Pension Agency To Post Deficit Above $10 Billion

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Pension Agency To Post Deficit Above $10 Billion

By John D. Mckinnon, The Wall Street Journal

January 13, 2004

The U.S. government's tattered safety net for corporate-pension plans will report a long-term deficit of more than $10 billion in its annual report, according to a House Democrat who has been critical of Republican pension policy.

The milestone, while it has no immediate effect on retired workers' benefits, focuses unwelcome attention on an area in which President Bush and congressional Republicans could face election-year vulnerability. Many Democrats contend that Mr. Bush and congressional Republicans haven't done enough to protect workers' retirement plans, particularly those in manufacturing and other traditional industries, and would like to make the issue a political weapon this election year.

Monday, Rep. George Miller (D., Calif.) said the increase in the Pension Benefit Guaranty Corp.'s long-term deficit reflects paralysis on the part of the White House and Congress. "The Bush administration continues to allow companies to pass billions of dollars worth of their own pension debt onto a government agency," he said. "This not only threatens the solvency of the agency, but raises the specter of a costly taxpayer bailout. Worse, millions of employees will face huge retirement-benefit cuts if these plans are handed off to the PBGC."

The PBGC, which insures retirement plans that have a fixed payout at retirement for 44 million current workers and retirees, declined to comment. A few months ago, estimates of its deficit stood at about $8.6 billion, according to Mr. Miller.

A Treasury Department spokeswoman said the administration "has indicated its strong support for comprehensive pension reform to improve the retirement security of America's workers and retirees." She said the administration "has put forth aggressive proposals...to improve the accuracy of the pension-liability discount rate used to determine fund contributions, increase the transparency of pension-plan information and strengthen safeguards" against underfunding.

Workers in old-line industries with traditional defined-benefit plans have been hurt in recent years by rising productivity and overseas competition. At the same time, their pension plans have suffered from stock-market tumbles and low interest rates. Making matters worse, critics say, lax federal funding rules for pension plans have allowed many companies to go for years without making needed contributions to their plans.

As a result, when employers have gone into bankruptcy and shed their obligations to retirees, their plans often have been seriously underfunded, magnifying the PBGC's burden. