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.
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