Pension Law Helps PBGC Results

A change in federal treatment of airline pension plans boosted the performance of the Pension Benefit Guaranty Corp. in fiscal year 2006.

The PBGC, the federal pension insurance program, is reporting $4.2 billion in net income for the 12-month period that ended Sept. 30 on $3.8 billion in premium revenue and investment revenue, up from $430 million in net income on $5.5 billion in premium revenue and investment revenue for fiscal year 2005.

Premium revenue from the program, which insures the pensions of 34 million Americans, held steady at about $1.5 billion, but a sharp drop in returns on fixed-income investments caused investment income to drop to $2.2 billion in fiscal 2006, from about $4 billion in fiscal 2005, the PBGC says.

Net income increased in spite of the drop in investment income because plan accounting provisions in the new Pension Protection Act shifted some airline pension plans into the “reasonably possible” failure category, from the “probable” failure category. That move added $4.8 billion to the PBGC’s net income, the PBGC says.

Although the number of participants and retirees in PBGC-administered plans held steady at 1.3 million, the amount of benefits paid increased to $4.1 billion, from $3.7 billion.