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CCH® PENSION AND BENEFITS — 11/30/07

PBGC deficit declined to $13.1 billion in FY 2007

The Pension Benefit Guaranty Corporation’s insurance program for single-employer pension plans reported a deficit of $13.1 billion in fiscal year 2007, according to the PBGC’s Annual Management Report submitted to Congress on November 14, 2007. The 2007 results represent a $5 billion improvement over last year’s $18.1 billion shortfall.

As of September 30, 2007, the single-employer program reported assets of $67.2 billion and liabilities of $80.4 billion. The decline in the deficit was due primarily to investment income of $4.7 billion and a $2.8 billion actuarial credit as a result of higher valuation interest factors. Total return on invested funds was 7.2%. The single-employer program posted premium income of about $1.48 billion in 2007, up slightly from $1.44 billion in 2006.

“A robust economy, strong investment returns and higher valuation interest factors have combined to reduce PBGC’s current deficit,” said Interim PBGC Director Charles E.F. Millard. He noted that much of the change in the PBGC’s stated deficit is due to the fact that no large plans failed this year and that higher valuation interest factors resulted in a lower calculation of the PBGC’s liabilities.

In 2007, no new large pension plans were classified as probable losses on the PBGC balance sheet. The Annual Management Report also shows that the PBGC’s potential exposure to pension losses from financially weak companies decreased to $66 billion, compared to $73 billion in 2006. During the year, the single-employer program took in 110 newly terminated pension plans. Overall benefit payments increased to $4.3 billion in 2007 from $4.1 billion in 2006. The PBGC’s separate insurance program for multiemployer pension plans reported a net deficit of $955 million for 2007, up from the $739 million deficit reported a year earlier.

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