Pension Benefit Guaranty Corporation (PBGC) Is Broke
Hat-tip to Jim Sinclair for posting this press release from the Pension Benefit Guaranty Corporation (PBGC):
WASHINGTON— The Pension Benefit Guaranty Corporation (PBGC) ended fiscal year 2009 with an overall deficit of $22 billion, according to the agency's Annual Management Report submitted to Congress today. The result compares with the $11.2 billion deficit recorded at the previous fiscal year-end on September 30, 2008.
The deficit in the PBGC's insurance program for single-employer pension plans widened to $21.1 billion for the year, $10.4 billion more than the prior-year's $10.7 billion shortfall. The separate insurance program for multiemployer pension plans posted a deficit of $869 million, exceeding last year's $473 million shortfall by $396 million.
In an interim report to Congress in May, the agency showed a record deficit of $33.5 billion, based on unaudited numbers at the fiscal year mid-point on March 31.
The Annual Management Report classified 27 large pension plans with total underfunding of $1.64 billion as probable losses on the PBGC balance sheet. The report also shows that the agency's potential exposure to future pension losses from financially weak companies increased to about $168 billion from the $47 billion booked in fiscal year 2008.
"Exposure to possible future terminations means that we could face much higher deficits in the future," said Acting Director Vincent K. Snowbarger. "We won't fail to meet our obligations to retirees, but ultimately we will need a long-term solution to stabilize the pension insurance program..."
The Pension Benefit Guaranty Corporation (PBGC) protects the retirement incomes of more than 44 million American workers in more than 29,000 private-sector defined benefit pension plans. A defined benefit plan provides a specified monthly benefit at retirement, often based on a combination of salary and years of service. PBGC was created by the Employee Retirement Income Security Act of 1974 to encourage the continuation and maintenance of private-sector defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at a minimum. Defined benefit pension plans promise to pay a specified monthly benefit at retirement, commonly based on salary and years on the job.
PBGC is not funded by general tax revenues. PBGC collects insurance premiums from employers that sponsor insured pension plans, earns money from investments and receives funds from pension plans it takes over.
PBGC pays monthly retirement benefits, up to a guaranteed maximum, to nearly 744,000 retirees in 4,000 pension plans that ended. Including those who have not yet retired and participants in multiemployer plans receiving financial assistance, PBGC is responsible for the current and future pensions of about 1,476,000 people.
The maximum pension benefit guaranteed by PBGC is set by law and adjusted yearly. For plans ended in 2009 and 2010, workers who retire at age 65 can receive up to $4,500 a month ($54,000 a year). The guarantee is lower for those who retire early or when there is a benefit for a survivor. The guarantee is increased for those who retire after age 65.
How's that "secure retirement" thing looking for you now, Mr. and Mrs. America?
Good thing Obamacare has special treatment planned for seniors, eh?
Do you understand the point of the illustration above?