Hammered by huge losses and lower interest rate assumptions, the Pension Benefit Guaranty Corp.’s deficit in fiscal 2009 nearly doubled, jumping to $22 billion from $11.2 billion in 2008.
The deficit in the PBGC’s insurance program for single-employer plans soared to $21.1 billion, up from $10.7 billion in fiscal 2008, while the deficit in the agency’s insurance program covering multiemployer pension plans climbed to $869 million, up from $473 million in 2008.
The big jump in the agency’s deficit is a dramatic reversal of fortune.
Starting in 2005, the agency’s financial position, aided by a strong economy, steadily improved. Its deficit, which hit a record $23.5 billion in 2004, declined each year.
That run of good fortune came to an abrupt end in fiscal 2009.
While the PBGC in 2008 didn’t incur a single loss even close to $100 million from a plan termination, it was hit by several in 2009, including its second-biggest loss. The agency estimated that its takeover this year of massively underfunded pension plans sponsored by bankrupt auto parts manufacturer Delphi Corp. will cost it nearly $6.3 billion.
And the agency could be hit with more big losses.
It says its potential exposure to future losses from financially weak companies was about $168 billion in fiscal 2009, which ended September 30, up from $47 billion the prior year.
“Exposure to possible future termination means that we could face much higher deficits in the future. We won’t fail to meet our obligations to retirees, but ultimately we will need a long-term solution to stabilize the insurance program,” PBGC Acting Director Vince Snowbarger said in a statement.
The agency’s insurance program is supported by premiums paid by employers with defined-benefit plans, as well as by investment income earned on those premiums and assets in failed pension plans it takes over.