits and reasonable administrative expenses.  The maximum benefit is an annuity of $12,870 for a worker with thirty years of service.

The two insurance programs are financed by premiums paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by the PBGC, and recoveries from the companies formerly responsible for the trusteed plans.  The PBGC does not receive any funds from general tax revenues and the obligations of the PBGC are not obligations of the U.S. government.  The PBGC had a deficit of $35.7 billion at the end of fiscal year 2013, of which $27.4 billion was from the single-employer program and $8.3 billion was from the multiemployer program.  PBGC expects the single-employer program’s deficit to improve over the next 10 years.  However, PBGC expects the multiemployer program to deplete its assets and be unable to pay out statutorily required benefits in 8 years.

Chapter Overview

This chapter of the Green Book includes Congressional Research Service (CRS) Reports, a section that lists Tables and Figures in the CRS reports, Legislative History and Links to Additional Resources.

This page was prepared on August 19, 2014 for the 2014 version of the House Ways and Means Committee Green Book.

Pension Benefit Guaranty Corporation Congressional Research Service (CRS) Reports

The House Ways and Means Committee is making available selected reports by the Congressional Research Service (CRS) for inclusion in its 2014 Green Book website.  CRS works exclusively for the United States Congress, providing policy and legal analysis to Committees and Members of both the House and Senate, regardless of party affiliation.  One CRS report with a cover date earlier than 2014 is included here because its content remains relevant.

95-118: Pension Benefit Guaranty Corporation (PBGC): A Primer

RS22624: The Pension Benefit Guaranty Corporation and Single-Employer Plan Terminations

R42521: Proposals to Change Pension Benefit Guaranty Corporation's (PBGC) Premium Structure: Issues for Congress

R43305: Multiemployer Defined Benefit (DB) Pension Plans: A Primer and Analysis of Policy Options

This page was prepared on August 19, 2014 for the 2014 version of the House Ways and Means Committee Green Book.

Pension Benefit Guaranty Corporation Tables and Figures in CRS Reports

The following tables and figures can be found in the CRS reports included in this chapter of the Green Book.

95-118: Pension Benefit Guaranty Corporation (PBGC): A Primer

Table 1. Number of Standard and Trusteed Pension Plan Terminations       

Table 2. PBGC Single and Multiemployer Insurance Programs: Net Financial Position, FY2002 – FY2013

Table 3. Pension Benefit Guaranty Corporation (PBGC) Benefit Payments and Payees, 1996 – 2012

Table 4. PBGC Multiemployer Insurance Program: Financial Assistance to Pension Plans

Figure 1. Financial Position of the Single-Employer Insurance Program of the Pension Benefit Guaranty Corporation

Figure 2. Financial Position of the Multiemployer Insurance Program of the Pension Benefit Guaranty Corporation

R42521: Proposals to Change Pension Benefit Guaranty Corporation's (PBGC) Premium Structure: Issues for Congress

Table 1. PBGC Single-Employer Program Data: FY2004 to FY2013

Table 2. PBGC Single-Employer Program Premium Levels

Figure 1. Financial Position of the Single-Employer Insurance Program of the Pension Benefit Guaranty Corporation

R43305: Multiemployer Defined Benefit (DB) Pension Plans: A Primer and Analysis of Policy Options

Table 1. Single and Multiemployer Pension Plans in 2011

Table 2. Defined Benefit Multiemployer Plan Certification in 2011

Figure A-1. Typical Balance Sheet of a Defined Benefit Pension Plan

Figure A-2. How Future Pension Benefits Are Discounted

Figure A-3. Present Value Formula

This page was prepared on August 19, 2014 for the 2014 version of the House Ways and Means Committee Green Book.

Pension Benefit Guaranty Corporation Legislative History

The following provides a legislative history of the Pension Benefit Guaranty Corporation from the 112th Congress through the first session of the 113th Congress. For prior legislative history, please see the 2012 Green Book.

SINGLE-EMPLOYER INSURANCE PLAN

Moving Ahead for Progress in the 21st Century Act, P.L. 112-141

The Moving Ahead for Progress in the 21st Century Act (MAP-21, P.L. 112-141) increased the premiums that plan sponsors pay to PBGC and made changes to the governance of PBGC.

MAP-21 increased the single-employer flat-rate premium to $42 per participant in 2013 and to $49 per participant in 2014, after which it would again be indexed for increases in the annual rate of growth in the average national wage.

MAP-21 increased the variable-rate premium, which had been $9 per $1,000 of underfunding, by $4 (after indexing) per $1,000 of unfunded vested benefits in 2014, and by another $5 (after indexing) per $1,000 of unfunded vested benefits in 2015.  After 2015, the variable rate will be indexed for increases in annual rate of growth in the national average wage.  MAP-21 provided a new rule that the maximum variable-rate premium cannot exceed $400 per participant in 2013. After 2013, the maximum variable-rate premium will be indexed for increases in the national average wage index.

MAP-21 made changes to the governance structure of PBGC, such as providing that the term of the Director of PBGC be five years, requiring the board of directors to meet at least four times per year, creating a Participant and Plan Sponsor Advocate in PBGC, and requiring independent reviews of governance structures and of the PBGC’s Single-employer and Multiemployer Pension Insurance Modeling Systems.  MAP-21 repealed PBGC’s statutory authority to borrow up to $100 million from the U.S. Treasury on an unsecured basis.

Continuing Appropriations Resolution, 2014, P.L. 113-67

P.L. 113-67 (introduced as H.J.Res. 59) was the vehicle for the December 2013 bipartisan budget agreement that increased PBGC premiums.  The single-employer flat-rate premium increased to $57 in 2015 and $64 in 2016.  After 2016, the flat-rate premium will again be indexed to increases in the average national wage. H.J.Res. 59 increased the variable-rate premium in 2015 by an additional $10 over the 2014 rate (after the 2014 rate is indexed for increases in the average national wage) per $1,000 of unfunded vested benefits and by an additional $5 (after the 2015 rate is indexed for increases in the average national wage) in 2016 per $1,000 of unfunded vested benefits.  After 2016, the variable-rate premium will again be indexed to increases in the average national wage.  P.L. 113-67 increased the maximum variable-rate premium to $500 per participant beginning in 2016.

MULTIEMPLOYER PLAN INSURANCE PROGRAM

Moving Ahead for Progress in the 21st Century Act, P.L. 112-141

The Moving Ahead for Progress in the 21st Century Act (MAP-21, P.L. 112-141) increased the premiums that the sponsors of multiemployer defined benefit pension plans pay to PBGC.  MAP-21 increased the 2013 premium by $2 per participant, after being increased for changes in the growth of the national average wage.  After 2013, the multiemployer plan premium will continue to be indexed for increases in the annual rate of growth in the national average wage index.

This page was prepared on August 19, 2014 for the 2014 version of the House Ways and Means Committee Green Book.

Pension Benefit Guaranty Corporation Links to Additional Resources

Pension Benefit Guaranty Corporation, www.pbgc.gov