US pension agency’s deficit widens to E4.8bn
US – The Pension Benefit Guaranty Corp., which backs the US pension system, says the deficit in its single-employer insurance programme has grown to around 5.4 billion dollars (4.8 billion euros) at the midyear – up from 3.6 billion dollars in 2002.
In its 2001 fiscal year, the PBGC had a surplus of 7.7 billion dollars, said the body’s executive director Steven Kandarian. He told a House of Representatives committee: “Our deficit has been caused by the failure of a significant number of large companies with highly underfunded plans.”
He added: “Data now coming in to PBGC confirm that the total underfunding in the single-employer defined benefit system exceeds 300 billion dollars, the largest number ever recorded.”
“In light of these record deficits and staggering amounts of pension underfunding, we are concerned that a number of proposals now under consideration would weaken existing funding rules and grant permanent funding relief,” Kandarian said.
The PBGC was set up in 1974 and protects the pensions of 44 million workers and retirees in more than 32,000 private defined benefit pension plans. It insures pension benefits worth 1.5 trillion dollars.
It receives no federal funding – it is mostly funded by insurance premiums paid by defined benefit pension sponsors.
“There are significantly underfunded plans in a number of industries, including steel, airlines, and the automotive sector. Two of these industries, steel and airlines, have accounted for 73% of the claims against PBGC, yet represent fewer than fiver percent of insured participants.”