CBO%3A Private Pension Insurance Would Cost More

Over the next 10 years, the researchers predict, the PBGC probably faces about $63 billion in pension plan failure risk. The researchers estimate that a private insurer would charge $123.50 per participant per year along with $58.50 per $1,000 of vested, unfunded benefits.

A private insurer would charge much more than the PBGC because of the risk that an unusually large number of insured pension plan failures might occur during a year when the stock market was down and the value of PBGC investments was down, the CBO researchers write.

Between 2004 and 2014, cumulative claims “are expected to be about $49 billion, but there is more than a 40% chance that claims will amount to no more than $15 billion and a 10% chance that claims over the period will total more than $120 billion,” the CBO researchers write.

The researchers suggest that several proposed solutions for the PBGC’s woes, such as increasing the basic cost per plan member to $30, would cut projected PBGC claims costs by less than 10%.

But the CBO researchers say one simple strategy == limiting plan holdings of stock to 30% of plan assets == could cut projected claims costs by about $9.9 billion.

The PBGC itself is moving to reallocate its own portfolio to cut the percentage of assets invested in stock to between 15% and 25% of the total, the researchers write.