Last year, a succession of corporate bankruptcies helped wipe out a $8 billion surplus at the federal agency that insures the pensions of 44 million Americans, the New York Times reports.
The Pension Benefit Guaranty Corporation is expected to disclose a deficit of $1 billion to $2 billion, according to the Times. Founded in 1974, the PBGC takes over insolvent pension plans, providing payments to retirees when the companies are unable to do so. In 2002, the agency took over three steel companies’ pension plans, each estimated at over a billion dollars.
The program’s strength might deteriorate further as more bankrupt companies are unable to fulfill their obligations to retirees, the Times reports. The agency is funded entirely by companies.
The agency is weighing its options to ensure the viability of the insurance program. Some have suggested raising the premiums that businesses pay to insure the pensions of their employees. Another idea being discussed is to require firms to fund their pension plans more fully. The agency is also considering the option of making the firms with the weakest pension funds pay the most in premiums, according to the Times.
“The well-funded employers don’t want to pay a lot of money to bail out the employers whose pension plans have fallen,” says Judith F. Mazo, a member of the agency’s advisory committee.
In any case, a new rule would require an act by Congress and would face opposition from the business community, according to the Times.
The agency says it has enough funds to make its current payments. The agency also takes in about $800 million each year from companies paying premiums.
The Times notes that, at the end of 2002, the gap between what corporations promised to pay in pensions and the money they have set aside to do so was estimated to be $300 billion.
