The Pension Benefit Guaranty Corporation and the Federal Budget


 

Publication Date: April 2007

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

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Abstract:

The Pension Benefit Guaranty Corporation (PBGC) is a wholly owned government corporation that insures private-sector defined benefit pension plans. The PBGC receives no appropriations, but some of its operational cash flows are included in the federal budget. In FY2006, the PBGC generated net revenue of $2.6 billion. Since 1975, it has generated more than $15 billion in revenue and has had net outlays (i.e., years in which its outlays exceed its receipts) in only two years, FY2003 and FY2005. The current budget, however, projects net outlays to continue in FY2007 and FY2008. In August 2006, the President signed the Pension Protection Act (PPA) of 2006, which changes the premiums that plan sponsors must pay to the PBGC as well as the contributions they must make to their plans. Over the next 10 years, the PPA provisions related to the PBGC are expected to decrease federal spending by $5.5 billion and decrease revenue by $2.4 billion. This report outlines the operational cash flows of the PBGC and how they are affected by provisions of the PPA as well as certain provisions included in the President's budget proposal for FY2008.