The Pension Benefit Guaranty Corp., a government agency that provides insurance for corporate pension funds, recently reported to Congress that its deficit has tripled in the last 6 months to $33.5 billion as it takes on payment responsibilities for underfunded pension plans of companies going bankrupt in the current economic crisis.
Acting director, Vince Snowbarger, commented: “Long term there is going to have to be some resolution of that deficit. I think at some point in time it’s going to require congressional attention.”
“How soon depends on what happens in the next several years,” he added.
Well, according to the PBGC’s own estimates, pension underfunding in the auto sector alone is $77 billion, so it looks to us like that ‘congressional attention’ may be required sooner rather than later.
A flurry of pension plans that have either been terminated or probably will end up being taken over by the PBGC is the largest reason for the agency’s rising deficit. Declining interest rates was listed as the second-largest reason for the shortfall. Investment losses from the stock market were only the third contributing factor.
“Despite ongoing deficits, the PBGC has sufficient funds to meet its benefit obligations for many years because benefits are paid monthly — spread over the lifetimes of participants and beneficiaries, not as lump sums,” Snowbarger said.
