By: Russ Kamp, Managing Director, Ryan ALM, Inc.

The PBGC has recently published its annual performance and financial report for 2023. Because of the ARPA legislation and the grant monies awarded to 35 distressed plans (covering roughly 615,000 participants), the Multiemployer Program had a net positive position of $1.5 billion at the end of FY 2023, compared with $1.1 billion at the end of FY 2022. Terrific news. The ARPA legislation is doing exactly what it was intended to do.

With regard to the single-employer program, the PBGC reported a net position of $44.6 billion at the end of FY 2023, compared with $36.6 billion at the end of FY 2022. Question: Does the PBGC need to have this type of surplus, especially given the improved funding of single employer plans in the US? As I recently posted, Milliman’s 100 Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans, reported that the average funded ratio for the constituents in the index rose from 103.6% at the end of September to 104.2% as of October 31. Given the improved funding, we’ve encouraged the plan sponsor community to utilize the elevated interest rate environment to de-risk and secure the promised benefits through a cash flow matching approach. Has the PBGC undertaken such an initiative?

Furthermore, wouldn’t it be wiser at this time to reduce the premiums (excessive) paid by sponsoring organizations to assist them in maintaining these important retirement programs or perhaps even encourage the reopening of plans closed because of the high cost to provide them? Does the PBGC really need to have a $44.6 billion net position? We’ve seen the impact on the American worker from having to rely on defined contribution plans as the only employer-sponsored retirement program. Encouraging the use of defined benefit plans would not only help the individual worker, but it would help the sponsoring organization manage its labor force.