FY 2016
PENSION BENEFIT GUARANTY CORPORATION 1 FY 201 6 | PROJECTIONS REPORT

SUMMARY

The Pension Benefit Guaranty Corporation (PBGC) insures pension participants against full loss of 

pension benefit when a private sector pension plan fails. PBGC operates two separate insurance

programs, one for single-employer and one for multiemployer defined benefit pension plans. The amount

of benefits guaranteed, the point at which the guarantees apply and the funding sources are quite different

between the two PBGC programs. This report reviews both programs.

This year’s projections for PBGC’s multiemployer program show less uncertainty regarding the year it will

use up all of its assets; most projections show insolvency occurring during the three fiscal years 2024-

2026. The risk of insolvency accumulates year by year, leaving the multiemployer program fund more 

likely than not to use up all of its assets by the end of fiscal year (FY) 2025. While the program covers

only roughly one-quarter of private sector defined benefit pension participants, it continues to have 

deficits (i.e., negative net positions0F

1

) much larger than those of the single-employer program. Those 

deficits are expected to grow, in nominal dollars, over time.

New results for PBGC’s single-employer program are consistent with findings of the prior year’s report –

the financial status of the program is likely to improve and reach a surplus net position within the next 

decade. Low claim levels in FY 2016, combined with recent increases in interest rates, cause the program 

to potentially reach net surplus several years earlier than previously projected.

MULTIEMPLOYER PLANS Over 100 of the multiemployer plans that PBGC insures, covering over 

1 million participants, have declared that they will be unable to raise contributions sufficiently to avoid 

insolvency over the next 20 years. Multiemployer plans are, as a group, less well funded than singleemployer plans. While most multiemployer plans are projected to remain solvent over the next 20 years, 

approximately one quarter of multiemployer plans are in critical status and will be unable to meet 

minimum funding requirements or remain solvent over the near term. Approximately one-third of these 

critical status plans are in critical and declining status and have disclosed they face insolvency in the next 

two decades.

Under the Multiemployer Pension Reform Act of 2014 (MPRA), critical and declining status plans are 

allowed to take steps to improve long term solvency including permanently reducing benefit promises to 

participants via benefit suspensions.1F

2 To suspend benefits, plans must meet a number of conditions. 

MPRA also gives PBGC new ways to help plans remain solvent by providing financial assistance for plan 

partitions (undertaken in conjunction with permanent benefit reductions) or for plan mergers.

The degree to which plans will attempt to extend solvency through benefit reductions and financial 

assistance requests remains somewhat unknown at the date of this report. As of April 15, 2017, fifteen

troubled plans had made an application for suspension. To date, only one application for suspension or 

partition had received all the required approvals.2F

3

 

1 Deficit and negative net position are used in this report to mean the excess of the present value of the liabilities for 

future payments under the guarantee program over the program assets. “Insolvent,” “Deficit” and “Claims” are 

further defined and discussed in the section “Financial Obligations” beginning on Page 4. 2 While MPRA allows plans to potentially define benefit suspensions as extending only for a limited period, and 

benefit suspensions must be removed if the plan no longer requires them in order to maintain solvency, they are 

generally anticipated to be permanent reductions in benefit amounts in applications for suspension received to date. 3 Ironworkers Local 17 Pension Fund received final authorization on January 27, 2017 

https://www.treasury.gov/services/Responses2/Iron-Workers-Local-17-Final-Approval-Letter.pdf. As it occurred 

after September 30, 2016 it is not reflected in the report scenario which shows no future suspensions.
PENSION BENEFIT GUARANTY CORPORATION 2 FY 201 6 | PROJECTIONS REPORT

This report illustrates two scenarios regarding the number of plans that will apply for and successfully 

meet the statutory and regulatory requirements for benefit suspensions and financial assistance. The 

solvency of individual plans and the near-term and long-term magnitude of benefit losses to participants

differ between these scenarios. However, the results show the insolvency of PBGC’s program is likely by 

the end of FY 2025 under either scenario. 

Assuming no plans elect suspensions or partitions (or financial assistance through facilitated merger), 

PBGC’s mean projected 2026 multiemployer deficit averages $58.6 billion discounted to today’s values,

an increase of $3.1 billion from the prior 10-year present value projected mean deficit. This increase is 

similar to that seen in PBGC’s most recent Annual Report,3F

4 which reported a $6.5 billion increase in the 

multiemployer program deficit to $58.8 billion as of the end of FY 2016. While the mean projected 2026 

multiemployer deficit is close to the FY 2016 net position in present value, it is projected to grow in 

nominal terms, to a mean projected value of $78.8 billion.

We also show an alternate scenario which assumes that some plans and participants will elect to use 

suspension and partition4F

5 under MPRA. We assume the same rates of use of suspension and partition as

in our prior (FY 2015) Projections Report, but change the way we model suspension and partition based 

on emerging experience with applications under MPRA, including a deferral of the assumed average date 

of commencement of benefits suspensions to 2018 rather than 2017. Under this scenario, the present 

value projected mean 2026 deficit is $57.8 billion. Under this scenario the 2026 deficit is also projected to 

grow, in nominal terms, to a mean projected value of $77.8 billion. The nominal and present value 

projected mean deficits are only modestly smaller than under the scenario that assumes no suspension or 

partitions.

Both scenarios include changes to assumptions and updates to the programming of the system. In 

particular, the multiemployer projections reflect the results of a study of likelihood of mass withdrawal in 

recent years. As a result of the study, we significantly reduced the assumed rates of mass withdrawal in 

our model. Discussion of the multiemployer simulations begins on Page 6; the changes in the model and

assumptions are detailed beginning on Page 25.

SINGLE-EMPLOYER PLANS The single-employer simulations show that improvements in the 

program’s net position remain likely during the coming decade. This year’s report shows a mean projected 

present value surplus of $9.6 billion for 2026, an increase of $7.0 billion from the prior report. There is 

significant variation around this mean outcome. We also project an earlier median date for the program to 

emerge from a net position deficit. This accelerates the trend seen in the past several reports.

This report incorporates various improvements to the model, the most notable being use of updated 

mortality tables. The single-employer results are detailed beginning on Page 29.

 

4 PBGC’s FY 2016 Annual Report may be accessed at https://www.pbgc.gov/Documents/2016-AnnualReport.pdf. 5 PBGC’s ability to provide financial assistance to plans for both facilitated mergers and for partitions is constrained 

by non-impairment and net long-run loss tests. The facilitated merger authority is not separately modeled in MEPIMS, but is incorporated within the modeling of the constrained financial assistance available under partition. For 

additional information on the assumptions, see the section “Assumed Utilization of MPRA Suspension, Partition and 

Facilitated Merger” beginning on Page 21.
PENSION BENEFIT GUARANTY CORPORATION 3 FY 201 6 | PROJECTIONS REPORT

TABLE OF CONTENTS

SUMMARY .......................................................................................................................1

Multiemployer Plans....................................................................................................1

Single-Employer Plans ..................................................................................................2

About This Report ........................................................................................................4

MULTIEMPLOYER PROGRAM............................................................................................6

SINGLE-EMPLOYER PROGRAM........................................................................................ 29

STATEMENT OF ACTUARIAL OPINION ............................................................................. 40

APPENDICES................................................................................................................. 41

TABLE OF FIGURES

Figure 1 – The Path to Critical and Declining Plan Status............................................................................................................................8

Figure 2 – Multiemployer Program Risks Compress –Insolvency by 2025 Likely.............................................................................. 11

Figure 3 -- PBGC Multiemployer Fund Projected to Be Drained ....................................................................................................... 12

Figure 4 -- PBGC Multiemployer Fund Insolvency Illustration Unchanged by Assumed Benefit Suspensions and Partitions.............. 13

Figure 5 -- Absent Suspensions and Partitions, Present Value of Deficit Likely to Remain Near Current Levels.............................. 14

Figure 6-- Projected Net Position Grows in Nominal Dollars (No Future MPRA Suspensions or Partitions) .................................. 15

Figure 7 – Little Change in Projected Present Value of Deficit After Reflecting Assumed Suspensions and Partitions ....................... 16

Figure 8 -- Future Assumed Suspensions and Partitions Have Little Effect on Nominal Projected Deficit......................................... 17

Figure 9 -- Wide Range of Future Outcomes, Absent Suspensions, All Deficits.................................................................................. 20

Figure 10 -- Assumed Future Suspensions Modestly Reshape the Risks to the Insurance Program...................................................... 20

Figure 11 – Range of Multiemployer Outcomes Shows Higher Likely Deficits, if there are No Future Suspensions............................ 24

Figure 12 – Range of Multiemployer Outcomes with Suspensions Also Worsen vs Prior Year............................................................ 25

Figure 13 -- Reconciliation of Changes in ME-PIMS Results ............................................................................................................ 26

Figure 14 – Single-Employer Program Likely to Reach Surplus over Time........................................................................................ 30

Figure 15– Single-Employer Net Position Projected in Nominal Dollars ........................................................................................... 31

Figure 16 – Single-Employer Net New Claims.................................................................................................................................. 32

Figure 17 – Single-Employer Program Investment Income .................................................................................................................. 34

Figure 18– PBGC's Potential 2026 SE Financial Position.............................................................................................................. 36

Figure 19– SE Financial Position: Comparison to Prior Year........................................................................................................... 37

Figure 20– Reconciliation of Changes in SE-PIMS Results............................................................................................................... 38

FREQUENTLY USED ABBREVIATIONS

ERISA Employee Retirement Income Security Act of 1974 as amended

ERM Critical status plans that have determined they have “Exhausted all Reasonable Measures”

FY Fiscal Year

ME Multiemployer

MPRA Multiemployer Pension Reform Act of 2014

PBGC Pension Benefit Guaranty Corporation

PIMS Pension Insurance Modeling System

PPA Pension Protection Act of 2006, as amended

PV Present Value

SE Single-Employer
PENSION BENEFIT GUARANTY CORPORATION 4 FY 201 6 | PROJECTIONS REPORT

ABOUT THIS REPORT

This report contains estimates and projections for both PBGC’s multiemployer and single-employer

programs. Projections begin with the values presented in PBGC’s most recent Annual Report, as of the 

end of Fiscal Year (FY) 2016, and project for the following decade and beyond, based on current

economic conditions, and current law.5F

6 PBGC uses two stochastic modeling systems to make the 

projections: the Multiemployer Pension Insurance Modeling System (ME-PIMS) and the Single-Employer

Pension Insurance Modeling System (SE-PIMS). Each relies on running many simulations to derive a

range of possible future outcomes. The report uses averages and ranges to summarize the simulations.

The purpose of the report is to provide an actuarial evaluation of the expected operation and status of 

PBGC’s multiemployer and single-employer programs over the near term. It does so by illustrating the 

projected solvency and net position (accounting balance sheet) for the two programs over time under a 

variety of simulated future conditions. The standard for actuarial evaluations is that the estimates be

reasonable and based on the use of reasonable methods and assumptions. In the professional opinions of

the signers, this report meets those standards.

The values shown are estimates, not predictions. They reflect a reasonable range of values that might

result based on the assumptions and behavioral relationships that underlie the Models. The values are

highly dependent on the stochastic projection of many, highly variable factors, such as future interest

rates, future equity returns, and future decisions by plan sponsors. The actual results that ultimately

occur in future years can, and likely will, vary materially from the projections in this report.

The Wide Range of Possible Outcomes

To illustrate the uncertainty inherent in projecting even the near future, this report shows a wide range of

possible outcomes associated with a given set of assumptions. These include mean (average) values and

“high,” median and “low” values projected for key outcomes for fiscal years 2017 to 2026. To

demonstrate potential variation, the “high” value is set at the 85th percentile (i.e., 85 percent of the

outcomes are lower), the median value at the 50th percentile, and the “low” value at the 15th percentile.

While the “high” to “low” range represents the bulk of projected outcomes, almost a third of projected

results lie above or below the “high” to “low” range. Over a 10-year period it is likely that results will fall 

outside the “high” to “low” range several times. Because these “tail” results are also important, the report

also presents discussions of the full distributions of projected financial positions for both programs.

Financial Obligations 

The report presents two types of financial obligation measures: (1) liabilities (and assets) stated on a

present value and nominal basis and (2) year-by-year cash flows. PBGC’s liabilities reflect the discounted

present value of the retirement benefits PBGC pays for the lifetime of participants and their

beneficiaries; these retirement benefits are generally guaranteed benefits with adjustments as set forth in

ERISA and regulations. “Claims” are newly recorded (lifetime) liabilities less any associated assets and

recoveries; they are generally recorded on PBGC’s books when the payment of guarantee amounts is 

probable. The amount that PBGC “books” is the present value of benefits payable to participants and

their beneficiaries for their lifetimes plus associated expenses that PBGC would pay for under the rules 

governing the guarantee program, less the present value of any assets or other recoveries. Discussions of 

 

6 This report generally uses data and assumptions as of September 30, 2016 (the end of FY 2016), but reflects the 

November increase in interest rates and estimated effects on PBGC asset holdings through December 31, 2016.
PENSION BENEFIT GUARANTY CORPORATION 5 FY 201 6 | PROJECTIONS REPORT

PBGC’s deficit, net position, financial position and net financial position all reflect the discounted present 

value of lifetime total liabilities in excess of total assets as of a certain date. PIMS generally models 

anticipated amounts shown as liabilities or assets on PBGC’s books at future points in time along 

alternate economic paths; it does not model footnote disclosures, such as amounts that represent 

reasonably possible contingencies.6F

7

The report also looks at year-by-year cash flows. Discussions of plan or PBGC insolvency focus 

primarily on the sufficiency of assets, investment returns, contributions or premiums, and other income

to meet benefit payments and expenses for a particular year; i.e., the report uses the term “insolvent” to 

mean lacking the funds to pay current benefits and expenses for a year. Furthermore, as discussed above, 

the term “deficit” is used to refer to the difference between the present value of liabilities for a lifetime of 

payments and assets, not to year-by-year cash flow amounts.

About the PIMS Models

The PIMS Models are the best available tools for this analysis; but, like most models, they are subject to

limitations. The Models are continually revised in light of changing law, plan sponsor behavior, and

PBGC’s understanding of that behavior. Major modeling changes for this report include changes to SEPIMS to include capability to utilize yield curves, flexibility for various levels of contribution policy 

assumptions, a modernized random number generator,7F

8 separation of mortality assumptions used for 

experience and funding target liability, and performance improvement. Changes to ME-PIMS include 

adding the capability to specify partition order, a modernized random number generator, modifications to 

the assumed probability of mass withdrawal based on recent empirical experience, separation of mortality 

assumptions used for experience and current liability, and performance improvement. 

The improvement of PBGC’s Models and their documentation is an ongoing and continuing process.

While both ME-PIMS and SE-PIMS can simulate demographic and economic factors up to 20 years into

the future, they do not model all longer-term sources of uncertainty affecting the pension system.8F

9 This 

year’s projections reflect changes to assumptions used in ME-PIMS regarding the suspension and 

partition application process. These assumptions reflect emerging experience under the program through 

January 2017. In both systems we adopt updated mortality table projections for calculating underfunding.

Estimated multiemployer program deficits and financial assistance shown in this report assume that

PBGC will provide benefits in accordance with the current level of guarantees rather than reducing

guarantee levels to those affordable by premiums.9F

10 This evaluation assumes no changes to the current

law after September 30, 2016 for both multiemployer and single-employer plans.

 

7 Reasonably possible contingencies are discussed in Note 9 of PBGC’s Annual Report. As of the end of FY 2016 

they were $223 Billion for the single-employer program and $19 Billion for the Multiemployer program. 8 See Professor L’Ecuver http://www.iro.umontreal.ca/~lecuyer/myftp/streams00/c++/RngStream.cpp 9 For more information on PIMS, including links to user publications and peer review papers, see the PIMS Web 

Page http://www.pbgc.gov/about/projections-report/pension-insurance-modeling-system.html. 10 This enables the measurement of the size of the promised benefits from the PBGC program and the resources 

PBGC has to meet those payments. Under current law [ERISA §4022A(f)(2)(C)], if premiums and PBGC fund 

assets are insufficient to pay guaranteed benefits, and Congress does not act on a formal PBGC submission of 

alternative actions, guarantees are reduced to the level affordable by premiums.
PENSION BENEFIT GUARANTY CORPORATION 6 FY 201 6 | PROJECTIONS REPORT

MULTIEMPLOYER PROGRAM

MULTIEMPLOYER PROGRAM............................................................................................6

Multiemployer Program Overview ......................................................................................6

Will PBGC Have Funds to Pay Multiemployer Guarantees?.................................................10

How Quickly Will the Multiemployer Fund Be Exhausted? .................................................11

Summary Projections........................................................................................................13

Projected Net Position............................................................................................................................................13

Sources of Uncertainty: Multiemployer Program...................................................................................................17

Projected Net New Claims......................................................................................................................................17

PV Financial Assistance Payments..........................................................................................................................21

Assumed Utilization of MPRA Suspension, Partition and Facilitated Merger .......................21

Changes in the FY 2016 Model of Suspensions and Partitions ...............................................................................22

Variability in Projected Financial Position, Multiemployer Program....................................24

Reconciling ME-PIMS Results from 2015 to 2016................................................................25

Sensitivity of Changes to the Model and Discount Rate......................................................27

MULTIEMPLOYER PROGRAM OVERVIEW

The current multiemployer system, covering approximately 10.5 million participants in about 1,350 plans, 

remains under severe stress. Multiemployer plans are collectively bargained plans that are maintained by 

one or more unions and multiple companies, generally in the same industry or as members of an 

association.

