Pension Agency Reports $22.8B Shortfall

WASHINGTON (AP) -- The federal agency that insures the private pensions of 44 million workers said Tuesday that its deficit was $22.8 billion in 2005, as big airlines in bankruptcy dumped their pension liabilities.

The Pension Benefit Guaranty Corp. disclosed in its annual financial report that as of Sept. 30, it had $56.5 billion in assets to cover $79.2 billion in pension liabilities.

There has been an explosion in recent years in the number of big, ailing companies -- especially in labor-heavy industries like airlines and steel -- transferring their pension liabilities to the PBGC. With billions of dollars flying out of the agency's door, concern has been mounting in Congress and elsewhere over its financial footing.

"Unfortunately, the financial health of the PBGC is not improving," the agency's executive director, Bradley D. Belt, said in a statement. "The money available to pay benefits is eventually going to run out unless Congress enacts comprehensive pension reform to get plans better funded and provide the insurance program with additional resources."

The PBGC's $22.8 billion deficit for fiscal 2005 takes into account both the pension liabilities the agency has assumed and those it expects to take over in the future. It is slightly narrowed from the $23.3 billion shortfall it reported a year ago, which was a record. If events such as companies terminating their pension plans that occurred after the end of the fiscal year on Sept. 30 had been counted, the 2005 deficit would have been $25.7 billion, the agency said.

Without a legislative overhaul of the private pension system, the PBGC eventually will run out of money to pay the pension claims of the retirees of companies whose plans it has assumed, some experts predict. That would mean that people retiring from financially troubled companies would have nowhere else to turn for their promised pension payments -- raising the possibility of a taxpayer bailout.

Traditional employer-paid pension plans, giving retirees a fixed monthly amount based on salary and years of employment, are now estimated to be underfunded by as much as $450 billion. That could jeopardize the retirement security of millions of Americans, lawmakers have warned.

Tuesday's disclosure by the PBGC "serves as yet another troubling reminder that Congress needs to act on comprehensive reforms to our nation's traditional pension system this year," said Rep. John Boehner, R-Ohio, chairman of the House Committee on Education and the Workforce. "I'm committed to completing work on comprehensive reform to protect workers, retirees and taxpayers."

United Airlines and US Airways used bankruptcy earlier this year, with judges' blessings, to slash costs by dumping their employee pension liabilities -- a combined $9.6 billion -- onto the PBGC.

Delta Airlines and Northwest Airlines, which both filed for Chapter 11 bankruptcy protection on Sept. 14, may seek to do the same. The pension plans of Delta and Northwest, the nation's No. 3 and No. 4 airlines, are underfunded by an estimated $16.3 billion.

And there is speculation that auto parts maker Delphi Corp., which filed for protection from creditors last month, also could terminate its pension plan and transfer liability to the federal agency.

For months, lawmakers have been grappling with an overhaul of the rules governing company pension plans to tighten controls over employers with underfunded plans and shore up the PBGC's finances. Legislation cleared a key House committee last Wednesday, advancing what could be the most important retirement issue Congress will address this year as Social Security's overhaul has faded into the background.

Democrats generally oppose it. They say it could lead some employers to drop their pension plans or switch from traditional so-called defined-benefit plans to less expensive defined-contribution programs, such as 401(k) plans -- in which employers contribute to a retirement fund and workers receive only what the investments have earned.

Many companies are replacing defined-benefit pension plans with defined-contribution plans. The PBGC only backs defined-benefit plans, which are most prevalent in older industries such as automobile manufacturing, steel and airlines -- now reeling from record fuel costs, historically low fares and cutthroat competition.

The agency was created in 1974 as a government insurance program for traditional employer-paid pension plans. Companies pay insurance premiums to the agency, and if an employer can no longer support its pension plan, the agency takes over the assets and liabilities and pays promised benefits to retirees up to certain limits.

Some employees do not receive their full pension benefits when the PBGC takes over a plan. The maximum annual benefit for plans assumed by the agency this year is $45,614 for workers who wait until 65 to retire.

Putting aside the question if an average worker can predict the future or be an expert on economy, are you suggesting that the employers KNOWINGLY made false promises?

The unions strong-armed them into making promises that were dubious but which would push the problem way out into the future. It was a short-term win for both the unions and the companies but an obvious long-term disaster to anyone with economic sense -- an easy win for both the union bosses and the companies, but a loser for future employees. Neither the unions nor the companies can complain about this situation, as they were both party to creating it. As for the individual employees, if you lie with dogs you may get fleas. This is no different than politicians promising "free" entitlements.

So you answer is yes? (that the employers KNOWINGLY made false promises)

Plausible deniability because no one can predict the future, though both the unions and company could have predicted this as the likely outcome. This is almost exactly like Social Security, writ small. There were no innocents in the crafting of this deal on any side of the table. If the companies are criminal, then so were the unions.

This is almost exactly like Social Security, writ small. There were no innocents in the crafting of this deal on any side of the table. If the companies are criminal, then so were the unions.

I see. So the private pension plans, accounts and investments will be gone too?

"The Pension Benefit Guaranty Corp. disclosed in its annual financial report that as of Sept. 30, it had $56.5 billion in assets to cover $79.2 billion in pension liabilities. "

I worked on one of the plans now under PBGC control. Back then, the plan could not determine how many participants it had to the nearest thousand. If they can't do that, it's kind of difficult to calculate the liabilities.

Yet, is the operative word. The Rat's like Jesse Jackson have already proposed a " one time" 20% tax on retirement accounts. I'm sure they have lots of other creative ideas to steal the money. All of course in the name of "fairness".

That's what I thought. Since these people did not put any of their own money in, the reason for any government involvement is nonexistent. Shame on them if they chose not to invest in IRA's or 401k's. Even if it were their own money (like in an IRA or 401k), if folks choose to invest it poorly, the government also has no reason to be involved.

I don't mean to sound harsh, but the purpose of social security is to prevent folks from being pushed out into the streets. I'm not crazy about SS, but at least I can agree that no one too old to work should be out on the street. But I don't see any reason why the government owes seniors a middle class or better existence.

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