U.S. Pension Agency Deemed 'High Risk'; Record $3.6b shortfall last year after burning $7.7b surplus

Associated Press ^ | 07-24-03

[Brian S]

WASHINGTON — Congressional investigators designated the government's pension-insurance program "high risk," adding it yesterday to a list of troubled agencies and services that need urgent attention.

The Pension Benefit Guaranty Corp. (PBGC), which pays a portion of retirement benefits promised to workers enrolled in bankrupt plans, posted a record $3.6 billion shortfall last year after burning through its entire $7.7 billion surplus. As of March 31, the unaudited shortfall had grown to $5.4 billion.

PBGC has "a significant accumulated deficit and faces additional potential losses," said David Walker, U.S. comptroller general and head of the General Accounting Office (GAO), the investigative arm of Congress.

The agency's financial troubles stem from an increase in the number of large, failing plans it has taken over from struggling private employers. The shortfalls have been concentrated in the airlines, steel and manufacturing industries.

The high-risk designation means the agency will receive increased attention from congressional investigators, and progress will be assessed in reports every two years.

"Although the system can meet its obligations in the near term, it is clear that comprehensive reform of our pension-funding rules is needed to strengthen the financial health of the defined benefit-pension system that millions of American workers rely upon," said Labor Secretary Elaine Chao, chairwoman of PBGC's board.

The Bush administration has proposed changing the measure used to calculate pension liabilities. In essence, a new measurement would reduce companies' obligations to the retirement plans because the plans would appear financially stronger.

The House is considering legislation that would make a similar change and would raise the age at which retirees must start withdrawing funds, from 70-<133>1/2 to 75.

Low interest rates, the sluggish economy, stock-market losses and an increase in retirees have hurt the private pension system. Fewer employers are choosing to offer such plans, which promise a monthly benefit to their workers who are not required to contribute.

More than half the 32,000 pension plans offered by single private employers are estimated to be underfunded, PBGC's executive director told Congress in April.

House Education and Workforce Committee Chairman John Boehner, R-Ohio, announced plans for a hearing to examine the financial health of the agency when Congress returns from an August recess.

"Providing greater pension security for workers means we must ensure that the Pension Benefit Guaranty Corporation is on sound financial footing, and the GAO's designation is cause for further concern," Boehner said. "We have to ensure both the financial integrity of America's defined benefit plans and the PBGC itself."

The PBGC is funded by premiums paid by companies that sponsor pension plans and receives no tax revenue.

[lelio]

posted a record $3.6 billion shortfall last year after burning through its entire $7.7 billion surplus.

How much of that $11.3B (yikes!) swing was due to paying out on bankrupt pension plans and how much of it was due to market fluctuations? Or does the PBGC not invest in the stock market?

And is there a breakdown of who they are paying money out to?

[Brian S]

Here's their website. The reports are in PDF format. Pension Benefit Guaranty Corp.

Have at it and good luck! :)