By law, PBGC’s insurance program for multiemployer plans operates differently than its single-employer 

program. The insured event is plan insolvency (i.e., the year in which a plan is anticipated to have 

insufficient funds to pay benefits and expenses). Even after a plan becomes insolvent, PBGC does not 

take over the administration of an insolvent multiemployer plan, but rather provides financial assistance 

to cover the plan’s guaranteed benefits and its expenses.10F

11

Multiemployer plans’ premium rates for PBGC coverage are lower than those for single-employer plans 

and are based solely on participant count. The amount and structure of the benefit guarantees provided 

under the program also differ significantly. Assets of PBGC’s multiemployer program are separate from 

those of the PBGC single-employer program by statute; assets from one program cannot be used to fund 

obligations of the other program.

The Pension Protection Act of 2006 (PPA) required multiemployer plans to be categorized based on 

funded status, compliance with minimum funding standards and duration to likely insolvency. The most 

troubled category of plans is those plans which are in critical status.11F

12 Generally these are plans that are 

likely unable to meet minimum funding requirements and/or are likely to become insolvent in the near 

term. The Multiemployer Pension Reform Act of 2014 (MPRA) defined a subcategory of critical status 

 

11 Technically this financial help is in the form of loans. However, with one exception over PBGC’s history, the 

loans have never been repaid. 12 Critical status plans are defined in ERISA § 305 (b)(2) under a variety of alternative criteria that target plans with 

severe funding or liquidity issues. Critical status plans must establish a rehabilitation plan detailing how they intend

to emerge from critical status (generally within 10-13 years), but if they are not projected to emerge during the 

rehabilitation period after exhausting all reasonable measures, they must develop an alternative scenario that allows 

them to emerge at a later time or to otherwise forestall possible insolvency. These critical status plans are referred to 

as “exhausted all reasonable measures” (ERM) plans.
PENSION BENEFIT GUARANTY CORPORATION 7 FY 201 6 | PROJECTIONS REPORT

plans which are “critical and declining”. These are critical status plans whose actuaries project that plan 

insolvency will occur within 20 years or less.12F

13 

MPRA gives critical and declining plans additional options to address the risk of insolvency, but the use 

of these options presents difficult choices for plan sponsors and participants. Under MPRA, critical and 

declining plans may take steps to improve long term solvency by permanently reducing benefit promises 

to participants via benefit suspensions if they meet certain requirements of the law, including application 

to and approval by the Department of the Treasury. MPRA also changes PBGC’s ability to provide early 

financial assistance to plans, either by assuming part of the plan’s liabilities via a plan partition or by 

providing facilitated merger assistance. In order to receive partition assistance, the plan must take all 

reasonable measures to avoid insolvency including the maximum benefit suspensions, if applicable. 

Mergers can stabilize or increase the base of contributing employers, combine plans’ assets for more 

efficient investing, and reduce plans’ administrative costs. MPRA provides for PBGC to be able to 

facilitate a merger of plans by providing technical assistance. Critical and declining plans may also apply 

for financial assistance to facilitate a merger, if necessary to avoid plan insolvency. Partition, or any 

facilitated merger, must also reduce PBGC’s long-term loss and can’t impair its ability to provide financial 

assistance to the many other plans that are anticipated to need assistance in the future. 

Prior Projections Reports have found that over 1 million participants are in plans likely to become 

insolvent over the next two decades. This number would include, as a primary component, participants in 

critical and declining plans. Data on critical and declining status plans is now becoming publicly available; 

while the data is not yet fully complete, it confirms that over 1 million participants were in critical and 

declining plans by 2017. 

Critical and declining plan status typically first applied to plans in plan years beginning in 2015. Data is 

generally not publicly reported on these plans until after the plan year has ended. Although plan actuaries 

must certify the PPA status of plans to the Secretary of Treasury much earlier than the Form 5500 data 

(within 90 days after the beginning of the plan year),13F

14 that data is treated as protected taxpayer 

information and is not publicly available. The most extensive reports (Form 5500 filings) are due to be 

filed nine and one half months after the end of the plan year, after reflecting routine extensions. Thus, as 

of the end of April, data for plans with 2015 plan years that began in August through December is 

generally not yet available. 

Plans must also report that they are in critical and declining status to their participants on the Annual 

Funding Notice. For most multiemployer plans, this notice is provided no later than 120 days after the 

end of the plan year, five and one-half months earlier than the due date (including extensions) for the 

Form 5500 filing. (Less than 50 multiemployer plans typically qualify for an extended filing date for the 

annual funding notice based on having less than 100 participants.) Finally, plans must notify participants 

if the plan is in critical or endangered status for a year, no less than 30 days after the plan actuary certifies 

the PPA status to Treasury. Typically these notices are sent at the same time as the annual funding notice 

that applies to the prior plan year. These notices, which may or may not include the information that a 

 

13 ERISA §305(b)(6). Under MPRA, plans in critical status must perform either a 15- or 20-year projection to 

determine whether they will become insolvent and thus “critical and declining”. As shown in PBGC’s 

Multiemployer Supplement (Page 5) almost all critical plans satisfy conditions that require a 20-year test 

https://www.pbgc.gov/documents/2015-PBGC-Data-Tables-Multiemployer-Supplement.pdf. 14 ERISA §305(b)(3).
PENSION BENEFIT GUARANTY CORPORATION 8 FY 201 6 | PROJECTIONS REPORT

critical plan is in critical and declining status, are publicly posted on a web site maintained by the 

Department of Labor.14F

15

Figure 1 summarizes data for plan years 2009 through 2015 for the group of plans which had declared 

they were in critical and declining status in a public filing for either plan year 2015 or 2016 as of April 18, 

2017. The group of plans included in Figure 1 combines plan reporting from several sources, including 

plans that reported critical and declining status by filing that status on the 2015 Form 5500 filing prior to 

April 18, 2017, or by notifying participants of this status for either 2015 or, to date, for 2016.15F

16 111 plans 

met these criteria. As of April 18, 2017, not all the plans were required to have filed their 2015 Form 

5500 – for 11 plans, 2015 data was estimated by using the 2014 filing.

Figure 1 – The Path to Critical and Declining Plan Status

Figure 1 shows the evolution of the funding status and number of plan participants for this set of plans 

over time, as they moved towards what would become critical and declining status. Funding status is 

 

15 https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/public-disclosure/critical-status-notices. 16 Data was gathered from plan Form 5500 filings for 2015 plan years that were available as of April 18, 2017. 

Generally this includes most multiemployer plans except those with plan years commencing in August or a later 

month. Plans certifying critical and declining status (Code “D”) were then compared with the list of critical funding 

notices for 2015 and 2016 maintained by the Department of Labor, also downloaded as of April 18, 2017. Plans 

that reported critical and declining status on any of these forms were then aggregated into the group of plans 

displayed. Prior year information is based on Form 5500 data for the plans included in the group. 

$0

$20,000

$40,000

$60,000

$80,000

2009 2010 2011 2012 2013 2014 2015

0.0

0.5

1.0

1.5

2.0

Unfunded Current Liability 

Aggregate Participant Count (Blue Line) 

Unfunded Current Liability by Zone Status 

The Group of Plans that Became Critical and Declining

(millions)

Critical and Declining Critical Endangered

Seriously Endangered None Participants
PENSION BENEFIT GUARANTY CORPORATION 9 FY 201 6 | PROJECTIONS REPORT

measured using the difference between “current liability”16F

17 and the market value of plan assets. For years 

2009 through 2014, underfunding for plans with a similar zone status for a year is aggregated.17F

18

As shown in Figure 1, most of the underfunding in critical and declining plans is due to plans that have 

been in critical status since that status was first designated under PPA. However, the fact that a plan is 

not in a PPA status for a particular year (i.e. “Green” plans) is not an indicator of zero risk; some plans 

have moved into critical status and then declined fairly rapidly.

The universe of critical and declining plans remains a small portion of the total number of multiemployer 

plans and the number of participants covered by these plans has declined over time, but remains well in 

excess of one million participants. 

Information on whether a critical and declining status plan will take action under MPRA to improve long 

term plan solvency by permanently reducing benefit promises to participants or apply for early financial 

assistance from PBGC is evolving. As of April 15, 2017, 15 plans had applied for approval to undertake 

benefit suspensions, 4 of which also applied for partition. None of the applications was approved prior to 

September 30, 2016. One of the 15 applications for suspension was approved in January, 2017 and no 

plan had yet been approved for partition as of April 15th.18F

19 

Given the lack of experience of plans successfully applying for suspensions and/or partitions, this report 

continues to present results: (1) assuming no future suspensions or partitions under MPRA will be 

effective (since, as of September 30, 2016, no plan had yet completed a suspension or partition, the 

assumption of no future suspensions or partitions effectively assumes no use of suspensions or partitions)

and (2) using estimates of the percentage of “critical and declining” plans that will make use of the 

suspension and partition provisions, using assumptions as to how the process will operate. The latter 

results should be interpreted in the light of the uncertainties outlined later in this report in the section 

“Assumed Utilization of MPRA Suspension, Partition and Facilitated Merger” beginning on Page 21. We 

primarily use the same utilization assumptions as in the FY 2015 Projections Report, but defer the 

assumed average date of commencement of benefits suspensions to 2018 rather than 2017 and make 

certain changes to how we model suspension and partition.

The estimate of the average projected deficit increased from last year’s projected 2025 mean present value 

deficit of $55.5 billion to this year’s $58.6 billion 2026 projected mean present value deficit, assuming no 

future suspensions and partitions under MPRA. Assuming some future use of suspension and partition

yields a mean projected 2026 deficit averaging $57.8 billion in present value, an increase of $4.4 billion 

from the comparable numbers in our prior report. While the present value of the ten year mean projected 

deficit is comparable to the September 30, 2016 starting value, in nominal terms the deficit is projected to 

 

17 Current liability is a measure of the present value of benefits earned by participants in the plan required to be 

reported on the Form 5500 multiemployer plan filing. As specified in Internal Revenue Code § 431(c)(6) certain 

major assumptions used to determine current liability are constrained, producing estimated liabilities that are 

comparable across plans. 

18 For 2015, all the plans are illustrated as in critical and declining status, based on the partial data availability. A few 

of these plans may only become critical and declining in 2016. Also, for certain plans 2015 data is not yet available 

and 2014 data has been used. For several small plans there were missing data elements in years 2009 through 2014 –

these have been estimated using data from an adjoining year.

19 A list of applications for suspension is maintained on the Treasury webpage 

https://www.treasury.gov/services/Pages/Plan-Applications.aspx; similarly a list of applications for partition is 

maintained on the PBGC web page https://www.pbgc.gov/prac/pg/mpra/multiemployer-plans-and-partition.html
PENSION BENEFIT GUARANTY CORPORATION 10 FY 201 6 | PROJECTIONS REPORT

grow, rising to a mean projected deficit of $78.8 billion or $77.8 billion depending on the assumed use of 

suspensions and partitions.

The year when PBGC’s multiemployer program is estimated to have a greater than 50 percent likelihood 

of insolvency remains at 2025, regardless of scenario. Most of the risk of PBGC’s multiemployer program 

insolvency is concentrated in three fiscal years: 2024, 2025 and 2026. The likelihood of insolvency does 

not vary greatly if plans are assumed to use suspension and partitions under MPRA -- whether or not 

suspensions are adopted, PBGC’s multiemployer program remains more than 50 percent likely to run out 

of assets by the end of FY 2025. The risk of insolvency rises rapidly after the 10-year period, reaching 99

percent by the end of the first 20 years.

The Model runs 500 simulations of the economy and how plans react to changes. While these results are 

highly variable, none of the simulations, under either scenario, show PBGC’s program in surplus. Instead, 

the Model shows PBGC’s multiemployer program will have a net deficit in 100 percent of our 10-year 

projection simulations.

WILL PBGC HAVE FUNDS TO PAY MULTIEMPLOYER GUARANTEES?

Participants in insolvent plans face the risk of plan benefits being cut to the level of PBGC guarantees 

upon plan insolvency. They face an additional risk that PBGC’s guarantee fund will run out of money to 

provide financial assistance, leaving PBGC unable to pay the current level of guarantees. This and 

following sections examine that second risk.

The multiemployer guarantee program remains at risk of running out of money. This year’s 

projections continue to show it is more likely than not that the program will run out of money by the end 

of FY 2025. At the end of the 10-year projection period ending in 2026, PBGC’s multiemployer fund

assets are depleted in over 70 percent of the simulations. Program risk continues to rise over time, 

exceeding 90 percent by 2029 and 99 percent by 2036.

The year by year risks of running out of money are compressed versus the prior year projections.

Figure 2 compares the results for the prior (FY 2015) and current (FY 2016) insolvency risk projections. 

The lines in the chart show results assuming no future MPRA suspensions and partitions while the 

columns show results assuming future suspensions and partitions. Generally, PBGC multiemployer 

program insolvency risk decreased prior to FY 2025 and increased slightly after FY 2026 indicating a 

narrowing of the likely dates of program insolvency. 

The 2015 Projections Report showed the risk of multiemployer program insolvency exceeding 10% in FY 

2022 and exceeding 90% in 2029. As shown in Figure 2, this year the projected risk of insolvency first 

exceeds 10% in FY 2023 and rises to 90% or more in FY 2028. Over half the likelihood of insolvency is 

now concentrated in fiscal years 2024, 2025 and 2026. 
PENSION BENEFIT GUARANTY CORPORATION 11 FY 201 6 | PROJECTIONS REPORT

Figure 2 – Multiemployer Program Risks Compress –Insolvency by 2025 Likely

Because PBGC’s ability to offer assistance to plans is constrained by the resources of its multiemployer 

program, and it must certify to Congress that offering partition or merger assistance will not impair its

ability to provide assistance to certain other plans, this report reflects an assumption that the number and 

format of partitions will be limited so as to not significantly accelerate PBGC’s insolvency. Thus the 

insolvency risk after reflecting future suspensions and partitions is very similar to that shown when 

reflecting no future suspensions and partitions.

HOW QUICKLY WILL THE MULTIEMPLOYER FUND BE EXHAUSTED?

As shown in Figure 2, our models estimate that the risk of insolvency rises over time, exceeding 50

percent within FY 2025. To derive the 50 percent level we simulate PBGC premiums paid and the 

potential financial assistance to plans under 500 economic paths. In more than half of the paths, PBGC’s 

multiemployer fund is depleted on or before the end of FY 2025. This form of presentation allows the 

reader to understand the potential timing of plan insolvency, but may not provide insight into the drivers 

of insolvency. 

To provide additional insight into the drivers of fund insolvency we have also prepared an illustration of 

PBGC’s multiemployer fund balance, assuming no future benefit suspensions or partitions. The 

illustration uses the average of the projected premiums and the financial assistance derived from our 

simulations. Figure 3 compares the assets as of the beginning of the fiscal year to the projected premiums 

and projected average financial assistance payments for that fiscal year.19F

20 Thus, for FY 2024, assets 

projected as of the beginning of 2024 are anticipated to exceed the financial assistance granted through 

2024 and to significantly exceed the portion of the financial assistance that is in excess of anticipated 

 

20 Assets are shown as of a point in time -- the beginning of the fiscal year -- and compared with the cash flow 

generated due to premiums and financial assistance for that following year (less material items, including investment 

income and administrative expenses, are not shown). For clarity, the chart has been revised from the presentation in 

the prior report, which showed assets as of the end of the fiscal year.

76%

75%

0%

50%

100%

Chance of Insolvency

Multiemployer Program Insolvency Risks

FY 2015 Reflecting Future Suspensions / Partitions FY 2016 Reflecting Future Suspensions / Partitions

FY 2015 No Future MPRA Suspensions / Partitions FY 2016 No Future MPRA Suspensions / Partitions
PENSION BENEFIT GUARANTY CORPORATION 12 FY 201 6 | PROJECTIONS REPORT

premiums. However, as of the beginning of 2025, projected assets are significantly less than the 

anticipated financial assistance net of anticipated premiums, illustrating the expected insolvency of the 

multiemployer program fund in that year. 

Figure 3 -- PBGC Multiemployer Fund Projected to Be Drained

Average projected financial assistance rises dramatically over time, as indicated in Figure 3, due to the 

rising needs of plans that enter insolvency in the 2020’s. Annual financial assistance rises much more 

rapidly than premiums, in the second decade attaining levels exceeding the current level of assets in the 

multiemployer fund.

Figure 4 incorporates assumptions about the use of benefit suspensions and partitions. It also compares 

the assets as of the beginning of the fiscal year to the projected premiums and projected average financial 

assistance payments for that fiscal year – financial assistance now includes the estimates of early financial 

assistance granted in partition or facilitated merger. It also shows an exhaustion of fund assets in 2025. 

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036

Millions of Dollars

PBGC Assets, Average Assistance Payments and Premiums by Fiscal Year

No Future MPRA Suspensions / Partitions

(Projected in Nominal $ Amounts)

Assets at Start of Year Financial Assistance Premiums
PENSION BENEFIT GUARANTY CORPORATION 13 FY 201 6 | PROJECTIONS REPORT

Figure 4 -- PBGC Multiemployer Fund Insolvency Illustration Unchanged by Assumed Benefit Suspensions 

and Partitions

The projections shown in Figure 3 and Figure 4 use the average (mean) level of financial assistance across 

all of our simulations in each year. Since the average level of financial assistance includes simulations of 

economic paths where plans become insolvent at relatively earlier dates, the average financial assistance 

level is somewhat larger than the median, but is expected to get closer to the median result as insolvency 

draws closer, until the point where, shortly before insolvency, they are equal. This year’s report shows 

increased convergence in the projections, with the year of insolvency based on average claims occurring 

in 2025, the same year as the median year in our projections. This represents a several month delay in the 

projected date of insolvency using mean projections from our prior (FY 2015) Projections Report and 

MPRA Report.20F

21

SUMMARY PROJECTIONS 

Projected Net Position

The 10-year projections show the multiemployer program’s net position deteriorated from last year’s 

projections. If there are no future suspensions and partitions under MPRA, ME-PIMS projects that the 

present value of PBGC’s 2026 multiemployer obligations will be higher than last year’s projections (a 

mean present value deficit of $58.6 billion for 2026 compared to the previous projection of a mean 

present value deficit of $55.5 billion for 2025, an increase of $3.1 billion from the comparable number in 

our prior Projections Report). This projected mean deficit estimate, expressed in present value terms, is 

also similar to PBGC’s current deficit reported in the most recent Annual Report, of $58.8 billion as of 

the end of FY 2016. 

