PBGC Can Provide Only One-Eighth of Promised Benefits After Cash Reserves Deplete
The Pension Benefit Guaranty Corp. (PBGC), which acts as an insurance company to pension plans should those plans go belly up, is in dire straits. The PBGC currently has $2 billion in cash reserves, but those reserves are set to be depleted by the inevitable insolvency of 128 pension plans over the next 20 years. The PBGC is expected to run out of cash reserves by 2025. Once that happens, the PBGC will only be able to provide about one-eighth of the minimum benefit it should provide to participants of failed multiemployer pension plans. Under current conditions, participants in the Central States Teamsters Pension Plan, which is projected insolvent by 2025, would face benefit cuts of 90%.
Government and industry leaders have a few suggestions regarding how to save the PBGC. The Executive Director of the PBGC is proposing raising $16 billion for the PBGC by enforcing a new premium rate, but employers are pushing back on paying more into the PBGC. Senator Sherrod Brown (D-OH) has introduced legislation to create new Treasury securities, proceeds of which would be used to fund low-interest loans to critical and declining plans, which would take pressure off the PBGC. The American Academy of Actuaries suggests that the PBGC combine its separate single employer program, which is much healthier, with its failing multiemployer program.