Alexa
  • Directory of Taiwan

Deficit widens slightly for US pension insurer

Deficit widens slightly for US pension insurer

The federal agency that insures the pensions of one in seven Americans has stepped up efforts to keep company pension plans from failing, as the agency reported that its annual deficit increased 4.5 percent to $23 billion.
The Pension Benefit Guaranty Corp. also said it paid $5.6 billion in benefits to participants in company pension plans that failed in fiscal 2010, ending Sept. 30. It noted that 147 pension plans failed, up from 144 a year earlier.
The PBGC's finances have been battered in recent years by the weak economy, which has brought more corporate bankruptcies and resulting failures of pension plans. The agency, which insures the pensions of some 44 million workers, assumes the pension liabilities of some companies in bankruptcy.
The $23 billion deficit compares with a shortfall of $22 billion the previous year. The PBGC said its total obligations increased by $11.5 billion in the latest year to $102.5 billion. On the other hand, the agency has $79.5 billion in assets to pay those obligations.
The situation was helped this year by having 38 companies emerge from bankruptcy proceedings with their pension plans intact. That saved about $4 billion in obligations that otherwise would have had to be paid, the agency said, and preserved benefits for around 250,000 employees and retirees. The companies included Lear Corp., LyondellBasell Industries and Smurfit-Stone Container Corp.
The recent stock market rally helped the PBGC make a 12 percent return on its investments this year, earning $7.8 billion. In addition, it collected $2.3 billion in insurance premiums from the companies whose pension plans it insures. Companies whose pension plans failed in the latest year include St. Vincent Catholic Medical Centers in New York and Hartmarx, the Chicago-based clothier that made Obama's inaugural and election night suits.
The PBGC was created in 1974 as a government insurance program for traditional employer-paid pension plans. Companies pay insurance premiums to the agency, and 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 has been in the red for 30 years in its 36 years of operation. It has plenty of money to operate now. But experts say it eventually will run out of money to pay the pension recipients it supports unless company pension funds adopt less risky investment strategies or Congress raises the insurance premiums companies must pay.