 

21 PBGC’s 2015 MPRA Report is at https://www.pbgc.gov/prac/multiemployer/mpra-report.html.

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036

Millions of Dollars

PBGC Assets, Average Assistance Payments and Premiums by Fiscal Year

Reflecting Assumed MPRA Suspensions / Partitions

(Projected in Nominal $ Amounts)

Assets at Start of Year Financial Assistance Partition Assistance Premiums
PENSION BENEFIT GUARANTY CORPORATION 14 FY 201 6 | PROJECTIONS REPORT

While the mean projected deficit is not projected to materially increase when expressed as a present value 

discounted back to September 30, 2016, it is projected to significantly increase in nominal terms 

(expressed in future dollars) to $78.8 billion.

Assuming plans use suspension and partition, the 10-year mean projected deficit increased from a mean 

present value of $53.4 billion for 2025 to a mean present value of $57.8 billion for 2026. In nominal 

terms the mean deficit is projected to grow to $77.8 billion.

The projected 2026 mean values reflect changes in assumptions and the projected mean values assuming

plans use suspension and partition also reflect differences in the model of suspension and partition to 

reflect recent experience. The assumption changes and their impact are discussed in the section

“Reconciling ME-PIMS Results from 2015 to 2016” beginning on Page 25.

Figure 5 compares the history of net positions reported by PBGC in its Annual Reports for the past 

decade (the solid line ending in FY 2016) to a range of projected net positions for the next ten years (FY 

2017 through 2026). It assumes no future benefit suspensions or partitions under MPRA. 

Figure 5 -- Absent Suspensions and Partitions, Present Value of Deficit Likely to Remain Near Current Levels

The projections show the present values of PBGC’s deficit (i.e., negative net position), assuming that 

PBGC maintained its financial assistance obligations at current guarantee levels, even if assets and 

premiums are insufficient to provide the guarantees. The resulting deficit is the present value of future 

financial assistance as of that year, less projected assets, plus any unfunded amounts for prior years carried 

forward (with interest)21F

22 in order to continue to provide the current schedule of guarantees and financial 

assistance in years prior to the projection date. Mean projected outcomes for each year are shown as a 

 

22 Unfunded amounts carried forward with interest are effectively treated as if PBGC could borrow them. This 

enables the completion of the present value calculation so that the total liability can be displayed, but is not intended 

to imply that PBGC has borrowing authority.

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-60

-50

-40

-30

-20

-10

0

2007 2012 2017 2022

Billions of SDollars

Multiemployer Program Net Position

No Future MPRA Suspensions / Partitions

Historical Experience 2007-2016 and PV 2017-2026 Projections

Projected "High/Low" Range Actual

(historic dollars)

Projected Mean
PENSION BENEFIT GUARANTY CORPORATION 15 FY 201 6 | PROJECTIONS REPORT

large square, smaller dots indicate the range between the 15th percentile (15 percent of the outcomes are

worse in that year) and the 85th percentile (15 percent of the outcomes are better). 

In Figure 5, the discounted mean future net position is projected to remain relatively close to the 

multiemployer program’s current net position in present value terms. New Figure 6 shows a different 

presentation of the information in Figure 5, converting the projections of future net position to nominal 

(future) dollars at each point presented. Thus the net position shown for the year 2020 in Figure 6

represents the projected liabilities and assets in 2020 dollars, rather than the present value of those 

projected liabilities and assets in 2020 discounted to a September 30, 2016 present value as in Figure 5. 

Figure 6-- Projected Net Position Grows in Nominal Dollars (No Future MPRA Suspensions or Partitions)

Figure 6 differs from Figure 5 only by showing the future net position without discounting to current 

dollars. It illustrates how the discounted present values and the resulting net deficit are expected to grow 

simply due to the passage of time.

Similar to Figure 5, Figure 7 shows the FY 2017 through 2026 present values of the projected 

multiemployer net position in contrast to the actual historical net positions as reported in nominal dollar 

values (the solid line ending in FY 2016). As in prior charts, mean projected outcomes for each year are 

shown as a large square, smaller dots indicate the range between the 15th percentile (15 percent of the 

outcomes are worse in that year) and the 85th percentile (15 percent of the outcomes are better).

However, Figure 7 differs from Figure 5 by including the effect of assumed election of suspensions and 

partitions under MPRA.

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-50

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-30

-20

-10

0

2007 2012 2017 2022

Billions of SDollars

Multiemployer Program Net Position

No Future MPRA Suspensions / Partitions

Historical Experience 2007-2016 and Nominal 2017-2026 Projections

Projected "High/Low" Range Actual

(historic dollars)

Projected Mean
PENSION BENEFIT GUARANTY CORPORATION 16 FY 201 6 | PROJECTIONS REPORT

Figure 7 – Little Change in Projected Present Value of Deficit After Reflecting Assumed Suspensions and 

Partitions

For ease of comparison, the projected values from Figure 5 (which do not include assumed suspensions 

and partitions) are shown alongside the new values as shaded diamonds for the mean projection and a 

box indicating the 15th to 85th percentile range.

Reflecting the election of suspensions and partitions under MPRA produces almost the same projected 

net deficit, as shown in Figure 5. The similarity in the projected net deficit reflects that, over the long

term, suspension (and financial assistance through partition) may be beneficial to plan participants but 

have modest impact on PBGC’s net deficit. 

Much like Figure 6, Figure 8 shows the FY 2017 through 2026 projected multiemployer net position in 

nominal dollar values in contrast to the actual historical net positions as reported in nominal dollar values 

(the solid line ending in FY 2016), but reflecting the election of suspensions and partitions under MPRA.

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-50

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-10

0

2007 2012 2017 2022

Multiemployer Program Net Position

Reflecting Assumed MPRA Suspensions / Partitions

Historical Experience 2007-2016 and PV 2017-2026 Projections

Projected "High/Low" Range. Without MPRA Without MPRA - Mean

With MPRA - Mean Actual Historical

Projected "High/Low" 

Range. With MPRA
PENSION BENEFIT GUARANTY CORPORATION 17 FY 201 6 | PROJECTIONS REPORT

Figure 8 -- Future Assumed Suspensions and Partitions Have Little Effect on Nominal Projected Deficit

While PBGC anticipates that at least one benefit suspension will be fully in effect as of the release of 

PBGC’s FY 2017 Annual Report, for simplicity, our model of elections assumes that “critical and 

declining” plans will make an election that is effective in 2018.22F

23 PBGC will continue to review the 

assumptions around election timing and percentage of plans electing as experience under MPRA emerges.

Sources of Uncertainty: Multiemployer Program

Post-MPRA, there are three major sources of uncertainty in the multiemployer system: (1) Probability of 

new claims; (2) Variability in the timing and amount of financial assistance payments; and (3) Extent to 

which plans will use suspensions and partitions under MPRA. These sources of uncertainty are discussed 

in detail in the following sections.

Projected Net New Claims

Projected new claims arise primarily, but not solely, from plans that are currently in poor financial 

condition. Uncertainty as to the probability and timing of future financial assistance reflects both the 

volatility of plan investment returns and the timing of potential mass withdrawal from the plan by 

contributing employers. This variability in fund earnings, contributions, and benefit accruals makes the 

date of insolvency and the amount of financial assistance uncertain.

The following tables show the mean present value of net new claims and the mean present value of the 

financial position of PBGC’s multiemployer program in 2026 (discounted to 2016 present values), 

whether or not plans utilize future MPRA suspensions and partitions. Alongside those values, the tables 

 

23For modeling purposes, assumptions regarding election of suspension and partition incorporate the likelihood that 

sponsors will apply, will comply with statutory and regulatory requirements, and that the suspensions will not be 

overturned by participant vote. For additional information see the discussion beginning on Page 21.

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-30

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-10

0

2007 2012 2017 2022

Multiemployer Program Net Position

Reflecting Assumed MPRA Suspensions / Partitions

Historical Experience 2007-2016 and Nominal 2017-2026 Projections

Projected "High/Low" Range. Without MPRA Without MPRA - Mean

With MPRA - Mean Actual Historical

Projected "High/Low" 

Range. With MPRA
PENSION BENEFIT GUARANTY CORPORATION 18 FY 201 6 | PROJECTIONS REPORT

display the “low” and “high” values at the 15th and 85th percentiles. For each of these tables, because 

higher new claims mean greater financial losses to the PBGC, the order of the columns has been reversed 

for the second row of projections to better show the relationship between high new claims and a 

deterioration of PBGC’s financial position. In addition to the present value of the liabilities less assets for 

FY 2026, which comprise the financial position, the chart also notes when the fund is insolvent as of that 

date (see Figure 2 for the range of solvency outcomes in other years).

No Future Suspensions/Partitions Under MPRA 2016 Present Value (PV)

(Dollars in billions at year end)

“Low”

(15th percentile)

Mean “High”

(85th percentile)

PV PBGC ME Net New Claims FY 2017 - 2026 $10 $24 $38

“High”

(85th percentile)

“Low”

(15th percentile)

PV FY 2026 PBGC ME Financial Position

(Deficit)/Surplus

$(37) $(59)23F

24

Insolvent

$(83)

Insolvent

The Net New Claims essentially reflect liabilities recorded when a plan is booked on PBGC’s financial 

statements offset by the value removed from the books in a subsequent year, should a plan’s financial 

condition materially improve.24F

25 The PV FY 2026 Financial Position measures future obligations as of 

2026, including net new claims as well as final adjustments for benefit payments, asset earnings, and 

projected 2026 assumptions, and then discounts to a 2016 present value. The number shown includes as 

part of the deficit any shortage of funds due to providing financial assistance at the currently guaranteed

level even after the multiemployer fund runs out of money.

The median present value of net new claims totaled over the next 10 years (assuming no future MPRA 

suspensions and partitions) is about $22 billion; that is, half of the simulations show a 10-year total of 

claims above $22 billion and half below. The mean present value of net new claims (that is, the average 

level of claims) is about $24 billion over the next 10 years. This is approximately 20 percent higher than

last year’s projections. 

The middle 70 percent of the outcomes, shown in the preceding table, for the present value of the 

multiemployer program’s projected financial position is a range of $46 billion. 

After assumed election of suspension and partition under MPRA, the projected mean deficit declines

somewhat, reflecting the likelihood that these plans will remain solvent for the long term and not need 

 

24 The mean present value discounted to 2016 is a $59 billion deficit. The mean discounted present value is the

average across all simulation paths; discount rates vary among different simulation paths. The mean projected 2026

value is a $79 billion deficit in nominal terms. 25 This is the present value of net PBGC obligations for plans projected to be booked during the next 10 years,

offset by the reversal of liabilities for plans “unbooked” over the 10-year projection period. The liability “unbooked” 

is the value in the year of removal; it reflects how the liability has evolved over time along a particular economic 

path and is not the same liability at which the plan was initially booked; decreases in liability, during the years when a 

plan remains “booked”, are not captured in the “unbooking” liability.
PENSION BENEFIT GUARANTY CORPORATION 19 FY 201 6 | PROJECTIONS REPORT

PBGC financial assistance, resulting in the removal of liabilities from the books, net of any additional 

partition assistance provided. 

Reflecting Assumed MPRA 

Suspensions / Partitions

2016 Present Value (PV)

(Dollars in billions at year end)

“Low”

(15th percentile)

Mean “High”

(85th percentile)

PV PBGC ME Net New Claims FY 2017 – 2026 $8 $24 $39

“High”

(85th percentile)

“Low”

(15th percentile)

PV FY 2026 PBGC ME Financial Position

(Deficit)/Surplus

$(37) $(58)25F

26

Insolvent

$(81)

Insolvent

The following graphs illustrate the range of projected outcomes for the financial position of PBGC’s 

multiemployer program 10 years from now, both before and after the use of the MPRA suspensions and 

partitions. For each value of PBGC’s projected net position along the horizontal axis, the height of the 

line shows the frequency of that net position (out of the 500 simulations).

Vertical lines on the graph show the present value of PBGC’s projected 2026 net position at the 15th and 

85th percentiles and the mean and median values of projected net positions. The median result is a deficit 

with a present value of $55.1 billion in FY 2026 assuming no future suspensions or partitions under 

MPRA. None of the 500 projections shows a surplus. The most optimistic projection shows a deficit of 

$7 billion in present value. Many projections show very severe deficits, with the largest projected at a 

present value of $182 billion.

 

26 The mean present value discounted to 2016 is a $58 billion deficit. The mean discounted present value is the

average across all simulation paths; discount rates vary among different simulation paths. The mean projected 2026

value is a $78 billion deficit in nominal terms.
PENSION BENEFIT GUARANTY CORPORATION 20 FY 201 6 | PROJECTIONS REPORT

Figure 9 -- Wide Range of Future Outcomes, Absent Suspensions, All Deficits

As depicted in the following graph, revisiting this distribution under the best estimate assumption about 

election of benefit suspension and partition under MPRA (i.e., assuming plans choose suspensions and 

partitions in the future), produces a shift in the distribution of potential future deficits under the program, 

with a large range of potential outcomes. Despite this shift, still none of the 500 projections shows a 

surplus.

Figure 10 -- Assumed Future Suspensions Modestly Reshape the Risks to the Insurance Program

0

10

20

30

40

50

60

70

80

(140) (130) (120) (110) (100) (90) (80) (70) (60) (50) (40) (30) (20) (10) 0 10

Number of simulations

(out of 500)

Billions of Dollars (present value) - (Deficit)/Surplus

PBGC’s Potential 2026 PV ME Net Position

No Future MPRA Suspensions / Partitions

0

10

20

30

40

50

60

70

80

(140) (130) (120) (110) (100) (90) (80) (70) (60) (50) (40) (30) (20) (10) 0 10

Number of simulations

(out of 500)

Billions of Dollars (present value) - (Deficit)/Surplus

PBGC’s Potential 2026 PV ME Net Position

Assuming Future MPRA Suspensions / Partitions

Median = ($55.1)

85th percentile = ($37.5)

Mean = ($58.6)

15th percentile ($82.5)

Median = 

($53.8)

Mean = ($57.8)

15th percentile = 

($37.0) 15th percentile ($81.4)
PENSION BENEFIT GUARANTY CORPORATION 21 FY 201 6 | PROJECTIONS REPORT

PV Financial Assistance Payments

In addition to new claims, ME-PIMS simulates financial assistance payments from PBGC to insolvent 

multiemployer plans to pay retiree benefits and maintain the plans. PBGC generally provides financial

assistance only after a plan becomes insolvent. Thus, financial assistance payments projected over the 

next 10 years are generally due to previous claims (i.e., plans already booked as losses).

Over the period from 2017 to 2026, financial assistance payments are projected to exceed the PBGC’s

resources, prior to the use of MPRA suspension and partition. Assets in the multiemployer program in

2016 are about $2.2 billion while the present value of projected premiums over the 10-year period is

about $2.8 billion, totaling about $5.0 billion. This is about $2.2 billion below the mean present value of 

financial assistance of $7.2 billion in the chart following, which shows the mean, and high and low values

for the present value of projected financial assistance payments. Even within the high/low range, financial

assistance payments vary by a factor of more than three.

No Future Suspensions/Partitions Under MPRA 2016 Present Value

(Dollars in billions at year end)

“Low”

(15th percentile)

Mean “High”

(85th percentile)

PV PBGC ME Financial Assistance Payments

FY 2017-2026

$3.4 $7.2 $10.8

PV Assets Plus Premium FY 2017 - 2026 $4.8 $5.0 $5.3

If plans use the MPRA suspension and partition options, the pattern of financial assistance will change. 

Plans whose partitions are underwritten by PBGC will receive financial assistance sooner in anticipation 

that they will need less total assistance and be able to survive. Financial assistance payments assuming 

MPRA election rates are shown in the following chart and discussed below in the section “Assumed 

Utilization of MPRA Suspension, Partition and Facilitated Merger.”

Reflecting Assumed MPRA Suspensions / 

Partitions

2016 Present Value

(Dollars in billions at year end)

“Low”

(15th percentile)

Mean “High”

(85th percentile)

PV PBGC ME Financial Assistance Payments

FY 2017-2026

$3.9 $7.4 $10.9

PV Assets Plus Premium FY 2017 - 2026 $4.8 $5.0 $5.3

The PV of Financial Assistance Payments for the period 2017 to 2026 represents the value of near term 

cash flows. In contrast, the projected net position reflects money still owed even after providing financial 

assistance for the next 10 years -- it emphasizes the increased demands on PBGC’s resources beyond the 

projected 10-year “financial assistance” payments shown above.

ASSUMED UTILIZATION OF MPRA SUSPENSION, PARTITION AND FACILITATED 

MERGER

MPRA gives critical and declining plans additional options to address the risk of insolvency, but the use 

of these options presents difficult choices for plan sponsors and participants. Under MPRA some plans 
PENSION BENEFIT GUARANTY CORPORATION 22 FY 201 6 | PROJECTIONS REPORT

facing insolvency within the next 20 years may take additional steps to improve long term solvency, 

including permanently reducing benefit promises to participants via benefit suspensions. In order to 

suspend benefits, plans must be in critical and declining status and submit an application to Treasury for 

approval of the benefit suspensions. The application must meet a number of conditions including:

careful processes for measuring long term solvency improvements, a demonstration that benefit 

reductions have been equitably distributed, notice to participants, and a vote by participants on the 

proposed reductions.

The ME-PIMS Model explicitly estimates a plan census and benefit distribution for each plan in its

sample. That information is used to determine, at each point along each economic path, (1) whether the 

plan is in critical status, (2) if the plan is projected to become insolvent within the ensuing 20-year 

period26F

27 and meets the criteria to be critical and declining, (3) the amount of benefits protected under 

MPRA, and (4) whether the plan would project long-term solvency, either through benefit suspensions 

alone, or with partition assistance. For critical and declining plans, ME-PIMS then applies assumptions as 

to whether Boards of Trustees will undertake and successfully complete the requirements of benefit 

suspension.

