US - The Pension Benefit Guaranty Corporation's (PBGC) exposure to future losses from financially weak companies has hit a record high of US$108bn despite little change in its year-end deficit.
Reporting its results for the fiscal year ending September 30, the federal pension insurer said its year-end deficit dropped slightly, by $0.5bn to $22.8bn but noted risks of future losses had risen sharply. The estimate has risen $26bn in the last two years and the PBGC's estimate of the total shortfall in insured single-employer plans remained in excess of $450bn.
Despite the decrease in single-employer deficit, the board claimed that if “events” - a clear reference to corporate insolvencies - subsequent to the fiscal year had occurred prior to the year end, the deficit would have hit a high of $25.7bn.
According to the agency’s annual performance and accountability report, submitted to Congress yesterday, despite asset growth of $17.bn the gap between assets and liabilities in the single employer programme remained around the $20bn mark, with liabilities reaching $79.2bn.
The PBGC incurred $4bn in losses from completed and probable pension plan terminations while collecting only $1.5bn in premiums. The insurance programme’s finances were aided by $3.9bn in investment income and a $2.3bn reduction in liabilities due to higher interest rates, leading to an overall net gain of $529m.
Unfortunately, the financial health of the PBGC is not improving, saidexecutive director Bradley Belt. The money available to pay benefitsis eventually going to run out unless Congress enacts comprehensivepension reform to get plans better funded and provide the insuranceprogram with additional resources.
Rep. George Miller (D-CA), the senior Democrat on the house education and the workforce committee, again called on Republicans to pass legislation to fix the nation's private pension system. Miller said: Congress has failed to act to shore up the financial condition of the nation's pension plans and failed to stop companies from dumping their pension plans onto taxpayers. As a result, the PBGC's deficit remains unacceptably high, and the agency's long-term financial health remains dire. With each passing day, the likelihood of a taxpayer bailout of the agency increases.”
The PBGC's separate insurance program for multiemployer plans also took a knock, posting a net loss of $99m resulting in a deficit of $335m compared to $236m a year earlier.
Mark Evans has been appointed as a director at Independent Trustee Services (ITS) to lead trustee appointments in London.
The Pension Protection Fund (PPF) is consulting on changes to the actuarial assumptions it uses in valuations in a bid to better reflect the bulk annuity market, with schemes set to move into surplus on aggregate.
Private sector defined benefit (DB) schemes were 96.3% funded on a Pension Protection Fund (PPF) compensation basis at the end of July, according to the lifeboat fund's monthly index.
Conduent has completed the sale of its actuarial and human resource consulting business to private equity investor, H.I.G. Capital.