Summary: The Pension Benefit Guaranty Corporation (PBGC) insures the pensions of about 42 million participants in 45,000 private defined benefit pension plans. During 1997, PBGC paid $824 million to retirees in plans that had terminated with insufficient assets to pay promised benefits. PBGC's financial condition has improved significantly in recent years. The agency has posted a surplus for the past two fiscal years--after having had a deficit for more than 20 years. The financial health of most insured, underfunded plans has also improved, but underfunding among some large plans continues to pose a risk to the agency. The improved financial condition of PBGC and the plans that it insures has resulted from better funding of underfunded plans and economic improvements, such as the extended national economic expansion and growth in the stock market. At this time, it is difficult to isolate the effects of the 1994 pension reform legislation on plan funding from other factors, such as the continued economic expansion. However, risks to the agency's long-term financial viability remain. PBGC is developing a new single-employer program forecasting model to estimate the probability of bankruptcies and terminations of underfunded plans under various economic conditions. In addition, PBGC has already improved its methodology for forecasting the financial status of the multiemployer program. PBGC has also improved its techniques for estimating its liability for plans that are likely to require future financial assistance and is now more closely monitoring the companies with underfunded plans that represent its biggest risks. Moreover, PBGC is strengthening its oversight through more audits of premium payments and audits of fully funded terminated plans and is working closely with plan sponsors to decrease regulatory and administrative burdens under the plan. Still, PBGC needs to continue its efforts to reduce the time it takes to assume control of terminated plans, improve the timeliness of final determinations of participants' benefits, and monitor the performance of contractors that assist PBGC in administering the insurance programs.
