PBGC Shows Statistics on Annuity Purchase and Deficient Pension Payouts

Written by Hersh Stern Updated Thursday, November 16, 2023

The PBGC, in response to a Senate Committee on Aging request, provided a summary of statistics on audit results of terminated plans. (Pension Plans: Standard Termination Audit Findings, PBGC, 6/16/97) The PBGC's most recent audit estimates that about 8% of about 290,000 plan participants in 6,000 fully funded plans that were ended between January 1994 and December 1995 did not receive their full benefit when they accepted lump sums.

The audit sampled 374 fully funded terminated plans covering 2,800 participants and found that 13.7%, or 382 participants, were underpaid. This raw, unadjusted data was then extrapolated to determine that 8% of lump sums were underpaid to participants in fully funded terminated plans during the audit cycle.

Testimonial Image
We wanted to establish a bit of extra income. There was a good recommendation about ImmediateAnnuities.com on CNN. We also liked that we could see excellent reviews about them on Google. They were very thorough from our first inquiry to when we decided to buy our annuity from Mass Mutual. They always answered our questions promptly and followed up with the insurance company, too. We have been receiving our monthly payments since last November and couldn’t be happier. What more can we say?
Keith and Samantha Isley
Read 650+ verified reviews

The sample audit concentrated primarily on small terminated pension plans where most errors in calculating lump sums occur. The PBGC said that 70% of its sample were plans with fewer than 250 participants. Because the errors have been detected primarily in small plans, extrapolating the data to all pension plans is not appropriate since a small percentage of participants are in small plans, the PBGC said. The error rate among large fully funded pension plans is quite small, according to the PBGC.

The PBGC found that miscalculations are due primarily to the use of the wrong interest rate in determining the lump sum amounts. Within certain legal constraints, plans generally use the PBGC interest rate or the 30-year Treasury rate.

When the PBGC finds errors in benefits payments on audit, it requires companies to correct the payments. If necessary, the PBGC will pursue court action.

We'd love to hear from you!

Please post your comment or question. It's completely safe – we never publish your email address.

Add a new comment: (Allowed tags: <b><i>)

Comments (0)

There are no comments yet. Do you have any questions?