Huge Turnaround Swings PBGC Multiemployer Program into the Black

The Pension Benefit Guaranty Corporation (PBGC)’s Multiemployer Insurance Program swung to a positive net position of $481 million for the fiscal year ending Sept. 30 from a deficit of $63.7 billion at the same time last year, according to the agency’s annual report.

The multiemployer program, which just a year ago was projected to run out of money by 2026, is now expected to remain solvent for more than 30 years, which PBGC attributed to the enactment of the American Rescue Plan Act (ARPA) of 2021. Meanwhile, the agency said it single-employer program remains financially healthy and has a positive net position of $30.9 billion as of the end of the fiscal year—nearly double the $15.5 billion it reported at the end of fiscal year 2020.

The multiemployer program covers defined benefit (DB) pension plans that are created through one or more collective bargaining agreements between employers that are usually in the same or related industries, and one or more employee organizations or unions. PBGC provides financial assistance to insolvent plans to allow them to pay guaranteed benefits and reasonable administrative expenses.

“For the first time in 20 years, PBGC’s insurance programs are both reporting positive net financial positions,” PBGC Director Gordon Hartogensis said in a statement. “The solvency of PBGC’s multiemployer insurance program—which was facing a near-term crisis—has been extended by decades into the future.”

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PBGC said the sharp improvement in net position was the result of a significant reduction in program liabilities due to the “unbooking” of the liability for plans that were expected to fail and seek assistance from the PBGC over the next decade. According to the annual report, PBGC provided $230 million in financial assistance to 109 multiemployer plans in fiscal year 2021, compared with the payment of $173 million to 95 plans in fiscal year 2020.

The agency also said that as a result of the enactment of ARPA, the number of participants relying on traditional financial assistance under Section 4261 of the Employee Retirement Income Security Act (ERISA) will decrease to approximately 53,000 participants receiving guaranteed benefits from just under 81,000.

Additionally, PBGC estimates that the special financial assistance (SFA) program created by ARPA will provide funding to more than 250 severely underfunded pension plans covering more than 3 million workers, retirees, and beneficiaries.

Multiemployer Pensions Reach Highest Funding Levels in 13 Years

Outlook Improves for Multiemployer Reform in 2021, 2022

Tags: American Rescue Plan Act of 2021, Annual Report, ARP, Gordon Hartogensis, Multiemployer Insurance Program, PBGC, Pension Benefit Guaranty Corporation, Single-Employer Program

Nothing ventured, nothing … There have been historic gains in venture capital (VC) this year. And we still have over a month to go.

This year is on track for a record in venture capital fund raising. VC investment, over this year’s first nine months, has eclipsed the record of $166.4 billion set in all of 2020 by more than 43%, according to accounting and consulting firm EisnerAmper.

Venture capital exit value (where the companies the firms have invested in go public or get sold privately) in this year’s third quarter alone was greater than the full-year exit values in every year during the past decade, except for 2019 and 2020, EisnerAmper reported.

The VC valuation expansions, analysts say, are propelled by a rise in valuations owing to institutional and other large investors shifting out of once-hot hedge funds into another alternative asset that, let’s face it, isn’t very liquid.

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Another factor is that public pensions funds have more money to play with, per Pew Charitable Trusts. That’s the result of an increase in assets of more than $500 billion in state retirement plans, thanks to investment returns of 25% and up in fiscal 2021 (ending June 30) and sizable increases in pension contributions from taxpayers and public employees. VC, along with its cousin private equity, are the best-performing alts.

When Lemonade, a mobile-based insurance startup, went public in July 2020, at $29 a share, it shot up to almost $150. While the stock has since backed off that high, it still is up 66% post-debut. Original venture investors were Silicon Valley stalwart Sequoia Capital and Israel-based Aleph. Today, Lemonade is trading at 45 times trailing 12 months revenues, said Don Butler, managing director at investing firm Thomvest Ventures.

Pitchbook research found that cryptocurrency/blockchain had the largest valuation boost thus far in 2021. Take Open Sea, a marketplace for digital assets, which was valued at $1.5 billion in its latest venture fund-raising round in July, led by VC firm Andreessen Horowitz. Pitchbook said this was more than 19 times the value the company reached after its previous VC influx.

Other notable valuation jumps in that sector—which promises to transform the internet—were CoinList, Element Finance, and MobileCoin, each climbing more than 10 times their previous levels.

Cybersecurity has been another hot area, what with a host of cyberattacks bedeviling the world. Big valuations hops were seen with Horizon3.ai and Lacework. Their values rose by more than 10 and 15 times, respectively.

Another strong segment that VC investors have favored is digital health care, Pitchbook noted. Reify Health, which focuses on decentralized clinical trials, rose 12.4 times its original value. And the weight loss management app Noom’s value expanded almost 11 times to $4.24 billion.