The degree to which plans and participants will decide to apply for benefit suspensions as of this date is 

still, to some extent, unknown due to limited experience. As of April 15, 2017, only 15 plans had applied 

for benefit suspensions and only 4 for partition. One benefit suspension had been approved and agreed 

to by participants. It will be implemented in FY 2017. 

Our assumptions for these plans reflect two primary factors: whether Boards of Trustees will voluntarily 

undertake to apply for a suspension that is found to comply with the requirements of the law and, to the 

extent that a plan is not “systemically important,” whether participants will vote to override the 

suspension. For “systemically important” plans, whose applications are approved by Treasury, the law 

requires that Treasury override any “no” vote, either by accepting the original suspension proposal or by 

adjusting the proposed suspensions. In the latter case, the Board of Trustees would have the option not 

to implement the adjusted suspensions.

Changes in the FY 2016 Model of Suspensions and Partitions

While no plans had completed the process of implementing a benefit suspension or a partition as of 

September 30, 2016, a number of plans have applied for suspension. Additional plans have used PBGC’s 

informal consultation process under MPRA to evaluate the ability of the plan to potentially apply for early 

financial assistance under a partition or a facilitated merger.

Based on the experience to date under the suspension and partition application process we have made 

several changes to our model of suspension and partition. The primary changes are:

• In a partition, the guaranteed portion of benefits for some participants are spun off to a separate, 

insolvent plan, for which PBGC will provide financial assistance. We have changed our model of 

which group of participants have the first priority for spinning off guarantee amounts so that 

benefits of terminated vested participants are assumed to be partitioned first; previously we 

 

27 Under MPRA plans in critical status must perform either a 15- or 20-year projection to determine whether they 

will become insolvent and thus “critical and declining.” The 20-year test applies if the plan is less than 80% funded 

or has a ratio of inactive to active participants of more than 2 to 1; it is rare for a plan to be in critical status if one of 

these conditions does not apply.
PENSION BENEFIT GUARANTY CORPORATION 23 FY 201 6 | PROJECTIONS REPORT

assumed retiree benefits would be partitioned first. This assumption reflects the implications of 

our understanding of the impairment test criterion for partition and merger assistance.

• Based on the interpretations of the requirements of the solvency test for applicants, the assumed 

average return on plan assets used in MPRA solvency tests was decreased from 7.5% to 6.5%.

• The assumed threshold for partition based on a reduction in PBGC’s long run loss has been 

decreased. This reflects less need to prioritize partition requests than originally anticipated. The 

model threshold has been reduced from 10% to 1%.

In addition, the rates at which plans have applied for suspension and partition have generally been slower 

and at a lower rate than we assumed in our previous valuation. Thus, for the FY 2016 valuation, we have 

assumed that the average date at which benefit suspensions will first be applicable will be FY 2018, one 

year later than incorporated into our prior set of assumptions. Otherwise, we continue the use of the rates 

of suspension and partition that we illustrated in our FY 2015 Projections Report. 

In combination, reflecting the emerging experience under the program, this report continues to assume 

an assumption of 0 percent likelihood that the largest critical and declining plan will suspend benefits, 30

percent for other plans using suspension alone, and 10 percent using suspension and partition. We expect 

to continue to evaluate our assumptions of future suspensions and partitions as more plans have an 

opportunity to consider whether or not to apply.
PENSION BENEFIT GUARANTY CORPORATION 24 FY 201 6 | PROJECTIONS REPORT

VARIABILITY IN PROJECTED FINANCIAL POSITION, MULTIEMPLOYER PROGRAM

If no future suspensions or partitions under MPRA are assumed, about 58 percent of the simulations

show some degree of improvement in PBGC’s financial position over the next 10 years, when discounted 

to a 2016 present value. (In nominal dollars, as shown in Figure 7, most of the projections show an 

increasing deficit.) As of September 30, 2016, the multiemployer program had a deficit of $58.8 billion. 

The mean discounted present value projected result for 2026, assuming no future suspensions or 

partitions, is a $58.6 billion deficit, and the median outcome in FY 2026 (discounted to a 2016 present 

value) is a $55.1 billion deficit.

Figure 11 illustrates the shift in the distribution of outcomes for the program compared to the prior 

report.

Figure 11 – Range of Multiemployer Outcomes Shows Higher Likely Deficits, if there are No Future 

Suspensions 

0

10

20

30

40

50

60

70

80

90

(140) (130) (120) (110) (100) (90) (80) (70) (60) (50) (40) (30) (20) (10) 0 10

Number of simulations

(out of 500)

Billions of Dollars (present value) - (Deficit)/Surplus

Changes From Last Year's Projections

No Future MPRA Suspensions / Partitions

FY16 (without election) FY15 (without election)
PENSION BENEFIT GUARANTY CORPORATION 25 FY 201 6 | PROJECTIONS REPORT

If plans are assumed to use suspensions and partitions, the graph changes. As previously noted, the mean 

present value of the 2026 deficit increases from $53 to $58 billion, with more outcomes to the left of the 

graph. There are no projected positive net position outcomes in either scenario.

Figure 12 – Range of Multiemployer Outcomes with Suspensions Also Worsen vs Prior Year

RECONCILING ME-PIMS RESULTS FROM 2015 TO 2016

Figure 13 displays a detailed reconciliation (in dollars, as well as percentages) of the changes from 2015 to 

2016. A discussion of each item follows the table. Decreases in the projected deficit amounts are shown 

in parentheses on the chart.

The magnitude of the dollar amounts shown in the table change significantly based on the order in which 

they are calculated, but they would still add up to the final value of $58.6 billion under any order. Because 

the projected assets are small compared to the liabilities, the percentages displayed would change less 

significantly, regardless of the order of measurement.

0

10

20

30

40

50

60

70

80

90

(140) (130) (120) (110) (100) (90) (80) (70) (60) (50) (40) (30) (20) (10) 0 10

Number of simulations

(out of 500)

Billions of Dollars (present value) - (Deficit)/Surplus

Changes From Last Year's Projections

Assumed Future MPRA Suspensions / Partitions

FY16 (with election) FY15 (with election)
PENSION BENEFIT GUARANTY CORPORATION 26 FY 201 6 | PROJECTIONS REPORT

Figure 13 -- Reconciliation of Changes in ME-PIMS Results

Reconciliation of Changes in ME-PIMS Results, 2015 to 2016 Results

(No Future Suspensions / Partitions under MPRA)

Description of Change Value of 

Change

($ billions)

Net Deficit

($ billions)

%

Change

Initial Position for Mean PV of 10-Year Projected Net Deficit

from 2015 Projections Report

$55.5

1. Changes due to Passage of Time from FY 2015 to FY 2016 1.1 56.6 +2.0%

2. Changes due to New Plan Data 6.2 62.8 + 11.0%

3. Changes in Economy and Economic Assumptions from FY

2015 to FY 2016

(0.5) 62.3 -0.8%

4. Changes to ME-PIMS Model 0.9 63.2 +1.4%

5. Change in Mortality Assumption 1.9 65.1 +3.0%

6. Change in Mass Withdrawal Assumption (6.5) 58.6 -10.0%

Year 2026 Mean PV of Projected Net Deficit based on 2016 ME- PIMS

Model – No Future Suspensions or Partitions

$58.6

(Reflecting Future Suspensions / Partitions under MPRA)

7. Reflect Suspensions and Partitions Using FY 2015 Report 

Assumptions

(2.8) $55.8 -4.8%

8. Reflect FY 2016 Assumptions Regarding Suspensions and 

Partitions

2.0 57.8 +3.6%

Year 2026 Mean PV of Projected Net Deficit based on 2016 ME- PIMS

Model – Reflecting Future Suspensions or Partitions

$57.8

Expected Change Due to Passage of Time: The 2015 report projected the PBGC net position in 2025

and presented the results valued in 2015 dollars. To compare with the 2016 report, which projects to 2026

with values reported in 2016 dollars, the 2015 projection is rolled forward to project one additional year 

with one less year of present value discounting. The effect of the roll forward is an increase in the 

projected net deficit of $1.1 billion.

Data Changes: Changes in the starting data between FY 2015 and FY 2016 include an increase in the 

number of plans in the sample in ME-PIMS, and incorporates new plan data that plans provide on Form 

5500.27F

28 These changes increase the present value of the deficit by $6.2 billion.

 

28 Information about Form 5500 and its attachments is available at http://www.dol.gov/ebsa/5500main.html.
PENSION BENEFIT GUARANTY CORPORATION 27 FY 201 6 | PROJECTIONS REPORT

Economy and Economic Assumptions: Between fiscal years 2015 and 2016, there were changes in the 

assumptions regarding the underlying economy (e.g., source of imputed asset earnings for the years 

immediately before the valuation for which actual data are not yet available), upon which all the MEPIMS projections are based. Reflecting these changes decreases the present value of the projected deficit 

by $0.5 billion. This is primarily due to an increase in the projected discount rates offset by relatively weak 

investment returns in multiemployer plans for the prior year resulting in an increase in the number of 

plans which may run out of money.

Changes to the Model: This report reflects several modifications to the coding (1) to allow the flexibility 

of partition order between terminated vested and retired participants, (2) to modernize the random 

number generator, (3) to update the mass withdrawal probability model, and (4) to enhance performance 

and make a series of modest program enhancements. These changes increase the mean projected 

liabilities by $0.9 billion.

Change in Mortality Assumptions: This year’s model reflects the most recent version of mortality rates 

and the new projection scales issued by the Society of Actuaries in projecting the anticipated year by year 

experience of plan population.28F

29 In addition, PIMS changed the mortality assumption for plans PBGC 

anticipated to receive financial assistance to be based on the one used in the FY 2016 Annual Report.

This change increases mean projected liabilities by $1.9 billion.

Change in Mass Withdrawal Assumption: ME-PIMS model of mass withdrawal by employers from 

pension plans was initially specified based on data collected prior to PPA. In the past year, PBGC studied 

the post-PPA mass withdrawal liability experience of plans29F

30 to see whether the same events drive mass 

withdrawal and to examine the resulting incidence. Actual rates of mass withdrawal have been 

significantly less than predicted, but appear to be influenced by many of the same factors as before PPA. 

As a result of that study, PIMS continues to use the same parameters to estimate the likelihood of mass 

withdrawal, but reduces the resulting probability by 75% for FY 2016. This change decreases mean 

projected liabilities by $6.5 billion without future MPRA take-up and by $6.1 with future MPRA take-up.

Assumptions Regarding Determination of Suspension and Partition: Based on emerging experience, 

this report adopts new assumptions for FY 2016. For more information on the change see the discussion 

beginning on Page 22. The change increases the mean present value of the projected deficit by $2.0

billion, but has only a small effect on projected solvency.

SENSITIVITY OF CHANGES TO THE MODEL AND DISCOUNT RATE

Similar to the FY 2015 Projections Report, PBGC includes tests of the sensitivity to increases and 

decreases in the PIMS discount rate for valuing PBGC obligations. Using the FY 2016 MPRA suspension 

and partition election assumptions, discount rates 50 basis points higher than in the base projection 

would improve the mean present value of the 2026 multiemployer net position of $57.8 billion by $3.7

 

29 Information about the RP-2014 Mortality table and the MP2016 Projection Scale is available at 

https://www.soa.org/Research/Experience-Study/Pension/research-2015-mp.aspx. The PIMS models use a static 

projection of the mortality scales as discussed in the Appendix. 30 Additional details regarding the study of mass withdrawal probability are available on the PIMS web 

page. https://www.pbgc.gov/sites/default/files/me-pims-masswithdrawalassumptions.pdf
PENSION BENEFIT GUARANTY CORPORATION 28 FY 201 6 | PROJECTIONS REPORT

billion to $54.1 billion and discount rates 50 basis points lower would worsen the mean present value of 

the deficit by $4.5 billion to $62.3 billion. Neither scenario shows any chance of a surplus in 2026.
PENSION BENEFIT GUARANTY CORPORATION 29 FY 201 6 | PROJECTIONS REPORT

SINGLE-EMPLOYER PROGRAM

SINGLE-EMPLOYER PROGRAM........................................................................................ 29

Single-Employer Program Overview...................................................................................29

Will PBGC Have Funds to Pay Single-Employer Guarantees? ...............................................29

Summary Projections........................................................................................................30

Net Position ............................................................................................................................................................30

Sources of Uncertainty: Single-Employer Program.................................................................................................31

Which Plans Will Fail?.............................................................................................................................................31

How Much Will PBGC Owe Participants?................................................................................................................32

How Much Will PBGC Still Owe in Fiscal Year 2026? ..............................................................................................33

What Investment Returns Will PBGC Realize?........................................................................................................33

How Much Premium Income Will PBGC Receive? ..................................................................................................35

Variability in Projected Financial Position, Single-Employer Program..................................35

Reconciling SE-PIMS Results from 2015 to 2016 .................................................................37

Recent Single-Employer Plan Trends..................................................................................39

Sensitivity of Changes to the Model’s Discount Rate ..........................................................39

SINGLE-EMPLOYER PROGRAM OVERVIEW

PBGC’s simulations show that significant improvement in the single-employer program’s projected net 

position is likely over the 10-year time horizon. This is a similar pattern to that reported last year, even 

after adjusting for some refinements to SE-PIMS. Among the changes made to the modeling system were 

reflection of more up-to-date mortality (for funding requirements, census experience and for determining 

PBGC liabilities), modernization of the random number generator, incorporation of yield curves, and

improvement of performance. In 2016, PBGC’s single-employer program covered over 28 million 

participants in over 22,000 plans.

The 2015 Projections Report projected a mean present value surplus of $2.6 billion for 2025. The 2016

Projections Report shows an improving prospect with a projected 2026 mean present value surplus of 

$9.6 billion. The report continues to show a wide range of variability in the potential outcomes for the 

projected surplus or deficit. However, none of the simulations project that the program will run out of 

money within the next 10 years.

WILL PBGC HAVE FUNDS TO PAY SINGLE-EMPLOYER GUARANTEES?

As discussed in the section “Financial Obligations” beginning on Page 4, PBGC’s financial statements in 

its Annual Report present liabilities that extend for the lifetime of pension plan participants and their 

beneficiaries. These liabilities primarily represent obligations for plans that have already terminated plus 

probable future claims. PBGC’s liabilities are then compared to the assets currently held to determine the 

net position. In general, the Annual Report does not look ahead to see how liabilities and assets will 

change as new claims arise, new premiums are earned, asset returns are realized, etc.

The paths simulated in SE-PIMS, by contrast, start with PBGC’s existing assets and obligations (liabilities)

as of Fiscal Year 2016 and then also project:

• Future premium income,

• Future PBGC claims, which increase PBGC’s benefit obligations but also include assets recovered

from terminated plans and from their sponsors, and
PENSION BENEFIT GUARANTY CORPORATION 30 FY 201 6 | PROJECTIONS REPORT

• Future investment income or losses on PBGC assets, based on PBGC’s investment policy and

asset allocations.

In the 5,000 paths simulated in SE-PIMS, there are none in which PBGC’s single-employer program

assets are completely exhausted within the 10-year projection period.

SUMMARY PROJECTIONS

Net Position

The FY 2016 single-employer program financial statement assets of $97.3 billion and liabilities of $117.9

billion result in a net deficit of $20.6 billion. The following chart shows PBGC’s actual net financial 

position from fiscal years 2007 to 2016, and the present value of the range of projections for the next 10 

years. The mean projected net position for each future year is shown as a large square. The dotted vertical 

bars for each future year show the range of results between the 15th and 85th percentiles for that future 

year. Since each year’s position affects the following year’s position, the uncertainty of PBGC’s financial 

position grows every year through FY 2026, as reflected in the progressively longer vertical bars.

Figure 14 – Single-Employer Program Likely to Reach Surplus over Time

Figure 15 shows a different presentation of the information in Figure 14, converting the projections of 

future net position to nominal (future) dollars at each point presented. Thus the net position shown for 

the year 2020 represents the projected liabilities and assets in 2020 dollars, rather than the present value of 

those projected liabilities and assets in 2020 discounted to a September 30, 2016 present value.

-30

-20

-10

0

10

20

30

40

2007 2012 2017 2022 2026

Billions of Dollars

Single-Employer Program Net Position

Will Likely Improve

Actual Experience 2007-2016 and PV 2017-2026 Projections

Actual

(historic dollars)

Projected "High/Low" Range Projected Mean
PENSION BENEFIT GUARANTY CORPORATION 31 FY 201 6 | PROJECTIONS REPORT

Figure 15– Single-Employer Net Position Projected in Nominal Dollars

Because PBGC’s obligations are paid out over the remaining lifetimes of people receiving pensions, a 

deficit means PBGC will have less money than it will need over a period of decades. Without changes, at 

some point there is a risk that a program in a deficit position will run out of money (i.e., it will have paid 

out all its assets and still owe benefits). However, a majority of our simulations show that future 

premiums net of claims may be sufficient to eliminate the deficit over time, although that point still 

appears to be years in the future. Whether or not the deficit is eliminated over time, from a year-over-year 

cash flow basis the program appears to be able to operate over the near term. Out of 5,000 simulations, 

none project that PBGC’s single-employer program will run out of money within the next 10 years. 

The improvements to PBGC’s net position over the 10-year period are due to a general trend of 

improving plan solvency and projected PBGC premiums exceeding projected claims.

Sources of Uncertainty: Single-Employer Program

The uncertainty in the future of PBGC’s single-employer program arises from questions we cannot now 

answer. These include not knowing which plans will fail, how much PBGC will owe participants as a 

result of these failures, how much PBGC will still owe people by FY 2026 (in outstanding benefits that 

remain beyond the 10-year projection period), what returns PBGC will realize on its assets, and how 

much PBGC will receive in premiums.

Which Plans Will Fail?

