Pension Agency Reports A Doubling Of Its Deficit In FY04
The government pension insurer today said its deficit has more than doubled to $23.3 billion, prompting renewed calls for pension overhaul. The Pension Benefit Guaranty Corp. said its fiscal year-end deficit grew from $11.2 billion a year ago. The PBGC insures traditional defined-benefit pension plans, and when.a company terminates its pension plan, the PBGC steps in and pays the company's retiree benefits. The agency said it has enough assets to pay its promised benefits "for a number of years" but it urged Congress to act. "It is imperative that Congress act expeditiously so that the problem doesn't spiral out of control," PBGC Executive Director Bradley Belt said. "The administration proposed an initial set of pension reforms last year, and today's report highlights the need for comprehensive reforms that ensure pension plans are better funded." Lawmakers are examining changes to the rules governing how companies fund their pension plans.
The deepening deficit stems from an increased number of pensions the agency must cover. Although the PBGC does not publicly disclose the assumptions used to project deficits, Hill staffers said they think the higher number includes bankrupt companies such as United Airlines, which plans to terminate its pension plans. Other airlines might follow suit. The PBGC said $14.7 billion of the loss was from completed and probable pension plan terminations
House Education and the Workforce Chairman Boehner, who is readying a pension bill, called the new estimates staggering. "The alarming trend of underfunded defined benefit plans, made worse by the troubles in the airline industry, is clearly increasing the pressure on the PBGC, threatening its ability to protect worker pension benefits and putting taxpayers' interests in real jeopardy," Bohener said. He added that he is "making progress" on the bill, which he plans to introduce early next year. The PBGC is now paying the benefits for more than 1 million people and the amount of benefits exceeded $3 billion.
-- by Emily Heil