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PBGC Blog: Retirement Matters

PBGC: A Year in Review

  |   November 18, 2014

With members of Congress, President Gerald R. Ford signed the Employee Retirement Income Security Act(ERISA) of 1974 on Monday, September 2, 1974. ERISA established the Pension Benefit Guaranty Corporation.

On Sept. 2, PBGC celebrated its 40th year of protecting pensions. And yesterday, PBGC released its FY 2014 Annual Report, highlighting the agency's accomplishments and areas for improvement. The review period covers Oct. 1, 2013 through Sept. 30, 2014.

PBGC's deficit increased to $62 billion in FY 2014, up from $36 billion the year before. The deficit increase is largely driven by the declining financial condition of a few multiemployer plans. The deficit in the multiemployer program grew to $42.4 billion, compared with $8.3 billion last year.  This increase is largely due to the fact that several additional multiemployer plans are now expected to run out of money within the next decade. But the single-employer program's deficit saw an improvement and dropped to $19.3 billion, down from $27.4 billion in 2013.

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PBGC will pay retirement benefits for nearly 1,400 current and future retirees at White Rose Inc., an independent food wholesaler based in Carteret, N.J.

The agency is stepping in because White Rose plans to sell its assets in bankruptcy and the pension plan will be abandoned. The company's plan, Third Amended and Restated Di Giorgio Retirement Plan, will end as of Oct. 27, 2014.

PBGC will pay all pension benefits earned by the plan's retirees up to the legal limit of about $59,320 a year for a 65-year-old.

Retirees will continue to get benefits without interruption, and future retirees can apply for benefits as soon as they are eligible.

Employees and retirees who are participants in White Rose's plan will continue to receive benefits from the company until PBGC assumes responsibility.

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ReichholdPBGC will pay retirement benefits for more than 4,500 current and future retirees at Reichhold Inc., a manufacturer of resins used for composites, based in Durham, N.C.

The agency is stepping in because the company plans to sell its assets in bankruptcy and the pension plan will be abandoned. The Reichhold Inc. Retirement Plan will end as of Oct. 17, 2014.

PBGC will pay all pension benefits earned by the plan's retirees up to the legal limit of about $59,320 a year for a 65-year-old.

Retirees will continue to get benefits without interruption, and future retirees can apply for benefits as soon as they are eligible.

Employees and retirees who are participants in the Reichhold plan will continue to receive benefits from the company until PBGC assumes responsibility.

According to PBGC estimates, the plan is 70 percent funded with $228 million in assets to pay $325 million in benefit liabilities. The agency is expected to cover $90 million of the $97 million shortfall.

On Sept. 30, 2014, Reichhold and three of its affiliates sought Chapter 11 protection in the U.S. Bankruptcy Court in Wilmington, Del. The company said in court papers that financiers Third Avenue Management, Black Diamond Capital Management, and J.P. Morgan Chase, which hold Reichhold's senior secured notes, intend to be the lead bidders for Reichhold's assets. An auction, sale hearing, and closing are slated for Dec. 19, 2014; Dec. 22, 2014; and January 30, 2015, respectively.

Hispanic Heritage Month

Each year, on September 15, we celebrate the start of National Hispanic Heritage Month. During this celebration, which runs through October 15, we recognize the significant impact Hispanic and Latino Americans have had on American history. We celebrate their rich culture and countless achievements. And this year's theme, "Hispanics: A legacy of history, a present of action and a future of success," reminds us of their profound impact on American culture. 

In his proclamation, President Obama said our Nation is strengthened when we lift up the Hispanic community. He also said when we create more ladders of opportunity, we provide hope for all Americans to reach their greatest potential.

But when looking at retirement preparedness, Hispanic Americans are often lower on the ladder than the general population.

Although many Americans face difficulty planning for retirement, Hispanic Americans face unique challenges that other minority groups do not. Hispanic Americans typically have less access to employer-provided benefits and contribute less on their own. The reason? Greater emphasis is usually placed on short-term financial security, such as eliminating debt. Saving for retirement is simply not a short-term priority.

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National Urban League.

PBGC will pay retirement benefits for 233 people covered by a plan sponsored by the Los Angeles Urban League Inc., a local chapter of the National Urban League, a non-profit civil rights organization.

In addition to the organization's work to advance equal opportunities for African American and other minority youths, the group also ran a Head Start program, which provided early education for pre-kindergarten students.

The agency is stepping in because the organization is unable to fund the plan that covers Head Start employees. The Defined Benefit Pension Plan of Los Angeles Urban League Head Start State Pre-school will end as of Aug. 31, 2014.

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This entry is part of a series of blog posts that looks back and commemorates the agency's work.

PBGC 40th Anniversary Logo

The big blows are landed

The fight to save pensions intensified, as financial crisis led to broken promises and end-runs on pension security. Iconic companies moved to end pension security and the number of people served by PBGC continued to rise.

We started the decade with annual benefit payments to participants surpassing the $1 billion mark for the first time.

As 2001 started, PBGC took over two Trans World Airlines' pension plans. These plans covered 36,500 former workers and retirees and were underfunded by about $700 million. By the end of the year annual benefit payments by PBGC to participants surpassed the $1 billion mark for the first time.

TWA was merely the first big blow of many that decade.

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