The primary drivers of PBGC’s projections are the financial health of the companies that sponsor 

pension plans and the amount of underfunding in those plans. If many companies with large, 

underfunded pension plans enter bankruptcy and are permitted to terminate their underfunded plans, 

new claims are created against PBGC, increasing future PBGC obligations. These new claims will also be 

reflected in PBGC’s projected net position.

-30

-20

-10

0

10

20

30

40

50

2007 2012 2017 2022 2026

Billions of Dollars

Single-Employer Program Net Position

Will Likely Improve

Actual Experience 2007-2016 and Nominal 2017-2026 Projections

Actual Projected "High/Low" Range Projected Mean
PENSION BENEFIT GUARANTY CORPORATION 32 FY 201 6 | PROJECTIONS REPORT

How Much Will PBGC Owe Participants?

Benefit payments and new claims. “Benefit payments” for a given year means the amount PBGC is 

projected to pay to retirees during that year (discounted to a 2016 present value), regardless of when their 

plans failed. “New claims,” on the other hand, represents the total present value of the projected costs 

over time to PBGC of plans that fail during the projection period. A new claim is the difference between 

the present value of all the money PBGC will have to pay for a plan that is projected to fail and the assets 

of that plan, including any recovery from plan sponsors. Note that the valuation reflects the benefits 

payable beyond the 10-year projection period for all failed plans; payments continue until all participants 

covered by the plan no longer receive benefits.

The present value of projected net new claims (illustrated in the following chart) represents the amount of 

money PBGC owes for participant’s benefits because their plans fail during the 10-year projection period, 

less the assets recovered from failed plans and the companies that sponsor them. In this chart, as in 

similar charts above, the solid line represents historical values, while the dotted lines represent the range 

of outcomes in future years.30F

31 The outcomes are between the 15th and 85th percentiles. Since PBGC 

trustees the assets of failed plans, new claims bring in both new assets and new liabilities. Because PBGC 

would generally not take over a plan that could pay all benefits due, each plan adds liabilities to PBGC 

that are larger than the assets that PBGC inherits from it.

Like investment income projections, the projections displayed for net new claims are for each year’s 

results, so patterns in the amount of variability reflect long-term trends rather than cumulative effects.

Figure 16 – Single-Employer Net New Claims

The following table shows a range of projections for present value of the new claims and benefit payments

for the next 10 years. The table shows the mean and the “high” and “low” values covering 70 percent of

 

31 The chart does not include claims for plans currently booked by PBGC but not yet terminated. Those plans are in 

a temporary intermediate state, where they have not yet terminated. Thus their claims are not included in the historic 

claims but SE-PIMS does not include booked plans in its projection of future claims (since those claims are reflected 

in the balance sheet values that are projected forward in PIMS).

0

1

2

3

4

5

6

7

8

2007 2012 2017 2022 2026

Billions of Dollars

Single-Employer Program Net New Claims,

Actual Experience 2007-2016 and 2017-2026 Projections

Actual

(historic dollars)

Projected "High/Low" Range Projected Mean
PENSION BENEFIT GUARANTY CORPORATION 33 FY 201 6 | PROJECTIONS REPORT

outcomes.31F

32 The projection of benefit payment amounts are present values of the benefit payments

projected to occur over the next 10 years, while the projected new claims amounts are the present values of

all new claims that are booked in the next 10 years.

2016 Present Value (PV)

(Dollars in billions at year end)

“Low”

(15th percentile)

Mean “High”

(85th percentile)

PV PBGC SE Benefit Payments FY 2017-26

$69 $78 $87

PV PBGC SE Net New Claims FY 2017-26

$10 $26 $42

More uncertainty exists about future new claims than about future benefit payments. Since benefit 

payments include continuing payments to people whose plans already have failed, PBGC already knows 

how much it expects to pay those people over the next 10 years. Furthermore, while projected benefit 

payments in this table are only for the 10-year projection period, projected new claims include obligations 

for benefit payments far into the future. Under the Model, the median present value of new claims over 

the next 10 years is approximately $22.0 billion. The mean present value of claims is higher, about $25.9

billion over the next 10 years. The mean is higher than the median because there is a chance under some 

simulations that claims could reach very high levels.

How Much Will PBGC Still Owe in Fiscal Year 2026?

Interest rates affect the present values associated with PBGC’s benefit obligations. The single-employer 

program’s obligations are mainly benefit payments to the retirees who depend on PBGC. At any given 

point in time, PBGC uses an interest rate to determine the market value of those obligations in the future. 

Changes in this interest rate have a big effect on the calculations. Variation in the rate accounts for a great 

deal of the variation in the value associated with the benefits owed. Within the 70 percent of outcomes 

presented, the single-employer program’s present value of projected liabilities in FY 2026 varies by $75

billion (discounted to a 2016 present value), as shown in the following table.

2016 Present Value

(Dollars in billions at year end)

“High”

(85th percentile)

Mean “Low”

(15th percentile)

PV PBGC SE Liabilities in FY 2026 $138 $10032F

33 $63

What Investment Returns Will PBGC Realize?

In contrast to its role with multiemployer plans, PBGC becomes the statutory trustee of the assets of

terminated single-employer plans. Because PBGC assumes the assets of these plans when they fail, the

 

32 In the tables, “high” and “low” projections for different measurements — such as “Benefit Payments” or “New

Claims” — simply order all results through that lens. So, amounts within a single column cannot be combined.

Where there are relationships among the values presented, they are noted in the text that accompanies the tables. 33 The mean present value discounted to 2016 is $100 billion. The mean projected 2026 value is $135 billion in 

nominal terms.
PENSION BENEFIT GUARANTY CORPORATION 34 FY 201 6 | PROJECTIONS REPORT

single-employer program has a significant pool of assets. The rate of return on these assets is a significant

source of uncertainty for the single-employer program.

As shown in Figure 17, investment income varies a great deal by year. However, the amount of variation

does not grow cumulatively, because each year’s projection is only for that year’s investment income, not

the accumulated total of all investment gains and losses. The dotted vertical bars represent the range of

outcomes in each year that lie between the 15th and the 85th percentiles. The vertical bars in the chart

remain similar in size.

For FY 2017 (the first year of the projection) the projected result ranges from a $6.9 billion gain to an $8.3

billion loss, expressed as present values discounted to 2016. This range differs from subsequent years, due 

to reflecting increases in interest rates between September 30, 2016 and December 31, 2016. Reflecting 

the increase in interest rates results in losses in the values of long-term bonds in PBGC’s investment 

portfolio – otherwise we incorporate a full year of investment risk (including possibilities of further 

changes to interest rates, upward or downward).

Figure 17 – Single-Employer Program Investment Income

For these projections, PIMS assumed PBGC would invest 70 percent of assets in fixed income investments 

such as treasuries and corporate bonds and 30 percent of assets in equities, consistent with PBGC’s 

investment policy.33F

34

 

34 At any point at which PBGC’s assets are projected to exceed 130% of its projected liabilities, the investment 

policy is assumed to change to 100% fixed income securities.

-9

-6

-3

0

3

6

9

12

15

2007 2012 2017 2022 2026

Billions of Dollars

Single-Employer Program Investment Income,

Actual Experience 2007-2016 and 2017-2026 Projections

Actual

(historic dollars)

Projected "High/Low" Range Projected Mean
PENSION BENEFIT GUARANTY CORPORATION 35 FY 201 6 | PROJECTIONS REPORT

The following table summarizes projections for the total base of assets in the single-employer program by

2026, as well as for the amount PBGC will earn in investment income through FY 2026.

2016 Present Value

(Dollars in billions at year end)

“Low”

(15th percentile)

Mean “High”

(85th percentile)

PV PBGC SE Assets in FY 2026 $79 $11034F

35 $140

PV PBGC SE Investment Income FY

2017-26

$12 $38 $63

Within the results shown in the table (15th percentile to 85th percentile), there is a range of $51 billion

projected in the investment returns that PBGC will realize and a $61 billion range in the total amount of

PBGC’s projected assets.

New claims also produce increased assets because when plans fail, PBGC inherits their assets as well as 

their future responsibilities. Thus a plan termination adds to the money PBGC has on hand, and adds even 

more to the amount PBGC owes. In many simulations with rising assets, new claims also increase.

How Much Premium Income Will PBGC Receive?

One other factor that helps reduce PBGC’s deficit is premiums. The projected amount of premiums that

PBGC will receive under current law is shown in the table below:

2016 Present Value

(Dollars in billions at year end)

“Low”

(15th percentile)

Mean “High”

(85th percentile)

PV PBGC SE Premiums FY 2017-26 $31 $43 $57

The present value of premiums figures shown above are lower than the corresponding values last year. 

For example, the mean present value of premiums decreased by 4.8 percent, and the 15th and 85th

percentiles decreased by 0.3 percent and 7.6 percent respectively. 

VARIABILITY IN PROJECTED FINANCIAL POSITION, SINGLE-EMPLOYER PROGRAM

SE-PIMS projects PBGC’s potential financial position by combining simulated claims (including amounts

PBGC recovers from failed plans and their sponsors) with simulated premiums, investment returns and

other factors, recognizing PBGC’s 2016 financial position as the starting point.

The financial position of the single-employer program as of September 30, 2016, was a deficit of $20.6

billion. In a majority of simulations, the FY 2016 projections show an improvement; the median present 

value of the projected position in 2026 is an $11.5 billion surplus. The mean present value of the 

projected position in 2026 is a slightly lower $9.6 billion surplus. The table below shows the mean 

position, along with the values at the 15th and 85th percentiles.

 

35 The mean present value discounted to 2016 is $110 billion. The mean projected 2026 value is $148 billion in 

nominal terms.
PENSION BENEFIT GUARANTY CORPORATION 36 FY 201 6 | PROJECTIONS REPORT

2016 Present Value

(Dollars in billions at year end)

“Low”

(15th percentile)

Mean “High”

(85th percentile)

PV FY 2026 PBGC SE Financial Position

(deficit)/surplus

$(14) $1035F

36 $34

Full distribution of results by financial position. Figure 18 shows the full range of outcomes that SEPIMS projects for PBGC’s single-employer financial position over the next 10 years. For each value of

PBGC’s projected net position along the horizontal axis, the height of the line shows how many paths (out

of 5,000) have that net position as a result. The higher the curve, the more simulations fall at that point in

the distribution. The further to the right any point on the curve is, the better the financial position 

associated with that point. The further to the right the graph’s “hump”, the more paths have positive 

outcomes, and the less spread-out the graph is side-to-side, the more the simulations agree on outcomes.

Figure 18– PBGC's Potential 2026 SE Financial Position

Vertical lines on the graph show the present value of PBGC’s projected 2026 net position at the 15th and

85th percentiles, and the mean and median values of projected net positions. The median (as mentioned

above) is an $11.5 billion surplus in FY 2026, while the mean is a $9.6 billion surplus.

 

36 The mean present value discounted to 2016 is a $10 billion surplus. The mean projected 2026 value is a $13 billion

surplus in nominal terms.

0

100

200

300

400

500

600

700

800

900

(140) (120) (100) (80) (60) (40) (20) 0 20 40 60 80

Number of simulations

(out of 5,000)

Billions of Dollars (present value)

PBGC’s Potential 2026 SE Financial Position

Mean = $9.6

Median = $11.5

85th percentile = $34.3

15th percentile = $(14.2)
PENSION BENEFIT GUARANTY CORPORATION 37 FY 201 6 | PROJECTIONS REPORT

RECONCILING SE-PIMS RESULTS FROM 2015 TO 2016

Comparison of financial position with last year’s results. Figure 19 compares the 2015 projections of

PBGC’s 2025 financial position with this year’s projections of the 2026 financial position. The distribution

has moved to the right (the mean and median values have both increased), while the width of the curve has 

changed only slightly. This means that the average results have improved, but there is little change in the 

variance around these averages. The mean projected position has improved by about $7.0 billion, from a 

surplus of $2.6 billion to a surplus of $9.6 billion. The median projected position has similar improvement.

Figure 19– SE Financial Position: Comparison to Prior Year

Figure 20 explores the effects of each of the changes in our model and data on the projected 2026 net 

deficit. It is important to note that the order of the changes affects the values. If the impact of the 

changes were measured in a different order, it is likely that the values for each of the changes would be 

different, although the final deficit number would remain the same. While the magnitude of changes 

appears large in relationship to the projected 2026 surplus, this is largely because the projected surplus is a 

smaller order of magnitude than the liability, and thus relatively small changes in modeled liability appear 

to have very large effects. These changes are small, however, in comparison with either projected 

liabilities or the range of potential deficits.

0

100

200

300

400

500

600

700

800

900

1000

(160) (140) (120) (100) (80) (60) (40) (20) 0 20 40 60 80

Number of simulations

(out of 5,000)

Billions of Dollars (present value)

PBGC’s SE Financial Position Compared to Prior Year

Projected 2026 financial position 2015 projection of 2025 financial position

Projected 2025 Mean

Projected 2026 Mean
PENSION BENEFIT GUARANTY CORPORATION 38 FY 201 6 | PROJECTIONS REPORT

Figure 20– Reconciliation of Changes in SE-PIMS Results

Reconciliation of Changes in SE-PIMS Results, 2015 to 2016 Results

Description of Change Value of 

Change

($ billions)

Net Position

($billions)

Initial Position for Mean PV of 10-Year Projected Net Position from 2015

Projections Report $2.6

 Expected Change due to Passage of Time $2.3 $4.9

Changes due to Economy and Economic Assumption $(0.2) $4.7

Changes to the SE Model $0.8 $5.5

Changes due to Updated Plan and PBGC data $4.6 $10.1

Changes to Mortality Assumptions $(0.5) $9.6

Year 2026 Mean PV of Projected Net Position based on 2016 SE-PIMS 

Model $9.6

Expected Change Due to Passage of Time: The 2015 report projected the PBGC net position in 2025

and presented the results valued in 2015 dollars. To compare with the 2016 report, which projects to 2026

with values reported in 2016 dollars, the 2015 projection is rolled forward to project one additional year 

with one less year of present value discounting. The effect of the roll forward is an increase in the 

projected net position of $2.3 billion.

Economy and Economic Assumptions: After reflecting the fall uptick in interest rates, economic 

indicators reflected in the assumptions used for the fiscal years 2015 and 2016 projections were fairly 

similar – the modest changes in assumptions result in a decrease in the present value of the projected 

surplus by $0.2 billion. 

Changes to the SE Model: This report reflects several modifications to the coding (1) to modernize the 

random number generator, (2) harmonize the treatment of demographic decrements in estimating year by 

year plan experience and (3) to enhance performance and make a series of modest program 

enhancements. These changes increase the mean projected surplus by $0.8 billion.

Updated Plan and PBGC data: During FY 2016, the net position of PBGC’s Single-Employer Program 

improved by nearly $3.5 billion.36F

37 Premium revenue and investment income more than offset increases in 

liabilities due to claims and to a decrease in discount rates over the fiscal year. Updated data on covered 

single-employer plans also improved projected surplus. The combined effect of these changes is a net

increase in the present value of the projected net position of $4.6 billion.

Changes to Mortality Assumptions: This year’s model reflects the most recent version of mortality 

rates and the new projection scales issued by the Society of Actuaries in projecting the anticipated year by 

year experience of plan population. In addition, PIMS changed the mortality assumption for plans PBGC 

will administer to be based on the one used in the FY 2016 Annual Report. PBGC also assumes a future 

regulatory change in the mortality assumptions plans are required to use in determining funding 

 

37 The Single-Employer Program’s deficit at the end of FY 2015 was $24.1.billion and at the end of FY 2016 was 

$20.6 billion.
PENSION BENEFIT GUARANTY CORPORATION 39 FY 201 6 | PROJECTIONS REPORT

requirements and variable-rate premiums. This change, assumed to take effect in 2018, increases statutory 

funding requirements (thereby decreasing the projected value of future claims) and increases the projected 

value of future premiums. The net effect of these mortality assumption updates is a decrease in the 

projected net position of $0.5 billion.

In total, the present value of the single-employer program mean projected net position increased from a 

$2.6 billion surplus to a $9.6 billion surplus.

RECENT SINGLE-EMPLOYER PLAN TRENDS

Our projections do not assume that plans are terminated voluntarily by healthy companies, only by 

companies in distress. However, some healthy companies do close their pension plans by purchasing 

annuities and undertaking a standard termination. In these cases, PBGC’s current obligations are not 

affected, but those companies cease paying premiums altogether. PBGC is analyzing the effect of these 

actions and will attempt to incorporate them in future reports.

PIMS historically did not model the potential for plans to discharge any significant part of their 

obligations by purchasing annuities through insurance companies and/or paying lump sums. We have 

begun to implement modeling of lump sum calculations in limited circumstances (PIMS reflects lump 

sum payment of benefits to workers leaving active employment from a cash balance plan that is at least 

80 percent funded). However, the use of annuity buyouts and lump sums by companies seeking to 

transfer risk for significant portions of their liabilities is not currently modeled as a continuing or 

expanding trend in the future. In addition to reducing premium receipts, these transactions might affect 

future exposure to claims in some circumstances. PBGC is now gathering data on these transactions as 

part of the premium filing and intends to continue investigating this trend.

SENSITIVITY OF CHANGES TO THE MODEL’S DISCOUNT RATE

PIMS benefits from comments of readers, other users and a peer review of the program. One suggestion 

made in prior peer reviews was to enhance the disclosure of the sensitivity of results to changes in 

assumptions and other aspects of the Model. PBGC has begun to do this, focusing first on the modeled 

discount rate. Over time, PBGC plans to expand this analysis to other significant areas of PIMS.

