25 January 2022

PBGC Updates Data on Single-Employer, Multiemployer Plans

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GOVERNMENT AFFAIRS

The Pension Benefit Guaranty Corporation (PBGC) has released new studies that update its data on single-employer pension plans and multiemployer pension plans.

Single-Employer Plans  

The PBGC has released its Analysis of Single-Employer Pension Plan Partial Risk Transfers (Based on Risk Transfer Data Reported in the 2015- 2018 PBGC Premium Filings), a study that reviews partial risk transfer data reported by single-employer plans to the PBGC on premium filings for 2015-2018. It analyzes partial risk transfer activities and summarizes this information by year, plan size, industry and whether or not the plan is frozen for benefit accruals or participation.

The major findings of this study include the following: 

  • 8% of PBGC-covered plans performed risk-transfer activity (RTA) during the 2015-2018 study period.
  • 44.8 % of large plans (greater than 1,000 participants) performed an RTA during the study period.
  • 92.6 % of plans that performed an RTA during the study period provided a lump sum option, as opposed to only 18.8% of plans that opted to purchase annuities.
  • 2.4 million participants received either a lump sum distribution or an annuity as part of a risk-transfer transaction during the study period, and thus are no longer participating in their pension plan or covered by PBGC insurance. These participants represent 7.9 % of the 30.9 million participants in PBGC-covered plans during the 2014 plan year.
  • 63% of all participants affected by an RTA during the study period received a distribution from their plan through the election of a lump sum.
  • Plans paying the PBGC’s variable-rate premiums (VRPs) at the per-participant cap were three times as likely to perform an RTA during the period as all other plans (i.e., those paying a lower or no VRP).
  • Plans sponsored by financially weak companies (i.e., plans that the PBGC considers reasonably possible to terminate) performed RTAs at similar rates to other plans.

The report also shows trends, including those concerning performing an RTA, lump-sum payments and purchasing annuities, which perhaps is more instructive than simple raw data. For instance, while the aggregate data shows that 92.6% of plans that performed an RTA during the period 2015-2018 provided a lump sum payment option, the number of such plans fell through the period and by 2018 was less than half that in 2015. Similarly, while during the totality of the period only 18.8% of the plans that performed an RTA purchased annuities, there was a marked increase in the number of single-employer plans purchasing annuities; in fact, the number of plans doing so more than doubled in just three years.

And as a companion to the Analysis of Single-Employer Partial Pension Risk Transfers, additional data tables related to partial pension risk transfer activity are posted along with the 2018 Data Tables.

Multiemployer Plans  

In Benefit Provisions in Multiemployer Defined Benefit Pension Plans 2016 Plan Year Reporting, the PBGC supplements its data tables and provides a detailed review of plan provisions available to active workers participating in multiemployer pension plans.

The significant findings in this report include:

  • The most common formulas provide for a flat dollar monthly benefit for each year of credited service.
  • The average monthly accrual rate for the flat dollar plans is about $102 per month per year of service.
  • The average benefit accrual rate across all plan types that were included in the study is estimated to be comparable to a $99 per month per year of service benefit; the median benefit across all plans is estimated to be $83 per year of service.
  • The construction industry covers by far the highest share of plans (55%) and the highest share of active participants (42%).
  • Pension accruals are generally lower for critical and critical and declining plans than for healthier plans. These critical and critical and declining plans also have a lower incidence of disability benefit provisions.
  • Accrued pension benefits are higher than average in the construction and transportation/warehousing sectors and lower than average in the retail and manufacturing sectors.
  • Normal retirement date overwhelmingly is age 65 (with or without a service requirement), although a significant number of construction industry plans use age 62. Construction industry plans, along with those in the transportation and warehousing sectors, have the highest incidence of subsidized early retirement benefits. “Subsidized” is defined as a 5% per year or less benefit reduction for early retirement.

Click here for the original article.

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