WASHINGTON (AP) — The federal agency that insures
pensions for one in seven Americans ran the largest deficit last year in
its 37-year history.
The Pension Benefit Guaranty Corp. said Tuesday that it ran a $26 billion imbalance for the budget year
that ended Sept. 30.
The agency has been battered by the weak economy, which has brought more bankruptcies and failed pension
plans.
Its
pension obligations rose by $4.5 billion. The PBGC also earned less
money in the stock market, which helps to fund pension plans. Returns
were $3.6 billion, half what it earned the previous year.
Joshua
Gotbaum, the agency director, says taxpayers may have to bail out the
agency "eventually" if Congress doesn’t raise companies’ insurance
premiums. He didn’t give a timeframe.
The agency insures the pensions for nearly 44 million U.S. workers.
The
Obama administration put a proposal before Congress in January to
increase premiums and tailor them to the size of companies and their
level of financial risk. Bigger companies and those at greater risk of
failing would pay larger premiums under the plan. Congress hasn’t acted
on it.
The fees haven’t been raised in five years.
Some
experts have said the agency eventually will run out of money to pay
pension claims unless company pension funds adopt less risky investment
strategies or Congress raises the insurance premiums.
But a group
representing businesses disputed Tuesday the PBGC’s figure of a $26
billion deficit, saying it is exaggerated because the agency’s
accounting is flawed. The figure makes the situation appear worse than
it is and is being used by the PBGC "to justify an enormous premium
increase," the American Benefits Council said in a statement.
The
agency doesn’t expect to run out of money in the next 10 years for the
majority of pension plans it has taken over. But its funding for
multi-employer pension plans has a 6 percent chance of running out by
2020 and nearly a 30 percent chance of insolvency by 2030, according to
the agency’s projections.
Multi-employer plans are pension agreements between labor unions and a group of companies, usually in the
same industry.
For
the budget year that just ended, the agency had $107 billion in pension
obligations and only $81 billion in assets to cover them. That added up
to the $26 billion shortfall.
Companies whose pension plans
failed in the latest year include Alabama Aircraft Industries Inc.,
Wolverine Tube Inc., mail order firm Harry & David and Johnson
Memorial Hospital in Stafford Springs, Conn.
In budget year 2010, the agency ran a $23 billion deficit.
The
PBGC was created in 1974 as a government insurance program for
traditional employer-paid pension plans. Companies pay insurance
premiums to the agency. If an employer can no longer support its pension
plan, the agency takes over the assets and liabilities, and pays
promised benefits to retirees up to certain limits.
The agency
backs defined-benefit plans, which are most prevalent in auto
manufacturing, steel, airlines and other industries. It has been in the
red for 30 of its 37 years of operation. It did have surpluses in some
years in the late 1990s and early 2000s, when fewer companies failed.
Copyright 2011 The Associated Press.