As discussed above, PBGC has added tests of the sensitivity to increases and decreases in the PIMS 

discount rate for valuing PBGC obligations. If market prices for annuities were based on discount rates 

50 basis points higher than in the base projection, this would improve the mean present value of the 2026

single-employer net position by $4.9 billion and improve the likelihood of a surplus in 2026 from 68.1

percent to 76.8 percent. Discount rates 50 basis points lower would decrease the mean present value of 

the surplus by $5.6 billion and reduce the likelihood of a surplus in 2026 to 58.8 percent.
PENSION BENEFIT GUARANTY CORPORATION 40 FY 201 6 | PROJECTIONS REPORT

STATEMENT OF ACTUARIAL OPINION

We, the undersigned, certify that this actuarial evaluation has been prepared in accordance with generally 

accepted actuarial principles and practices and, subject to the disclaimers herein, to the best of our 

knowledge, fairly reflects the possible distribution of projected outcomes relative to the operations and 

status of the Corporation’s single-employer and multiemployer plan insurance programs as of September 

30, 2016, but reflecting estimated effects of interest rate changes on PBGC’s assets and liabilities and 

suspension and partition applications through December 31, 2016. 

In preparing this evaluation, we have relied upon information provided to us regarding plan and 

participant data, plan sponsor financial information, historic asset yield and bankruptcy information and 

other matters. We have checked this information for reasonableness as appropriate based on the purpose 

of the evaluation; the responsibility for the source information obtained from Forms 5500 and elsewhere 

rests with the preparers of these data. 

Subject to the disclaimers herein, in our opinion, 

(1) The techniques and methodology used are generally acceptable within the actuarial profession.

(2) The assumptions used are appropriate for the purposes of this report. 

(3) The resulting evaluation represents a reasonable estimate of the possible distribution of projected 

outcomes relative to the operations and status of these programs. 

The undersigned are available to discuss the material in this report.
PENSION BENEFIT GUARANTY CORPORATION 41 FY 201 6 | PROJECTIONS REPORT

APPENDICES

APPENDICES................................................................................................................. 41

Overview of PIMS .............................................................................................................41

Future Outcomes Are Expressed in Present Value Terms.......................................................................................41

How Projections Compare to Financial Statement Liabilities.................................................................................42

ME-PIMS...........................................................................................................................42

ME-PIMS – Overview ..............................................................................................................................................42

ME-PIMS — Data ....................................................................................................................................................43

ME-PIMS — General Methodology.........................................................................................................................44

ME-PIMS — Sampling .............................................................................................................................................44

ME-PIMS — Plan Sponsor Behavior........................................................................................................................46

ME-PIMS — Imputing the Inactive Census .............................................................................................................46

ME-PIMS — Assumptions.......................................................................................................................................47

Possible Future Refinements to the ME-PIMS Model ............................................................................................51

SE-PIMS ............................................................................................................................51

SE-PIMS — Overview ..............................................................................................................................................51

SE-PIMS — Data......................................................................................................................................................52

SE-PIMS — Methodology........................................................................................................................................52

SE-PIMS — Assumptions.........................................................................................................................................53

Sample Statistics from FY 2016 Runs in ME-PIMS and SE-PIMS ...........................................57

OVERVIEW OF PIMS

The analysis contained in this report utilizes ME-PIMS and SE-PIMS. PIMS Models are primarily models 

of pension plans, rather than of plan participants. They use data reported by a sample of pension plans to 

model the future funded status of the universe of private sector multiemployer and single-employer 

pension plans. Both Models project long-term financial outcomes by running many simulations, each 

modeling year-by-year changes over 20 years into the future. Each simulation starts with known facts 

about the economy, the universe of PBGC-insured plans, and PBGC’s financial position. The program 

then introduces random year-by-year changes (within certain bounds) to simulate economic fluctuations, 

producing 500 simulations for alternate economic paths through time. Within a simulation, each plan’s 

outcomes from one year form the following year’s starting-point for that plan, and so on. The Models 

recognize that all single-employer plan sponsors have some chance of bankruptcy, that all multiemployer 

plans have some chance of insolvency, and that these probabilities change over time depending on a 

variety of factors.

Neither SE-PIMS nor ME-PIMS is a predictive model. Although ME-PIMS mathematically models the

likelihood of mass withdrawal from a given plan or plan insolvency prior to mass withdrawal, it does not

anticipate withdrawal by individual employers. It does, however, reflect anticipated employer behavior in

limiting contributions to multiemployer plans. SE-PIMS does not attempt to anticipate companies’ more

general behavioral responses to changed circumstances, such as, whether or not to continue to sponsor

defined benefit plans.

Future Outcomes Are Expressed in Present Value Terms

This report generally expresses future outcomes in present value terms (i.e., discounted back to 2016); 

unless the numbers are explicitly noted as expressed in nominal terms, values shown should be assumed 

to be discounted present values. Each simulation’s outcomes are discounted based on the 30-year 

Treasury bond yields projected for that simulation, regardless of whether the underlying simulated cash 

flows are generated from holdings of equities, corporate bonds, or U.S. Treasury bonds.
PENSION BENEFIT GUARANTY CORPORATION 42 FY 201 6 | PROJECTIONS REPORT

In the projections of net position, one important factor is the determination of the amount of money 

PBGC owes to provide benefits or assistance in today’s present values. Changes in interest rates have a 

large effect on this calculation — the higher the interest rate used to calculate future obligations 

(liabilities), the lower the present value of the obligations reported. ME-PIMS and SE-PIMS model 

uncertainty in future changes to these interest rates.

How Projections Compare to Financial Statement Liabilities

The long-term projections, presented here, are different from the exposure reported in PBGC’s financial 

statements. There, PBGC classifies some plans as “probable for financial assistance” (multiemployer) or 

“probable to terminate” (single-employer) and records them as losses on its financial statements. PBGC 

describes others as “reasonably possible” losses and discloses the estimated exposure due to these plans

in Section VI of the PBGC Financial Statements, “Single-Employer and Multiemployer Program

Exposure,” but does not book them as losses. These estimates are based on plans that PBGC insures and 

considers reasonably possible to require financial assistance or to terminate, compared with all the plans 

that PBGC insures (the universe modeled in ME-PIMS and SE-PIMS).

PIMS treats the financial statement liabilities as initial inputs to the Model, estimating how they may vary 

in the future and adding in the effects of projected new claims, benefit payments and asset returns.

ME-PIMS

ME-PIMS – Overview

Each year in the course of preparing its financial statements, PBGC analyzes insured large (over 35,000 

participants) and medium (between 2,500 and 35,000 participants) multiemployer plans to identify those 

ongoing plans that might become claims against the insurance program.37F

38 In determining whether a plan 

should be classified as a probable risk of requiring financial assistance in the future and recorded in

PBGC’s financial statements as a balance sheet liability, PBGC evaluates whether the plan can be

expected to become insolvent within the following 10 years, often taking into account detailed available 

plan, industry, and employer data. Each plan is determined to either be “booked” as a liability for the 

financial statements for a given year or not to be included in the accrued liabilities at all.

To project future claims against the multiemployer program that are not already booked in the current 

financial statements, ME-PIMS models a similar process for each plan in each future year for each 

simulation. In each projection year and for the particular economic path being simulated, ME-PIMS 

projects a plan’s funded status, cash flow, asset base, and growth or decline in the contribution base, to 

determine whether that plan is projected to become insolvent within a specified time horizon (generally 

the next 10 years). In each projection year, the plans that are projected as future insolvencies within that 

time horizon become ME-PIMS liabilities that year for the particular simulated path. Thus a plan may be 

“booked” in ME-PIMS in some years and some simulations and not in others.

There is typically a long time lag between PBGC’s booking of a multiemployer plan and the start of 

PBGC’s financial assistance payments. Payments begin only after the plan has depleted its assets. In MEPIMS’ simulation of the multiemployer program, a plan can be booked as a probable claim in one year of 

 

38 Generally, all multiemployer plans currently receiving financial assistance from PBGC as well as those that have

terminated are included in PBGC’s financial statements, along with ongoing probable insolvencies. Since FY 2015, 

the liabilities of the small plans that have not yet terminated are represented in the aggregate in the financial 

statements by a small plan bulk reserve.
PENSION BENEFIT GUARANTY CORPORATION 43 FY 201 6 | PROJECTIONS REPORT

a projection, and then, if economic conditions are projected to improve sufficiently, it can become unbooked (in the Model) in a later year. Because PBGC’s accounting procedures for financial statements 

reflect considerations not included in the ME-PIMS modeling analysis, and because the financial

condition of plans can vary from year to year, the ME-PIMS projections of PBGC’s net position may 

deviate from PBGC’s financial statements in subsequent years.

No single underfunding number or range of numbers is sufficient to evaluate PBGC’s exposure and 

expected claims over the next 10 years. Claims are sensitive to changes in interest rates and investment 

returns, overall economic conditions, contributions, changes in benefits, the performance of some 

particular industries, and bankruptcies. In the multiemployer program, a large number of claims from the 

actual and projected insolvencies of small and medium-sized plans, and a small number of claims from 

large plans, have characterized the PBGC’s historical claims experience and are likely to affect potential 

future claims experience as well.

ME-PIMS portrays future underfunding, under current law funding rules, as a function of a variety of 

economic parameters. The Model anticipates that individual plans have various probabilities of positive 

and negative experience, and that these probabilities can change significantly over time. The Model also 

recognizes the uncertainty in key economic parameters (particularly interest rates and market returns). 

The Model simulates the flows of claims that could develop under hundreds of combinations of

economic parameters and extrapolations of plans’ respective 10-year historical patterns.

A multiemployer plan can go through a “mass withdrawal,” which happens when all employers stop 

participating in a plan at the same time. For each plan in each of the projection years, ME-PIMS 

calculates a probability of mass withdrawal based on the factors listed in the “Assumptions” section. 

When determining whether a multiemployer plan undergoes a mass withdrawal in a given year/scenario, a 

random number is drawn and compared with the plan’s probability threshold for mass withdrawal — the 

result determines whether or not a mass withdrawal is included in that year of the simulation.38F

39

ME-PIMS — Data

ME-PIMS has a detailed database of actual plans (including previously booked plans). These plans 

represent more than half of PBGC’s insurance exposure in the multiemployer defined benefit system, 

measured from the latest Form 5500 filings available as of the preceding spring (generally information for 

plan years that commenced during 2014 and ended either as of December 31, 2014 or during 2015). The 

database includes:

• summary statistics on plan demographics,

• plan benefit structure,

• asset values,

• liabilities,

• actuarial assumptions, and

 

39 For example, assume the mass withdrawal probability for a plan is 5 percent and that the random numbers are

drawn from an urn of balls numbered from 1 to 100. If the ball drawn is numbered 5 or less then the plan

experiences a mass withdrawal. If the random number is greater than 5, the plan does not experience a mass

withdrawal.
PENSION BENEFIT GUARANTY CORPORATION 44 FY 201 6 | PROJECTIONS REPORT

• historical contribution levels and demographic trends (over the 10 prior years) to assist in 

modeling plan trends.

The ME-PIMS database also contains other pension plan information obtained from Schedules MB of 

Form 5500. For booked plans PBGC collected additional data beyond the general information available 

on the Form 5500 and used it in the Model. The additional data is subject to confidential treatment 

requests under 29 CFR 4901.24.

ME-PIMS — General Methodology

ME-PIMS projects PBGC’s potential financial position by combining simulated claims with simulated 

paths for premiums, expenses, PBGC’s investment returns, and changes in PBGC liability; that is, the 

present value of benefits and expenses payable pursuant to claims recognized by the PBGC. The 

probability of any particular outcome is estimated by dividing the number of simulations with that 

outcome by 500, the number of multiemployer simulations.

Because multiemployer liabilities are booked by PBGC several years before a plan becomes insolvent, a 

plan’s financial condition can improve after it is first booked, reducing PBGC’s liability for that plan (i.e., 

the value of its claim) by delaying its projected date of insolvency and/or reducing the flow of assistance 

anticipated after insolvency. In some cases, insolvency is delayed beyond the 10-year threshold required

for recognition, causing the plan to become “un-booked” and reducing its claim value to zero. 

Conversely, a plan’s condition can deteriorate further following the initial recognition.

ME-PIMS reflects un-bookings as negative claims, which are taken into account in the mean and median 

claim amounts (i.e., the above amounts represent the value of booked minus un-booked future claims). 

However, financial improvements during the projection period that are insufficient to cause claims to be 

un-booked are not reflected in the un-booked ME-PIMS claims values. As a result, the change in net 

position over the projection period may fall short of the amount that would actually be determined when

reflecting the present values of simulated premiums, financial assistance, expenses, and investment 

returns over that period.

ME-PIMS primarily models the plan’s financial status rather than that of the plan’s contributing 

employers.

In the multiemployer program, there is little distinction between claims due to insolvency and probable 

liabilities, unlike the single-employer program. In the single-employer program, a probable liability is 

generated on PBGC’s books when the condition of the sponsoring employer justifies such a classification. 

In the multiemployer program, a probable liability is generated when certain plan metrics are sufficiently 

problematic, a mass withdrawal is triggered, or cash-flow insolvency is projected within 10 years.

ME-PIMS — Sampling

In ME-PIMS, a sample of actual plans (both booked and non-booked) represents the universe of 

multiemployer plans. ME-PIMS simulates contributions and underfunding for the sample plans chosen 

for the ME-PIMS analysis. It extrapolates or scales the results generated by this sample of plans to the 

universe of all multiemployer plans by multiplying each sampled plan by a weighting factor. To avoid the 

risk that a particular sampled plan is anomalous and will materially distort the overall results, PIMS 

includes almost all the largest plans in its sample, and decreasing proportions of smaller plans, where 

sampling anomalies would have a smaller impact. Thus, the largest plans typically have the smallest 

weighting factors.
PENSION BENEFIT GUARANTY CORPORATION 45 FY 201 6 | PROJECTIONS REPORT

ME-PIMS starts with PBGC’s multiemployer net position from the financial statements (a $58.8 billion 

deficit in the case of FY 2016) for currently insolvent and probable plans. The starting net position is 

modeled using a sample of 34 insolvent plans, 27 terminated probable plans, and 54 (including 20 small 

booked plans) ongoing probable plans. This is a change from 29, 32, and 54 plans, respectively, used in 

FY 2015. In addition, ME-PIMS starts with data on the funded status of 183 non-booked plans 

(compared to 180 in 2015) that are weighted to represent the universe of PBGC-covered plans that are 

not current or probable claims for PBGC.

The ongoing non-booked PIMS sample is divided into tiers, by plan size (based on vested current 

liabilities). In each tier of the sample plans, the individual plans are weighted by the factor for that tier, 

where the factor is the total vested liability for all multiemployer plans in that tier divided by the total 

vested liability for the sample plans in that tier. If a plan is projected to present a claim in ME-PIMS, the 

claim to the multiemployer program is the claim for that plan multiplied by the factor for that plan’s tier.

The size of the sample was increased for the FY 2014 and subsequent Projections Report to 

accommodate (1) the change in procedures to determine which plans are to be included in the financial 

statements (i.e., which plans are to be booked), as implemented by the Multiemployer Working Group

(MWG) for the fiscal year ended September 30, 2014, and (2) the passage of MPRA, which makes 

available suspension and partition options for certain “critical and declining” plans. To accommodate the 

new booking procedures, the PIMS sample of ongoing non-booked plans was divided into three 

categories: small (under 2,500 participants), medium (between 2,500 and 35,000 participants) and large 

(over 35,000 participants) plans. To accommodate the modeling of MPRA, each of these groups was

further divided in “MPRA” and “others” yielding a total of six categories.

The list of plans in the MPRA group for each size category is determined by reference to an external 

model of all multiemployer plans. The external model performs a deterministic projection of plans using

stylized patterns of contributions and benefit payments that vary by plan characteristics. Plans that are 

projected to become insolvent within 20 years using the external deterministic model are classified as 

being part of the MPRA group and separately sampled and weighted. Generally, ME-PIMS attempts to

individually model almost all the large and most of the medium plans the external model determines may 

be “critical and declining.” Thus there are 20 sample plans total in the three MPRA groups; the weights 

are 1.00, 1.428 and 5.781 for the large, medium and small size plans, respectively. There are 9 tiers of 

plans in the “others” groups, 2 for the large plans, 4 for the medium plans and 3 for the small plans. The 

weights for the tiers range from 1.085 to 14.543 for the tier representing the smallest plans.

Under the new booking procedures (implemented in FY 2014) for the financial statements, ongoing small 

plans are no longer included explicitly in the financial statement calculations, but are replaced by a bulk 

“small plan reserve.”39F

40 ME-PIMS does not precisely duplicate the bulk reserve methodology but further 

divides the “other” small plans into two groups. The first group consists of the small plans that are 

assumed to be booked in the first valuation year (year 0), as determined by an initial ME-PIMS run. The 

weight for these plans, 0.755 in FY 2016, is determined by the ratio of the ME-PIMS PV of assistance for 

these plans to the bulk reserve. The decrease in weight, from 1.389 in FY 2015 to 0.755 in FY 2016, is 

due to more small MPRA plans being “booked” in year 0. The plans that are not booked in year 0 are 

weighted according to the process used for the medium and large tiers

 

40 The revised methodology is discussed on Page 83 of PBGC’s 2014 Annual Report, available at

https://www.pbgc.gov/Documents/2014-Annual-Report.pdf.
PENSION BENEFIT GUARANTY CORPORATION 46 FY 201 6 | PROJECTIONS REPORT

ME-PIMS — Plan Sponsor Behavior

Generally, the Model assumes that plans in critical status will increase contributions and make other plan 

changes. These assumptions differ for critical status plans that have “exhausted all reasonable measures” 

(ERM).

The Model also reflects potential adoption of suspension of benefits and partition by plan sponsors of 

critical and declining plans, based on the financial status of each sample plan along each modeled 

economic path. Plans that are critical and declining along a particular path are assumed to make a onetime decision whether or not to apply for suspensions and partitions based on the assumptions regarding 

partition and suspension probabilities.

