Huge Turnaround Swings PBGC Multiemployer Program into the Black

The Pension Benefit Guaranty Corporation (PBGC)’s Multiemployer Insurance Program swung to a positive net position of $481 million for the fiscal year ending Sept. 30 from a deficit of $63.7 billion at the same time last year, according to the agency’s annual report.

The multiemployer program, which just a year ago was projected to run out of money by 2026, is now expected to remain solvent for more than 30 years, which PBGC attributed to the enactment of the American Rescue Plan Act (ARPA) of 2021. Meanwhile, the agency said it single-employer program remains financially healthy and has a positive net position of $30.9 billion as of the end of the fiscal year—nearly double the $15.5 billion it reported at the end of fiscal year 2020.

The multiemployer program covers defined benefit (DB) pension plans that are created through one or more collective bargaining agreements between employers that are usually in the same or related industries, and one or more employee organizations or unions. PBGC provides financial assistance to insolvent plans to allow them to pay guaranteed benefits and reasonable administrative expenses.

“For the first time in 20 years, PBGC’s insurance programs are both reporting positive net financial positions,” PBGC Director Gordon Hartogensis said in a statement. “The solvency of PBGC’s multiemployer insurance program—which was facing a near-term crisis—has been extended by decades into the future.”

PBGC said the sharp improvement in net position was the result of a significant reduction in program liabilities due to the “unbooking” of the liability for plans that were expected to fail and seek assistance from the PBGC over the next decade. According to the annual report, PBGC provided $230 million in financial assistance to 109 multiemployer plans in fiscal year 2021, compared with the payment of $173 million to 95 plans in fiscal year 2020.

The agency also said that as a result of the enactment of ARPA, the number of participants relying on traditional financial assistance under Section 4261 of the Employee Retirement Income Security Act (ERISA) will decrease to approximately 53,000 participants receiving guaranteed benefits from just under 81,000.

Additionally, PBGC estimates that the special financial assistance (SFA) program created by ARPA will provide funding to more than 250 severely underfunded pension plans covering more than 3 million workers, retirees, and beneficiaries.