Pension Benefit Guaranty Corporations single-employer program is improving, but the funding crisis for multiemployer pension plans is not, according to the agencys fiscal 2013 projection report.
Recent figures indicate the fiscal 2013 deficit of $27.4 billion is projected to narrow to $7.6 billion by fiscal 2023. Last year, PBGC estimated a deficit of $32.5 billion for fiscal 2022.
The report projects that the current $24.7 billion single-employer deficit will shrink to $7.6 billion by 2023, and suggests that the PBGC pension fund is highly unlikely to run out of money in the next decade giving credit to the improved market, rising interest rates and higher PBGC premiums.
However, while economic conditions have improved significantly in the past year and most multiemployer plans are projected to remain solvent, the pension benefits of more than 10 percent of multiemployer plan participants are at serious risk, the PBGC said.
Some already distressed plans remain critically underfunded and will not be able to further raise contributions or reduce benefits sufficiently to avoid insolvency, the agency notes. Using a new methodology that takes this into account, PBGCs current projections are showing that insolvencies affecting more than a million of the 10.4 million people in multiemployer plans are now both more likely and more imminent.
The failures of these plans will drain PBGCs multiemployer program of its assets, leaving PBGC unable to pay guaranteed benefits, and the agency estimates that, absent premium increases and/or changes in law, the program is more likely than not to run out of funds in eight years, and highly likely to do so within 10 years.
The report notes several uncertainties about its projections, including not knowing which plans will fail, plus its own premium income and market returns on PBGC assets. The projections represent a range of scenarios, from conservative to optimistic. The annual exposure reports, based on actuarial evaluation, are required by law. PBGC officials say also they intend to analyze how voluntary plan terminations by plan sponsors will impact its premium base.
Global security and aerospace technology giant Lockheed Martin announced it is freezing its current salaried-defined benefit pension plan as it transitions its employees to an enhanced defined contribution retirement plan.
While there were many factors that were considered when making this decision, most importantly is that eventually we would be required to freeze the pension plan, the company said Tuesday. If we dont freeze the pension plan by 2020, current regulations would impose significant tax penalties on our employees and the company. By proactively making this decision now, it gives our employees time to plan for the changes.
A spokeswoman adds, Since we closed the pension plan to new participants in 2006, we expect that by 2016, the majority of our employees will not be pension participants. Introducing a unified retirement program ensures that were offering consistent and competitive retirement benefits to the majority of Lockheed Martin salaried employees.
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