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The Pension Benefit Guaranty Corp. projects, in a report issued Monday, that the deficit in its single-employer insurance program will continue to shrink, but paints — even with sweeping reform legislation passed last year — a very different and negative picture for its multiemployer insurance program.
In its fiscal year 2014 Projections Report, the PBGC projects that the deficit in its single-employer program, which is funded in part by premiums paid by employers with pension plans, will shrink to $4.9 billion by 2024, down from last year's actual deficit of $19.3 billion. Last year, the PBGC projected that its deficit would shrink to $7.6 billion by 2023.
In its report, the PBGC attributes its shrinking deficit to improved pension plan solvency and increases — mandated by Congress under a 2013 law — in insurance premiums pension plan sponsors pay the agency.
Under that 2013 law, the base PBGC premium, which was $49 per participant in 2014, was boosted to $57 per participant this year and will rise to $64 in 2016.
The same legislation also raised the variable-rate premium, which is paid by employers with underfunded plans, to $24 per $1,000 of plan underfunding in 2015 and $29 per $1,000 of plan underfunding in 2016, up from $14 in 2014.
However, the report paints a different and dismal picture for the agency's multiemployer pension plan insurance program, even with the passage of legislation last year that allows financially distressed multiemployer plans to cut benefits already earned by participants, as well as raised premiums the plans pay the agency.
While last year's law, the agency's projects, will reduce the 2014 deficit of $42.4 billion to $28 billion by 2024, it only will delay by three years to 2025 from 2022 when the insolvency of the agency's multiemployer insurance program, which guarantees a portion of participants' promised benefits when plans fail, will be more likely than not.
While provisions in the 2014 multiemployer law that allow troubled plans to suspend benefits will “substantially reduce the magnitude of the PBGC deficits in 2024, they do not significantly change the projected insolvency of the fund,” the report said.
Newly released regulations the IRS lay out the steps financially troubled multiemployer pension plans must follow when they need to cut participants' benefits in order to survive.