The Pension Benefit Guaranty Corporation (PBGC) is a federal corporation established under Title IV of the Employee Retirement Income Security Act of 1974 (ERISA, P.L. 93-406 ). The PBGC insures private pension beneficiaries against the complete loss of accrued benefits if their defined benefit pension plan is terminated without adequate funding. The PBGC receives no appropriations from general revenue. Its operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income from the assets in its trust fund, and recoveries from the companies formerly responsible for the trusteed plans. There are two kinds of pension plans: "defined benefit" plans and "defined contribution" plans. A participant in a defined benefit plan receives a fixed benefit at retirement prescribed by a formula set forth in the plan, usually based on pay, years of service, or both. The employer makes contributions to the plan based on actuarial calculations designed to ensure that the plan has sufficient funds to pay the future benefit prescribed by the formula. Under a defined contribution plan, no particular benefit is promised. Instead, benefits are based on the balance of an individual account maintained for the benefit of the employee. The benefit received by a participant at retirement is generally dependent on two factors: total contributions made to the plan during the worker's participation in the plan and the investment experience of the amounts contributed on the employee's behalf. Under either type of pension plan, employees may be permitted to make contributions. The PBGC insures qualified defined benefit pensions provided by employers in the private sector. A plan is qualified if it meets the requirements of the Internal Revenue Code and ERISA and is thus eligible for favorable tax treatment. Defined contribution plans and nonqualified defined benefit plans are not insured by the PBGC. In a defined benefit plan, the employer bears the risk of investment losses. The Internal Revenue Code and ERISA contain minimum funding standards that require the employer to make contributions to a defined benefit plan to fund promised benefits. If, for example, the plan experiences poor investment performance or actuarial miscalculations, the employer will be required to make additional contributions to the plan. The minimum funding rules provide for funding over a period of time and do not require the plan to have sufficient assets to pay all the benefits earned under the plan at any particular time. It is possible for a defined benefit plan to terminate without having sufficient assets to pay promised benefits. The PBGC insures defined benefit plan benefits up to certain limits to protect plan participants in the event of such a termination. However, the PBGC may not protect all benefits promised under a plan. Consequently, if a defined benefit plan is terminated while it is not fully funded, the participants might receive less from the PBGC than they were promised under the plan. The PBGC currently insures the pension benefits of 44 million workers and retirees participating in more than 30,000 private-sector defined benefit pension plans. In FY2007, the PBGC paid about $4.3 billion in benefits to almost 1.3 million individuals whose pension plans had failed. The PBGC insures both single-employer and multiemployer pension plans. The PBGC's single-employer program guarantees payment of basic pension benefits when an underfunded plan terminates. When an underfunded pension plan sponsored by a financially distressed company is terminated, the PBGC takes over the plan assets and assumes responsibility for paying retirement benefits to the plan's participants, subject to the statutory benefit limits. In 2007, the PBGC's single-employer program insured the pensions of 33.8 million workers and retirees in about 28,900 plans. The program is directly responsible for the benefits of about 1.2 million workers and retirees in almost 3,800 trusteed pension plans. The PBGC insurance program for single-employer plans reported a deficit of $13.11 billion in FY2007, based on assets of $67.24 billion and liabilities of $80.35 billion. The deficit for 2007 was $5 billion less than the $18.1 billion deficit reported one year earlier. The PBGC reported that the decline in the deficit was due primarily to investment income of $4.7 billion and a $2.8 billion actuarial credit as a result of higher valuation interest factors. Through the end of FY2006, the PBGC's single-employer program had incurred net claims of $29.0 billion (see Table 1 .) Of this amount, nine of the ten largest claims against the PBGC, totaling $19.8 billion, occurred between 2001 and 2005. The PBGC's net claims equal the portion of guaranteed benefit liabilities not covered by plan assets or recovered from the general assets of the employer. These claims will eventually have to be covered through premiums, earnings on PBGC assets, or other sources of revenue. Multiemployer