Feds Pension-Plan Safety Net Faces Severe Funds Squeeze

Pension Benefit Guaranty Corp.’s single-employer program is improving, but the funding crisis for multi-employer pension plans (typically, union plans) is not, according to the federal agency’s fiscal 2013 projection report released on June 30.

The report projects that the current $24.7 billion single-employer deficit will shrink to $7.6 billion by 2023 and is “highly unlikely” to run out of money in the next decade. PBGC officials credit strong market returns, rising interest rates and higher PBGC premiums.

For some multi-employer pension plans, market improvements are not enough to solve severe underfunding problems that are pushing the plans toward insolvency. Those troubled plans could cause the federal agency’s current deficit of $8.3 billion to grow to $49.6 billion by 2023, according to the projection report. Nearly 1 million participants in those troubled plans are likely to experience significant benefit reductions. Benefits for all multi-employer plan participants could be cut even more if the PBGC program runs out of money entirely, an event the agency said in a statement is highly likely in 10 years, without premium increases or other changes.

In fiscal 2013, PBGC paid $89 million in benefits for 44 multi-employer plans and $5.4 billion in benefits for single-employer plans. S