To determine whether a plan will need suspension or partition assistance along a particular economic 

path, ME-PIMS uses the imputed plan census to calculate benefits at the maximum suspension level 

(110% of PBGC’s guarantee, with additional protections for aged and disabled participants).40F

41 If the 

suspension reduction is sufficient to achieve long-term solvency, the plan election will be for suspensiononly or no changes (depending on a random-number draw). If the suspension is inadequate, the plan is 

further processed to determine whether an election for suspension plus partition will be modeled. 

For a suspension-only candidate plan, the maximum suspensions are adjusted using aggregate cash flows 

to calculate the benefit levels just high enough to achieve long-term solvency over the 30 years of the 

projection period. The requirement for longer term solvency is modeled on a simplified basis by 

requiring a funding ratio of at least 20% at the end of 30 years. For a suspension plus partition candidate

plan, the benefits are reduced to the maximum suspension level and the amount of partition assistance 

required is determined so as to maintain solvency. If the present value of partition assistance required is 

less than the present value of future assistance by more than a de minimis amount, assuming no partition 

occurs, the plan is assumed to pass MPRA’s expected long-term loss test (see ERISA §4233(b)(3)(A)). 

Should the plan meet these requirements, it is then modeled as electing between suspension and partition 

or no changes.

ME-PIMS does not separately model other forms of financial assistance such as facilitated merger 

assistance. Since they are subject to similar limits on plans except the requirement for maximum 

suspensions, we model them as part of the potential partition universe. Given MPRA’s impairment tests 

(see ERISA§4233(b)(4) and §4231(e)(2)(c)), the effect on PBGC outcomes is likely similar whether 

financial assistance is provided through facilitated merger or partition.

The 2016 version of ME-PIMS includes new modeling around the anticipation of actual implementation 

of benefits suspensions and partitions for individual plans. These changes also delay the assumed date of 

benefit suspensions by one year (from FY 2017 to FY 2018). 

ME-PIMS — Imputing the Inactive Census

ME-PIMS generally operates on the basis of plan data, using aggregate information as reported on the 

Form 5500; it imputes individual participant census information in order to estimate changes in plan 

liabilities due to demographic changes over time. The active participant census is readily developed from 

the active age/service scatter attachment to the plan’s Form 5500. The inactive census is imputed on a 

basis that varies by age, service, form of benefit (modeling life annuities and joint and survivor annuities),

gender, and benefit amount. The imputed inactive census is based on actual inactive data received from 

 

41 This calculation uses imputed census data. A percentage of the population is assumed to be disabled.
PENSION BENEFIT GUARANTY CORPORATION 47 FY 201 6 | PROJECTIONS REPORT

several plans. The actual inactive data provide a master template for the assumed distributions by age,

service, gender and form of payment to generate each plan’s initial inactive census.

ME-PIMS then applies the individual plan’s current accrual rate (with adjustment for inflation) to this 

initial inactive census, which is then further scaled to the Form 5500 in-pay benefits and the starting 

current liabilities of the plan.

The Model also incorporates the ability to input plan specific census information where available.

ME-PIMS — Assumptions

The following variables are stochastically projected:

• Interest Rates, Stock Returns, and Related Variables. (e.g., inflation, wage growth, and 

multiplier increases in flat-dollar plans). These variables are determined by the underlying means, 

standard deviations and correlation matrix established for the ME-PIMS projection.

o Stock returns are modeled as independent from one period to the next. To determine a 

simulated sequence of stock returns, the Model randomly draws returns from a 

distribution that reflects historical experience going back to 1926.

o Interest rates are modeled as correlated over time. With the Model, the Treasury yield for 

a given period is expected to be equal to the yield for the prior period, plus or minus 

some random amount.

o The random draws affecting the bond yields and stock returns are correlated according 

to an estimate derived from the period 1973 to 2007. Stock returns are more likely to be 

high when the Treasury yield is falling and vice versa. Credit spreads on investmentgrade corporate bonds are modeled to regress toward their historic mean values.

• Asset Returns. Plan asset returns are based on an internal study of historic asset returns among 

large plans. Using the financial rates directly modeled in PIMS (stock market returns, long-term 

Treasury bond returns and yields), the study estimated mixtures of those rates to best fit the 

historic returns of plans in the study. PIMS projects annual plan returns using the following 

weighting based on the average of the estimated rate mixtures: 48 percent stock market returns, 

23 percent long-term Treasury bond returns, and 30 percent long-term Treasury bond yield, with 

a -2.5 basis points additive return adjustment (percentages are rounded). Future plans for PIMS 

may include modeling of additional asset class returns allowing PIMS to use the investment 

allocation information trustees now report as part of the annual Form 5500 filings.

• Plan Demographics. Starting with the plan’s active employee population data from the Form 

5500 (grouped by age and service bands), the distribution of active participants for each plan in 

the future varies according to that plan’s actuarial assumptions regarding retirement, disability, 

and termination of employment. Age and service also vary over time due to hiring assumptions 

that are determined separately in each scenario of the projection. Hiring patterns vary with 

stochastic projections; the general assumption is that a plan’s historical hiring distribution 

continues and hiring occurs (or not) to bring the size of the active population up to the size 

indicated by the continued trend as needed after plan decrements (retirement, termination of 

employment, disability) take place. ME-PIMS does not currently assume industry-specific 

employment trends. ME-PIMS models net annual changes in employment levels reflecting the 

path of economic variables in a particular simulated path over time, resulting in a mean net 

decrease in the active multiemployer population of 1.3 percent per year across all simulated paths.
PENSION BENEFIT GUARANTY CORPORATION 48 FY 201 6 | PROJECTIONS REPORT

• Benefit-level and Employer-contribution Increases. These vary annually during the 

projection period with some correlation to modeled economic conditions in each future year.

• Probability of Mass Withdrawal. We generate the probability of mass withdrawal under a 

model that uses each plan’s:

o plan size,

o ratio of active to inactive population,

o ratio of assets to benefit payments and expenses,

o ratio of the accumulated credit balance in the funding standard account to employer 

contributions,

o ratio of market value of assets to vested actuarial liabilities, and

o ratio of current year to previous year contribution amount.

The current report continues to reflect the above factors, but reduces the assumed incidence of 

mass withdrawal by 75% based on a study https://www.pbgc.gov/sites/default/files/me-pimsmasswithdrawalassumptions.pdf of post-PPA experience.

The following non-stochastic assumptions are also used in ME-PIMS projections:

• Mortality. For purposes of determining sample plans’ year by year mortality experience during 

the projection period: the blended RP-2014 annuitant and non-annuitant mortality tables, 

projected with MP-2016 to the specified projection year on a static basis. For purposes of 

determining the present value of PBGC assistance: the blended RP-2014 Healthy male mortality 

table times 1.09 and the Healthy female mortality table times 0.99, projected to 2031 using the 

MP-2016 scale for FY 2016. For projections of future fiscal years, the static projection is updated 

by one additional year, using the MP2016 scale, for each year beyond FY 2016.

• Contribution Level/Credit Balances. The credit balance is increased each year by the 

valuation interest rate and decreased by the amount by which modeled contributions are less than

the minimum required. ME-PIMS modeling of employer contributions reflects that most 

employers make contributions at a level above the minimum required.

• Benefit Improvements. For flat-dollar plans that are not in critical or endangered41F

42 status, 

benefit multipliers are assumed to increase annually by the rate of increase in average wages. The 

majority of multiemployer plans have flat-dollar formulas, though there is a trend towards 

formulas that are based on a percentage of total contributions attributable to each participant,

especially for plans in critical or endangered status. ME-PIMS models both flat-dollar and 

percent-of-contributions benefit formulas. In plans where the benefit formula is not a flat-dollar 

or percent-of-contributions schedule, a translation of the actual formula is made so that the plan 

is modeled as a comparable flat-dollar plan.

• Benefit Improvement Restriction. ME-PIMS assumes that critical status plans and most 

endangered status plans will not adopt future benefit improvements.

 

42 A plan is generally considered to be in “endangered status” if it is not in “critical status” and it (1) is less than 80

percent funded or (2) has an accumulated funding deficiency in the current plan year or is projected to have an

accumulated funding deficiency in any of the six subsequent plan years. A plan is in “seriously endangered status” if

the plan is not in “critical status” and both (1) and (2) apply. (Internal Revenue Code §432(b)(1))
PENSION BENEFIT GUARANTY CORPORATION 49 FY 201 6 | PROJECTIONS REPORT

• PBGC Premiums. ME-PIMS models premiums based on the rate under current law with 

projected rates increasing under the indexing provisions in current law. There is no allowance in 

premium projections for write-offs of uncollectable premiums and for the fact that a portion of 

the premium collected is not credited with interest under MPRA.

• PBGC’s Assets. All assets in the multiemployer program are, by law, placed in revolving funds. 

PBGC’s policy is to invest revolving fund assets in United States Treasury securities. Asset 

returns in ME-PIMS are bound by the modeling of Treasury returns in future years.

• Discounting Future Claims. When ME-PIMS discounts future claims, the discount factor is a 

single interest factor which models the “select” and “ultimate” factors described in the 2016

financial statements with an assumed reversion to the relationship of market interest rate and 

annuity pricing factors observed prior to the 2008 financial crisis. Those factors are based on a 

survey of private-sector annuity market prices.

• Determining Discounted Future Present Values Shown in Report Tables. For calculations 

involving discounting future amounts, the discount rate used is the simulated 30-year Treasury 

rate generated for the particular year and economic path.

• Behavior of Critical Status Plan Sponsors. The per-capita contribution in critical status plans 

increases at a multiple of the prior observed rate, but the annual rate of increase in per-capita 

contribution is limited to 12 percent per year (7 percent for those critical plans assumed to 

declare ERM). The plan aggregate contribution amount (indexed for wage inflation) is capped by 

a multiple of the 2008 contribution. The cap assumes that aggregate contributions in non-ERM 

plans will not more than double in the first six years, not more than triple in the next six years or 

exceed 3.5 times the base year amount thereafter. The limit is 1.5 times the pre-PPA base year

contribution in ERM plans. A floor is set such that the aggregate dollar limit never falls below the 

prior year’s contribution. These increases in contributions are treated as “supplemental” and do 

not affect the benefit accrual rate in plans where the benefit is based on a percentage of employer 

contributions. Non-ERM critical status plans are assumed to eliminate early retirement subsidies 

and temporary supplements for active participants.

• Assumptions to Facilitate Suspension and Partition. This 2016 Projections Report reflects 

updated assumptions to model the effects of MPRA:

o Partition: For plans which require partition in addition to suspension in order to 

maintain solvency, ME-PIMS tests to ensure that the partition will reduce PBGC’s long 

run loss by a minimum of 1 percent. For plans that meet that requirement it assumes 

that there is a 10 percent likelihood that a plan that could be successfully partitioned 

under the standard would actually be approved for partition. In addition, ME-PIMS was

updated to allow partitioning of terminated vested participants first (as compared to 

retired participants first in FY 2015) to better reflect the PBGC’s process.

o Solvency Test Return on plan assets: The assumed return on plan assets used in solvency 

tests was lowered from 7.5% to 6.5% to reflect experience in the application process.

o These assumptions differ from the assumed rates used as the primary assumption for 

modeling suspension and partition for the FY 2015 Projections Report. Reflecting 

emerging experience, we believe these updated assumptions provide a more reasonable

view of the immediate outlook.

o Incidence of Suspension and Partition: For plans that can suspend benefits and remain 

solvent without requiring partition assistance, ME-PIMS assumes that one large plan has 
PENSION BENEFIT GUARANTY CORPORATION 50 FY 201 6 | PROJECTIONS REPORT

a 0 percent likelihood of suspending benefits and that the other suspension-only eligible 

plans will do so 30 percent of the time. For plans which require partition in addition to 

suspension in order to maintain solvency, ME-PIMS tests to ensure that the partition 

will reduce PBGC’s long run loss by at least 10 percent. For plans that meet that 

requirement it assumes that there is a 10 percent likelihood that a plan that could be 

successfully partitioned under the standard would actually be approved for partition.

These assumptions are unchanged from the FY 2015 Projections Report.

• Plan Demographics to Facilitate Cash Flow Modeling. To determine the cash flows in

multiemployer plans, ME-PIMS utilizes a number of assumptions (same assumptions as FY 

2015):

o Proportion of active population assumed to be male: 70%,

o Proportion of retirees (in ongoing plans) assumed to be male: 80%,

o Proportion of terminated vested participants (in ongoing plans) assumed to be male: 

94%,

o Age difference: females three years younger than their male spouses,

o Proportion of active population assumed to elect joint and survivor form: 60%,

o Proportion of retirees assumed to possess a joint and survivor form: 30%,

o Proportion of terminated vested assumed to elect joint and survivor form: 35%,

o Joint & survivor form: joint and 50% survivor benefit,

o Proportion of participants assumed married for pre-retirement death benefit: 80%, and

o Conversion factors based on PBGC rates for the joint and 50% survivor benefit: .8730 

for male participants; .9135 for female participants.

The 2016 version of ME-PIMS uses the same assumptions42F

43 as used in the 2015 version of the Model

except as detailed below:

• Mortality Table used to Determine the Present Value of PBGC Assistance: the Blended 

RP-2014 Healthy male mortality table times 1.09 and Healthy female mortality table times 0.99, 

projected to 2031 using the MP-2016 scale. We updated this table to match the mortality tables 

used for the FY 2016 Annual Report.

• Mortality Table used to Determine Plan Experience: the Blended RP-2014 annuitant and 

non-annuitant tables projected to the valuation date using the MP2016 scale. We updated the 

anticipated experience for plans to reflect emerging long term mortality experience in general, as 

reported by the Society of Actuaries.

• Mass Withdrawal Probability: As recommended in the Buck peer review, we have studied the 

empirical experience of mass withdrawal assumption subsequent to the effective date of PPA.

Incidence of mass withdrawal appears to continue to be related to the factors in our model, but 

to occur at much lower rates. Accordingly, the mass withdrawal probabilities resulting from the 

 

43 This list excludes changes that arise merely from changes in economic conditions or from annual updates, for 

example changes in interest rates, asset returns, and one additional year of mortality improvement.
PENSION BENEFIT GUARANTY CORPORATION 51 FY 201 6 | PROJECTIONS REPORT

model were reduced by 75% in the current model of ME-PIMS. Further study of the drivers of 

mass withdrawal is anticipated in the coming years.

• Assumptions used to Facilitate Suspension and Partition: The assumptions shown differ 

from those used in 2015 to support the modeling of suspensions and partitions, including: 1) the 

order of partition was changed from retired participants first to partitioning terminated vested 

participants first, 2) the assumed rate of return on plan assets used in testing solvency projections 

was lowered from 7.5% to 6.5%, and 3) the threshold for the reduction in PBGC’s long run loss 

was lowered from 10% to 1%. We believe the revised assumptions better reflect emerging 

experience under the program.

Possible Future Refinements to the ME-PIMS Model

PBGC expects to continue to modify and improve ME-PIMS in the future. Areas under study include 

incorporating additional modeling of plans’ actual responses to PPA, including further updates in the 

areas of projected mass withdrawals and employer benefit and funding decisions, and responses to MPRA 

in the area of suspension of benefits and partition.

A plan becomes insolvent when it does not have enough assets to pay benefits as they become due. A 

single-employer plan has one sponsor for which financial information is often available and whose 

financial condition can be assessed and modeled. By contrast, among multiemployer plans, even the 

identity of some individual employers that participate in particular multiemployer plans has only recently 

become available. Others remain unknown. PBGC expects to continue to explore improvements to the 

model of plan insolvency that might reflect other plan or industry characteristics.

PIMS currently models future mortality improvement using age-varying static mortality projections. 

Future improvements to the system may incorporate generational mortality tables that include variation 

by age and cohort.

SE-PIMS

SE-PIMS — Overview

No single underfunding number or range of numbers is sufficient to evaluate PBGC’s exposure and 

expected claims over the next 10 years. Claims are sensitive to changes in interest rates and investment 

returns, overall economic conditions, contributions, changes in benefits, the performance of some 

particular industries and bankruptcies.

Large claims from a small number of terminations characterize PBGC’s claims experience throughout its 

history and are likely to affect PBGC’s potential future claims experience as well.

SE-PIMS starts with data on PBGC’s single-employer position and data on the funded status of more 

than 460 plans that are weighted to represent the universe of PBGC-covered plans. The Model produces 

results under 5,000 different simulations (500 economic paths times 10 bankruptcy simulations). The 

probability of any particular outcome is estimated by dividing the number of simulations with that 

outcome by 5,000. The Model uses funding rules as prescribed by current law.

PBGC’s expected claims under the single-employer program depend on two factors: the amount of 

underfunding in the pension plans that PBGC insures (i.e., exposure) and the likelihood that corporate 

sponsors of these underfunded plans will encounter financial distress that results in bankruptcy and plan 

termination (i.e., the probability of claims).
PENSION BENEFIT GUARANTY CORPORATION 52 FY 201 6 | PROJECTIONS REPORT

SE-PIMS — Data

SE-PIMS has a detailed database of more than 460 actual plans, sponsored by more than 330 firms, 

which represent about half of PBGC’s insurance exposure in the single-employer defined benefit system 

measured from the 2014 Form 5500 filings which contain information for plan years that commenced 

during 2014 and ended either as of December 31, 2014 or during 2015 (the most recent year of complete 

Form 5500 filing data available). SE-PIMS also reflects any available contributions from later years’ filings 

that are available when the initial results are generated. The plans selected for the sample are those with 

sponsors that have the largest shares of total plan liabilities in the single-employer defined benefit system 

and where (1) sufficient publicly accessible data is available on the sponsor to use the SE-PIMS 

bankruptcy probability model, and (2) plan details can be sufficiently captured in the SE-PIMS Model. 

The database includes:

• summary statistics on plan demographics,

• plan benefit structure,

• asset values,

• liabilities,

• actuarial assumptions, and

• key financial information about the employer sponsoring the plan.

