PBGC's $62B Surplus Resets the Actuarial Case for Premium Reform

The PBGC single-employer program closed FY2025 with a $62.2 billion surplus, $152.3 billion of assets against $90 billion of liabilities. Total underfunding across all 22,000 insured single-employer plans is roughly $85 billion, most of it sitting with sponsors who will fund it themselves. The reserve already covers about 73% of the entire system's shortfall, and current premium rates project it past $100 billion within a decade.

Key Takeaways

• $62.2 billion of surplus against $85 billion of total system underfunding. PBGC becomes responsible only for the fraction whose sponsors become distressed, so the reserve covers far more than its realistic maximum exposure.
• A 169% funded ratio on its own insurance liabilities, with the Projections Report showing the surplus positive in every modeled scenario across the 10-year horizon, including combined market-downturn and high-claims stress tests.
• The flat rate has compounded at roughly 8.5% a year since 2012, from $35 to $111, set by deficit-reduction pay-fors rather than by any reserve requirement.
• $222,000 a year in flat-rate premiums alone for a 2,000-participant plan, before variable-rate charges, valuation fees, trustee costs and investment management.
• The multiemployer program closed FY2025 at a $2.6 billion positive net position from a $65.2 billion deficit in FY2020, recapitalized by appropriations rather than by single-employer premium income.

A Reserve Larger Than the Risk It Insures

Single-employer plans pay three premiums under ERISA Section 4006. The flat rate, charged per covered participant regardless of funded status, reached $111 for 2026 plan years. The variable rate, which does scale with underfunding, charges $52 per $1,000 of unfunded vested benefits with a per-participant cap of $751 and is frozen at $52 under Section 349 of the SECURE 2.0 Act. The distress termination premium of $1,250 per participant for three years applies only when a troubled sponsor cannot support a standard termination.

Plan Year	Flat Rate (per participant)	Variable Rate (per $1,000 UVB)
2012	$35	$9
2015	$57	$24
2018	$74	$38
2020	$83	$45
2022	$88	$48
2024	$101	$52
2025	$106	$52
2026	$111	$52

The escalation did not come from a reserve calculation. The Multiemployer Pension Reform Act of 2014 and the Bipartisan Budget Acts of 2013 and 2015 each used premium increases as pay-for mechanisms, treating premium income as federal revenue offsetting other spending, and the indexing provisions locked the compounding in.

The Congressional Research Service put the 10-year average projected position at roughly $71.6 billion by FY2033 on a baseline scenario, up from the $54 billion level at publication. The $62.2 billion already reached in FY2025 made that projection look conservative within two years of it being written.

Against that, the outflow is stable. PBGC pays $6.4 billion a year to nearly 926,000 retirees in trusteed plans while insuring 18.4 million workers and retirees across roughly 22,000 active single-employer plans, and premium income plus investment returns have consistently outrun it.

The reserve-adequacy test has to start from a realistic loss estimate rather than the face value of every underfunded plan. Of the roughly $85 billion of system underfunding, the majority sits with ongoing sponsors able to fund the shortfall over time. "The single-employer program's growing surplus due to the current, legally mandated SE premium structure, continues to be far out of proportion to the SE system's risk," said Bruce Cadenhead, American Academy of Actuaries Vice President of Retirement.

The Premium Level Selects Against the Pool

A premium set by budget arithmetic still has actuarial consequences, and they run through who stays in the pool.

At $111 per participant, a 2,000-participant frozen plan pays $222,000 in flat-rate premiums before variable-rate charges, valuation fees, trustee costs, PBGC filing costs and investment management. That is a de-risking accelerant, and the exit is visible in transfer volume: full-year 2025 pension risk transfer sales reached roughly $49 billion, the third-strongest year on record after $51.8 billion in 2024.

Only funded plans can execute a buyout at competitive pricing. A plan at 80% funded status cannot purchase annuities at 101% of accounting liability. So the plans leaving through pension risk transfer are disproportionately the well-funded ones, pulled out by premium economics that make termination cheaper than continuation, and the plans remaining are disproportionately those that cannot afford to leave.

That is an adverse selection spiral with a political feedback loop attached. Elevated premiums push the healthiest risks out, the residual pool concentrates in higher-risk exposures, and the deteriorating pool profile then reinforces the argument for keeping premiums high. It runs directly against PBGC's statutory objective of encouraging the continuation of defined-benefit plans, and the Academy named high premiums as a factor discouraging employers from continuing to offer benefits through them.

The threshold moves every year. Premium drag alone now justifies transfer for plans above roughly 105% funded before any credit for favorable buyout pricing, and each indexed increase lowers where that line sits.

The Justification Expired and the Obstacle Did Not

For years the elevated single-employer premium carried an implicit defense: PBGC needed a strong overall position while the multiemployer program ran deep deficits. It was never legally sound, since ERISA prohibits funds moving between the programs, but it was politically coherent. It no longer holds on its own facts.

The multiemployer program closed FY2025 at a $2.6 billion positive net position, $4.9 billion of assets against $2.3 billion of liabilities, from a deficit of roughly $65.2 billion at the end of FY2020 and projected insolvency around 2026. The rescue came from direct appropriations under the American Rescue Plan Act of 2021: the Special Financial Assistance program had approved $77.9 billion for 161 plans covering 1.8 million participants by May 2026. The program is now projected solvent beyond 2063 in most scenarios, at essentially zero cost to single-employer sponsors.

What remains is the constraint that created the premium level in the first place. PBGC premium income is recorded as federal revenue under Congressional budget rules, so reducing premiums scores as a revenue loss requiring an offsetting increase or spending cut. Congress raised these premiums precisely because they scored as revenue, and reversing the direction carries a formal scoring cost the budget committees have to absorb. The Academy identified reforming the budget treatment as a prerequisite for structural premium reform rather than one option among several.

That is why the arithmetic and the outcome have separated. The reserve test is not close, the projections are not close, and the cross-subsidy defense has been retired by an appropriation. None of that changes the scoring rule, and no major premium legislation is moving in the current session.