In the most recent example of why pensioners in the US should perhaps be a bit concerned about the security of their benefits, a new report<\/a> suggests that the government agency in charge of backstopping private-sector pension plans (the Pension Benefit Guaranty Corporation) isn\u2019t entirely optimistic about its own ability to provide an effective safety net for multiemployer plans.<\/strong><\/p>\n Via Pensions and Investments<\/a>:<\/p>\n More than half of multiemployer plan participants will have their benefits reduced if their plans become insolvent and rely on government guarantees in the near future, said a study released Wednesday by the Pension Benefit Guaranty Corp.<\/em><\/strong><\/p>\n <\/p>\n That compares to 21% of participants now in plans that have already run out of money and rely on PBGC guarantees.<\/em><\/p><\/blockquote>\n As the following chart shows, the agency is doing a fairly decent job when it comes to participants in plans that are currently insolvent and receiving assistance, but when it comes to backing up plans that are \u201clikely to need assistance in the future,\u201d the outlook is not good, with more than half of participants suffering a reduction in benefits…<\/p>\n Worse still, of the 51% who will have their benefits cut, 54% will see cuts of 10% or more\u2026<\/p>\n Importantly, the PBGC only looked at currently insolvent plans or terminated plans. It did not take into account plans which it believes will be insolvent sometime within the next decade. Were those numbers included, the agency says that \u201cthe risk and magnitude of benefit loss increases dramatically [and] the gap between promised benefits and guarantees widens further.\u201d\u00a0<\/strong><\/p>\n Here\u2019s why (via Pension Investments again):<\/p>\n Many of the plans headed toward insolvency or projected to do so within 10 years represent plans with larger populations or more generous benefits. \u201cThat by implication suggests that as the benefit amounts get bigger, the current level of the guarantee will cut a lot more participants and the cuts will be a lot higher,\u201d said a PBGC official involved with the study who declined to be identified. \u201cFuture insolvencies are going to be generally less well protected than the current system.\u201d<\/em><\/p><\/blockquote>\n * \u00a0* \u00a0*<\/p>\n We\u2019ll leave you with the following from the PBGC\u2019s 2014 annual report:<\/p>\n The multiemployer program\u2019s net position declined by $34,176 million, increasing its deficit to $42,434 million, an all-time record high for the multiemployer program\u2026<\/em><\/p>\n Some plans, even an improving economy will not be sufficient to maintain their solvency…<\/em><\/p>\n <\/p>\n The FY 2013 Projections Report found that, at current premium levels, PBGC\u2019s multiemployer program is itself on course to become insolvent with a significant risk of running out of money in as little as five years. The risk of insolvency rises rapidly, exceeding 50 percent in 2022 and reaching 90 percent by 2025.<\/strong> When the program becomes insolvent, PBGC will be unable to provide financial assistance to pay guaranteed benefits for insolvent plans.\u00a0<\/em><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":" Government Admits It Can’t Fully Guarantee 51% Of Insolvent Pension Plans ZeroHedge.com Earlier this month we outlined why it is a bad time to be a pensioner. Among the issues we identified were the 18% increase in EU corporate pension … Continue reading \n
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