SE-PIMS — Methodology

The SE-PIMS sample of more than 330 large plan sponsors is weighted to represent the universe of 

PBGC-insured, single-employer plans. The weighted representation reflects the values of total liabilities 

and underfunding, and the distribution of funding levels among plans in the insured universe that were 

available publicly as of the preceding spring (generally information for plan years that began in 2014).

The weights in SE-PIMS scale the sample of plans to be representative of the entire universe of singleemployer plans (generally trying to capture the distribution of plans by size). This is done by creating 

scaled copies (referred to as “partners”) of the sponsors in the SE-PIMS sample. Each partner is 

projected to sponsor scaled copies of the same plans sponsored by its source sponsor. Partners begin 

each simulation with the financial conditions copied from their source sponsors but are scaled in the sizes 

of their balance sheet entries and employment and receive individual projections of their financial

conditions and bankruptcy experiences. Because the SE-PIMS sample is drawn from larger than average 

plans and corporations, each partner is scaled (in plan size and sponsor size) to one-fifth the size of its 

source.

Partners are allocated to sponsors in SE-PIMS to create a weighted sample that approximates the 

distribution of plan liabilities by funding status in the insured universe.

For example, the weighted sample’s total value of plan liabilities among plans 50 to 60 percent funded is 

compared to the same total for the insured universe, and similarly for plans 60 to 70 percent funded, 70 

to 80 percent funded, etc. Partners are allocated for a best fit to the entire distribution.

SE-PIMS simulates contributions, premiums, and underfunding for these plans using the minimum 

funding and premium rules, and then extrapolates the results to the universe of single-employer plans.
PENSION BENEFIT GUARANTY CORPORATION 53 FY 201 6 | PROJECTIONS REPORT

Funding rules and PBGC premiums under current law are reflected in the modeling. SE-PIMS also uses 

the employer’s financial information as the starting point for assigning probabilities of bankruptcy, from 

which it projects losses to the insurance program.

Projections of claims against the insurance program are made stochastically. Claims against the pension 

insurance program are modeled by simulating the occurrence of bankruptcy for plan sponsors. The 

Model reflects the relationship that occurred from 1980 to 1998 between the probability of bankruptcy 

and the firms’ contemporaneous financial health variables (equity-to-debt ratio, cash flow, firm equity, 

and employment), modified as described below. For each period, the Model assigns a random change in

each of these variables to each firm, correlated with changes in the economy. The simulated financial 

health variables determine the probability of bankruptcy for that year.

The Model assumes, with the exception noted below regarding variable-rate premiums, that all plan 

sponsors contribute the minimum amount each year. The Model runs 500 economic paths (varying 

interest rates and equity returns) with each plan’s sponsor being “cycled” through each economic path 10 

times (with varying financial health experiences, bankruptcy probabilities, etc.) for a total of 5,000 

different simulations.

SE-PIMS then extrapolates the results of these simulations to the universe of insured single-employer 

plans.

SE-PIMS — Assumptions

The following variables are stochastically projected:

• Interest Rates, Stock Returns, and Related Variables. (e.g., inflation, wage growth, and 

multiplier increases in flat-dollar plans).43F

44 These variables are determined by the underlying 

means, standard deviations, and correlation matrix established in SE-PIMS.

o Stock returns are modeled as independent from one period to the next. To determine a 

simulated sequence of stock returns, the model randomly draws returns from a 

distribution that reflects historical experience going back to 1926.

o Interest rates are modeled as correlated over time. With the Model, the Treasury yield for 

a given period is expected to be equal to the yield for the prior period, plus or minus 

some random amount.

o The random draws affecting the bond yields and stock returns are correlated according 

to an estimate derived from the period 1973-2007. Stock returns are more likely to be 

high when the Treasury yield is falling and vice versa. Credit spreads on investmentgrade corporate bonds are modeled to regress toward their historic mean values.

• Sponsor Financial Health Variables. (equity-to-debt ratio, cash flow, firm equity, and 

employment).

• Asset Returns. Plan asset returns are based on an internal study of historic asset returns among 

large plans. Using the financial rates directly modeled in PIMS (stock market returns, long-term 

Treasury bond returns and yields) the study estimated mixtures of those rates to best fit the 

 

44 In a flat-dollar plan, the pension benefit is determined by multiplying a fixed amount by the participant's years of

service. In a salary-related plan, the benefit is determined by multiplying a percentage of the participant's salary by

the years of service.
PENSION BENEFIT GUARANTY CORPORATION 54 FY 201 6 | PROJECTIONS REPORT

historic returns of plans in the study. PIMS projects annual plan returns using the following 

weighting based on the average of the estimated rate mixtures: 48 percent stock market returns, 

23 percent long-term Treasury bond returns, and 30 percent long-term Treasury bond yield, with 

a -2.5 basis points additive return adjustment (percentages are rounded). Future plans for PIMS 

may include modeling of additional asset class returns allowing PIMS to use the investment 

allocation information sponsors now report as part of the annual Form 5500 filings.

• Plan Demographics. Starting with plans’ population data from the Form 5500, the distribution 

of active participants for a plan varies throughout the forecast, according to that plan’s actuarial 

assumptions regarding retirement, disability, and termination of employment. Age and service 

also vary over time due to hiring patterns that are determined separately in each simulated path of 

the projection. Unless the plan is frozen, PIMS assumes a stationary mean active participation 

level for the plan. The distribution of ages and benefits for retired and terminated vested 

participants are imputed from a long term projection of the starting active population and 

normalized to the actual counts furnished by the Schedules SB. All participants are assumed to be 

male and are assumed to elect straight life annuities.

• Probability of Bankruptcy. Sponsors are subjected to an annual stochastic chance of 

bankruptcy. That probability of bankruptcy is determined by formulas estimated from historical 

bankruptcies and various measures of companies’ financial health over the period 1980 to 1998. 

The bankruptcy risks generated for PIMS are compared to market indices and the largest outliers 

have their modeled risk recalibrated to equal the mean of the market estimate of bankruptcy risk 

for their class of bonds. Bankruptcy probability formulas generally do not vary by industry.44F

45 A 

plan presents a loss to participants and/or the pension insurance program if its sponsor is 

simulated to experience bankruptcy and the plan is less than 80 percent funded for termination 

liability. 

PBGC plans to update its bankruptcy model to look beyond book values of the firms to their 

market values in determining bankruptcy risk.

The following non-stochastic assumptions are also used in SE-PIMS projections:

• Mortality. For purposes of determining plans’ mortality experience during each year of the 

projection period: the blended RP-2014 annuitant and non-annuitant tables projected to the 

valuation date using the MP2016 scale. For purposes of determining the amount of underfunding 

at termination, the blended RP-2014 Healthy male mortality table times 1.09, projected to 2031 

using the MP-2016 scale. This is the same male mortality assumption as was used for the FY 

2016 PBGC’s Annual Report. For projections of future fiscal years, each year beyond FY 2016

the static projection is updated by one additional year. For purposes of determining statutory 

minimum funding requirements beginning in 2018, we modeled updates to the table by changing 

our assumption to the prescribed table in the IRS proposed rule on December 29, 2016 projected 

on a static basis each year beyond 2018 using scale MP-2016. We assumed that large collectively 

bargained plans opt to use a substitute mortality table whose rates are assumed to be 9% higher 

than the standard table (5% higher relative to the RP-2000-based table for valuation years prior 

to 2018).

 

45 SE-PIMS makes an exception for the financial and utilities industries, where relatively high degrees of leverage are 

considered not to signal a risk of bankruptcy. SE-PIMS also increases the bankruptcy probabilities of a few large 

companies, especially in the retail industry, whose Model probabilities greatly underestimate the risk of bankruptcy 

as measured by their bond ratings.
PENSION BENEFIT GUARANTY CORPORATION 55 FY 201 6 | PROJECTIONS REPORT

• Contribution Level/Credit Balances. The credit balance is increased each year by the plan’s 

rate of return on assets and decreased by the amount assumed to be used to satisfy the minimum 

funding requirement. For purposes of modeling future claims, SE-PIMS assumes that employers 

will contribute the minimum required amount each year as determined using the further 

smoothing authority under the Bipartisan Budget Act of 2015 and that any credit balance 

remaining will be used to the maximum extent permitted until the balance is completely depleted.

Updated actual 2014 and 2015 contributions and the associated Minimum Required 

Contributions are reflected where available as of the data compilation date.

• Benefit Improvements/Benefit Improvement Restriction. For flat-dollar plans, benefit 

multipliers are assumed to increase annually by the rate of inflation and productivity growth. For 

salary-related plans, the benefit formula is assumed to remain constant, but annual salary 

increases are reflected based on the rate of inflation, productivity growth, and a factor measuring 

merit and/or seniority. Because SE-PIMS does not model benefit increases that exceed the 

average wage increase of affected employees, benefit improvement restrictions are not applicable 

in PIMS.

• Cash Balance Plans. SE-PIMS assumes that plans will pay the full accrued benefit (the account 

balance) as a lump sum to all retiring and terminating active participants in any plan that is at least 

80 percent funded.

• Plan Accrual Benefit Restrictions. Plans with funded percentages below 60 percent must cease 

benefit accruals. SE-PIMS reflects this rule, and assumes that once a plan is frozen, it will remain 

frozen, even if the percentage increases above 60 percent at some future time.

• Declassification of Credit Balances. When determining funding percentages for triggering 

benefit restrictions, SE-PIMS reduces assets by credit balances. Sponsors have the option of 

declassifying credit balances at any time to raise the funded percentage to the level needed to 

avoid a benefit restriction. For modeling purposes, SE-PIMS assumes that sponsors will choose 

to declassify credit balances to the extent necessary to avoid the benefit freeze restriction (60 

percent threshold), but assumes that traditional plan sponsors will not declassify balances to 

attain the 80 percent threshold. Because cash balance plans are assumed to pay the full accrued 

benefit as a lump sum to departing participants, contingent on sufficient funding, these plans are 

assumed to declassify credit balances to achieve 80 percent funding.

• PBGC Premiums. SE-PIMS models premiums based on the rate under current law with 

projected rates increasing under the fixed increases and indexing provisions in current law. There 

is no allowance in premium projections for write-offs of uncollectable premiums. Premiums are 

assumed paid by the employer.

• Variable-Rate Premiums. PBGC’s experience has been that many companies make plan 

contributions in excess of the minimum, in part to avoid or reduce their variable-rate premium 

payments. Virtually all of these companies have been at a low risk of bankruptcy, and their plans 

have not accounted for a material portion of PBGC’s claims. By contrast, the relatively small 

number of plans that result in claims are sponsored by companies that have not made 

contributions above the required minimum for an extended period prior to the claim. Using the 

general PIMS projection that companies will make the minimum required contributions would 

overstate the estimate of PBGC’s variable rate premium income. Accordingly, for variable-rate 

premium projections only (i.e., not for ongoing funding), the SE-PIMS Model reflects an 

adjustment to plan assets phased in over five years to offset the assumption that plans generally 

contribute at the minimum. The adjustment to assets also reflects increasing tendencies for 
PENSION BENEFIT GUARANTY CORPORATION 56 FY 201 6 | PROJECTIONS REPORT

sponsors to reduce underfunding through extra contributions as variable premium rates increase. 

Variable-rate premiums are further scaled to match recent experience. This report reflects a oneyear delay in the portion of asset increase related to premium rates in order to better match 

PBGC’s actual experience in variable-rate premium collection as premium rates rise.

• PBGC’s Assets. Projected returns are based on analysis of historical returns, return volatilities, 

and correlations between the different asset class returns. At any point at which PBGC’s assets 

are projected to exceed 130% of its projected liabilities, the investment policy is assumed to 

change to 100% fixed income securities.

• Discounting Future Claims. When SE-PIMS discounts future amounts, the discount factor is a 

single interest factor which models the “select” and “ultimate” factors described in the 2016

financial statements with an assumed reversion to the relationship of market interest rate and

annuity pricing factors observed prior to the 2008 financial crisis. Those factors are based on a 

survey of private-sector annuity market prices.

• Determining Discounted Future Present Values Shown in Report Tables. For calculations 

involving discounting future amounts, the discount rate used is the simulated 30-year Treasury 

rate generated for the particular year and economic path.

(For additional information on SE-PIMS and the assumptions used in running the Model, see PBGC’s 

Pension Insurance Data Book 1998, Pages 10-17, which also can be viewed on PBGC’s website at

http://www.pbgc.gov/documents/1998databook.pdf.)

The 2016 version of SE-PIMS recognizes the following changes in assumptions from those used in the 

2015 version of the Model.45F

46

• Mortality Table used to Determine the Amount of Underfunding at Termination: The 

Blended RP-2014 Healthy male mortality table times 1.09, projected to 2031 using the MP-2016 

scale. We updated this table to match the mortality tables used for the FY 2016 Annual Report.

• Mortality Table used to Determine Minimum Funding and Variable Rate Premium 

Requirements: For purposes of determining statutory minimum funding requirements 

beginning in 2018, we modeled updates to the table by changing our assumption to the new 

prescribed table set forth in the IRS proposed rule on December 29, 2016 and projected on a 

static basis each year beyond 2018 using scale MP-2016. We assumed that large collectively 

bargained plans opt to use a substitute mortality table whose rates are assumed to be 9% higher 

than the standard table (5% higher relative to the RP-2000-based table for valuation years prior 

to 2018).

• Mortality Table used to Determine Plan Experience: For purposes of determining plan 

experience, we modeled updates to the table by changing our assumption to the Blended RP2014 annuitant and non-annuitant tables projected to the valuation date using the MP2016 scale.

We updated the anticipated experience for plans to reflect emerging long term mortality 

experience in general, as reported by the Society of Actuaries.

 

46 This list excludes changes that arise merely from changes in economic conditions or from annual updates, for

example changes in interest rates and asset returns, or one additional year of mortality improvement.
PENSION BENEFIT GUARANTY CORPORATION 57 FY 201 6 | PROJECTIONS REPORT

SAMPLE STATISTICS FROM FY 2016 RUNS IN ME-PIMS AND SE-PIMS

The following tables show selected output statistics from runs of ME-PIMS and SE-PIMS for this (2016)

report. These statistics are specific to the Model runs for this report.

__________________________________________Table 1_____________________________________

Arithmetic Means, Standard Deviations and Correlations of Key Financial Market Values FY 2016

Single-Employer and Multiemployer Model Runs 

(across 2017-2026 for 500 economic paths)

Long-Term Treasury

Yield

Return on 30-year 

Treasury Bonds

Stock Market

Return

Mean 3.2% 3.0% 8.8%

Standard Deviation 1.1% 8.5% 20.2%

Correlations:

Long-Term Treasury Yield 1.00 -0.30 -0.01

Return on 30-year Treasury 1.00 0.20

Stock Market Return 1.00

__________________________________________Table 2_____________________________________

Arithmetic Means and Standard Deviations of Market Rates Derived From Projected Long-Term

Treasury Yields in FY 2016 Single-Employer and Multiemployer Model Runs

Long-Term

CorporateRate Inflation Rate

Wage, Salary and Flat Benefit

Growth Rate

Mean 4.3% 2.8% 4.4%

Standard Deviation 1.1% 1.1% 1.1%

________________________Table 3__________________________

Projected Plan Returns46 F

47 

FY 2016 Single-Employer and Multiemployer Model Runs

Arithmetic Mean

Geometric Mean

5.8%

5.3%

Standard Deviation 10.2%

 

47 The geometric rate of return reflects that negative asset returns set plans back more than positive returns help them,

by reducing the base of assets. This is particularly important for plans whose benefit payments exceed contributions.
PENSION BENEFIT GUARANTY CORPORATION 58 FY 201 6 | PROJECTIONS REPORT

_________________________Table 4__________________________

Projected Annual Bankruptcy Probabilities47 F

48 

FY 2016 Single-Employer Model Runs

Arithmetic Mean 0.5%

Standard Deviation 1.3%

__________________________Table 5a________________________

Annual Probability of Plans’ Projected Mass Withdrawal FY 2016

Multiemployer Model Runs 

No Future MPRA Suspensions/Partitions4 8F

49

Arithmetic Mean 0.7%

Standard Deviation 1.8%

__________________________Table 5b________________________

Annual Probability of Plans’ Projected Mass Withdrawal FY 2016

Multiemployer Model Runs 

Assuming MPRA Election Rates49

Arithmetic Mean 0.6%

Standard Deviation 1.7%

__________________________Table 6a________________________

Annual Rate of Plans’ Projected Insolvency FY 2016

Multiemployer Model Runs 

No Future MPRA Suspensions/Partitions49F

50

Arithmetic Mean 0.4%

Standard Deviation 0.2%

 

48 The bankruptcy probability modeling methods and results are more fully described in Boyce, S. and Ippolito, R.A. 

(2002), The Cost of Pension Insurance. Journal of Risk and Insurance, 69: 121–170. doi: 10.1111/1539- 6975.00012.

49 These mass withdrawal probabilities are weighted based on plan weights to provide a better comparison with the 

multiemployer universe. Probabilities shown on the FY 2015 report were “equal weighted” and represented the rates 

only for the sample of plans. For FY 2016 the equivalent “equal weighted” rates for the sample are 1.3% and 

2.8%.assuming no future suspensions or partitions and 1.2% and 2.6%, assuming MPRA election rates. 50 These projected insolvency probabilities are weighted based on plan weights and the standard deviation is 

determined based on variation by simulations to provide a better comparison with the multiemployer universe. 

Probabilities shown on the FY 2015 report were “equal weighted” and the standard deviation is determined based on 
PENSION BENEFIT GUARANTY CORPORATION 59 FY 201 6 | PROJECTIONS REPORT

__________________________Table 6b________________________

Annual Rate of Plans’ Projected Insolvency FY 2016

Multiemployer Model Runs 

Assuming MPRA Election Rates50

Arithmetic Mean 0.4%

Standard Deviation 0.1%

 

variation by projection years. For FY 2016 the equivalent “equal weighted” rates for the sample are 1.3% and 0.7%

assuming no future suspensions or partitions and 1.2% and 0.6%, assuming MPRA election rates.