US - The Pension Benefit Guaranty Corporation (PBGC) expects to pay out almost five times as much to insolvent multi-employer plans than it has done over the past 30 years.
The lifeboat fund said it had paid just over $500m in financial assistance to 62 insolvent multiemployer plans since fiscal year 1981. However, the agency estimates its liability for such payments will rise over the next decade to nearly $2.3bn, paid to 104 plans.
In its Pension Insurance Data Book 2009, the PBGC said the number of insolvent plans receiving financial assistance on a year-by-year basis has grown steadily from one plan receiving about $300,000 in 1981 to 43 plans receiving nearly $86m in 2009.
If an insolvent multiemployer pension plan recovers financially, it is required to repay the financial assistance with interest. In the programme's 30 years of existence, only one multiemployer plan has repaid the PBGC for the financial assistance it received, the report said.
It added: "Thirty-nine plans are currently receiving or are about to receive financial assistance and are classified as ‘current probable plans'. Another 65 plans have been designated as ‘terminated future probable plans' or ‘ongoing future probable plans' and are expected to need financial assistance in the future.
"The estimated present value of non-recoverable future financial assistance to these 104 ‘probable plans is $2.3bn'. This $2.3bn was the major component of the programme's liabilities at the end of FY 2009.
"At the same time, the programme had less than $1.5bn in assets and a deficit of $869m. PBGC's new ME-PIMS simulation model indicates that, under current rules, there is about a 65% probability that the program's deficit will grow over the next 10 years.
"The model's mean estimated deficit at that time is $4bn, nearly five times the current level. The model estimates there is only an 11% probability that the programme will be in surplus in 2019."
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