The Pension Benefit Guaranty Corporation is reporting that its insurance program
for pension plans showed a deficit of $22.8 billion as of September 30, 2005.
As of September 30, the single employer program reported assets of $56.5 billion
and liabilities of $79.2 billion, according to the agency's annual report submitted
Accounting standards also required the PBGC, a government agency that insures
pension plans, to disclose the change in net position that would have occurred
as a result of subsequent events. In addition to on-balance-sheet liabilities,
the report showed that PBGC's exposure to losses from pension plans sponsored
by financially weak employers rose to $108 billion from $96 billion the year
"Unfortunately, the financial health of the PBGC is not improving,"
says Bradley D. Belt, PBGC's executive director. "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."
For the fiscal year, the PBGC incurred $4.0 billion in losses from completed
and probable pension plan terminations while collecting only $1.5 billion in
premiums. The insurance program's finances were helped by $3.9 billion in investment
income and a $2.3 billion reduction in liabilities due to higher interest rates,
leading to an overall net gain of $529 million.
The single-employer program took in 120 terminated pension plans with a total
of $10.5 billion in assets and $21.2 billion in liabilities, for an average
funded ratio of 50 percent. All but $300 million of this liability was already
reflected on the PBGC's balance sheet at the end of fiscal year 2004.
The pension insurance program's exposure to future losses remained high in
2005. Each year the PBGC calculates "reasonably possible" exposure,
an estimate of the amount of unfunded vested benefits in pension plans sponsored
by companies at greater risk of default. The 2005 financial statements show
PBGC's reasonably possible exposure reaching a record $108 billion, up from
$96 billion in 2004 and $82 billion in 2003. The PBGC's estimate of the total
shortfall in insured single-employer plans remained in excess of $450 billion.
The PBGC assumed responsibility for the pension benefits of an additional 235,000
workers and retirees in 2005, bringing the total number owed a benefit to 1.3
million. The amount of benefits paid increased from $3.0 billion in 2004 to
$3.7 billion in 2005 and is projected to rise to $4.4 billion in 2006.
PBGC is a federal corporation created under the Employee Retirement Income
Security Act of 1974. It currently guarantees payment of basic pension benefits
for more than 44 million American workers and retirees participating in more
than 30,300 private-sector defined benefit pension plans. The agency receives
no funds from general tax revenues. Operations are financed largely by insurance
premiums paid by companies that sponsor pension plans and by PBGC's investment