plans are collectively bargained plans to which more than one company makes contributions. The PBGC's multiemployer program provides financial assistance through loans to insolvent plans to enable them to pay benefits. The PBGC does not become the trustee of insolvent multiemployer plans. These loans (which are typically not repaid) generally continue year after year until the plan no longer needs assistance or has paid all promised benefits at the guaranteed level. In 2007, the PBGC's multiemployer program insured the pensions of 9.9 million workers and retirees in about 1,530 plans. The multiemployer program reported a net deficit of $955 million, a $216 million net deterioration from the end of the previous year. The loss for the year was due largely to PBGC's booking of additional probable losses from expected future financial assistance to troubled plans. The program had assets of $1.2 billion and liabilities totaling about $2.2 billion. There is a statutory ceiling on the benefits that are insured by the PBGC. A different benefit limit applies to each program. For plans that terminate in 2008, the annual limit for the single-employer program is $51,750 for a single life annuity payable at age 65. The guarantee for the multiemployer program is much lower. In 2008, for an individual with 30 years of service, the annual guaranteed limit is $12,870. The annual benefit limits are indexed each year to the average annual increase in wages in jobs covered by Social Security. Because the benefit limit is higher than the pensions earned by most participants in insured plans, most workers in single-employer plans taken over by PBGC receive the full benefit earned at the time of termination. However, the lower guarantee limit for the multiemployer program has left most of the retirees in insolvent plans without their full benefits. The PBGC currently has a $14.1 billion deficit in assets necessary to satisfy all claims made through 2007. The Government Accountability Office (GAO) has identified PBGC's single-employer program as "high-risk," stating that "the program remains exposed to the threat of terminations of large underfunded plans in weak industries and of sponsors voluntarily terminating or freezing their [defined benefit] plans." In 2007, the PBGC's estimated potential exposure to future claims was approximately $66 billion, down from $73 billion in 2006. Not all underfunded pension plans are likely to present claims to the PBGC. The estimate of $66 billion represents underfunding of plan sponsors whose credit ratings are below investment grade or meet one or more financial distress criteria. It is not an estimate of likely claims against the PBGC. The PBGC's liabilities are not explicitly backed by the full faith and credit of the federal government. However, should the agency become financially insolvent, the GAO has noted that "Congress could face enormous pressure to bail out the PBGC at taxpayer expense." The PBGC receives no appropriations from general revenues. Instead, by law the agency's operations are financed from four sources: insurance premiums paid by the sponsors of covered private defined benefit pension plans, assets from terminated plans taken over by the PBGC, investment income, and recoveries from sponsors of terminated pension plans in bankruptcy proceedings. In addition, the PBGC has the authority to borrow up to $100 million from the U.S. Treasury. Unlike insurers in the private sector, the PBGC cannot set the premiums for the insurance it provides. Plan sponsors are required by law to purchase insurance from the PBGC, and the insurance premiums are set by Congress. Historically, premiums have been the most reliable source of PBGC revenue. The agency received $1.557 billion in premium revenue in 2007. An employer that maintains a single-employer defined benefit pension plan must pay an annual premium for each participant in the plan. The PBGC's single-employer premium income was $1.48 billion in FY2007. Initially set at $1 per participant by ERISA in 1974, Congress has raised the premium periodically since then. The Omnibus Budget Reconciliation Act of 1987 ( P.L. 100-203 ) imposed an additional variable rate premium on underfunded plans. The variable rate premium was initially set at $6 for each $1,000 of the plan's unfunded vested benefits, up to a maximum of $34 per participant. The Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ) increased the basic per capita premium to $19, and the variable rate premium to $9 for each $1,000 of the plan's unfunded vested benefits, up to a maximum of $53 per participant. Beginning in 1991, the maximum variable rate premium was $72 per participant. The Retirement Protection Act of 1994 ( P.L. 103-465 ) left the per capita premium at $19 per participant. However, the cap on the variable rate premium was phased out over a three-year period beginning in 1994. The Deficit Reduction Act of 2005 (DRA, P.L.