The longer-term solvency of the U.S. Pension Benefit Guaranty Corporation (PBGC) is at risk, says director Bradley Belt. He warned last week of a significantly increased deficit for the 2003-04 fiscal year, which ended on 30 September. The 2003 deficit was a record $11.2 billion. “The longer-term solvency of the pension insurance program … is at risk,” Belt told a Senate Commerce Committee hearing.
The pension insurance agency slipped into deficit in 2002 after having to bail out failed pension plans in the steel industry. Since then, it has had to absorb troubled airlines such as US Airways, which suspended pension payments after saddling the PBGC with $2.2 billion in liabilities from its previous bankruptcy that ended in 2003.United Airlines is also terminating its pension plans.
The PBGC is currently paying monthly benefits to nearly half a million people. Belt says it has a $31 billion in exposure to struggling airlines alone, but alluded to problems in all industries. Belt’s predecessor at the PBGC, Steven Kandarian, had issued similar warnings.
Belt said pension rules must be strengthened so that liabilities are better measured, and so companies do not make pension promises they cannot keep. He also said his agency would like to have power to put a lien on a company’s assets in bankruptcy proceedings. But he warned that “no amount of tinkering will achieve a lasting solution.”