The Pension Benefit Guaranty Corporation (PBGC) today announced that the assets of the single-employer plan insurance program exceeded liabilities by nearly $3.5 billion, providing a positive net position for only the second time after more than 20 years of mounting deficits. The federal insurance corporation, which had a deficit that reached $2.9 billion in 1993, reported its improving financial condition in its 1997 Annual Report to the President and the Congress.

"A financially strong, well-managed PBGC is part of this nation's strategy for providing Americans with retirement security. Workers know that with PBGC on their side they will receive the benefits they have earned, and employers know with a bottom-line professional organization in place the incentive for defined benefit pensions will continue," said Alexis M. Herman, Secretary of Labor and Chairman of PBGC's Board of Directors.

PBGC's improved financial condition was due largely to investment earnings, which tripled the investment income earned one year earlier.

"We must maintain a cushion that will be sufficient to protect the insurance program against any future economic downturns. With a financially strong insurance program, workers and employers can have confidence that pensions are secure," said PBGC Executive Director David M. Strauss.

As of September 30, 1997, the single-employer program had assets of $15.3 billion and liabilities of about $11.8 billion. Investment income totaled nearly $2.8 billion as the agency benefited from a strong economy and high investment returns. Premium income declined slightly from 1996 due to lower variable-rate premium payments.

The agency's separate insurance program for multiemployer plans, which has maintained a surplus for more than 15 years, also recorded a financial gain. With the gain, the multiemployer program reported a positive net position of $219 million, based on assets of $596 million and liabilities of $377 million. The multiemployer program covers 8.8 million people, and the single-employer program covers about 33 million people.

PBGC paid $824 million in benefits to 205,800 people during 1997. Including people who have not yet retired, the agency is responsible for the pensions of about 465,000 people and 2,510 terminated pension plans.

A total of 17 settlements obtained through the Early Warning Program protected the insurance program and tens of thousands of workers and retirees from $760 million in pension losses. In the area of enforcement, the agency was involved in 85 active litigation cases in state and federal courts and 790 bankruptcy cases.

The Report is structured to mirror and highlight the goals of the five-year Strategic Plan that PBGC developed during the year.

PBGC's financial statements received an unqualified audit opinion for the fifth consecutive year, attesting to the consistency and integrity of the agency's financial management and controls. The audit was performed by Price Waterhouse LLP under the direction and oversight of PBGC's Inspector General.

PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by about 42 million American workers and retirees participating in private-sector defined benefit pension plans. PBGC insures about 45,000 pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and investment returns. 

 

Growth of PBGC Assets, Liabilities, and Net Position
Single-Employer Program, 1975-1997

($ in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Deficit for 1975 reflects combined results of single-employer and multiemployer programs; all other years reflect single-employer program only.

** In 1986, PBGC temporarily reported a deficit of $3.826 billion, based on assets of $1.74 billion and liabilities of $5.566 billion, which reflected the short-term inclusion of three underfunded LTV Steel plans restored to LTV administration in the next year.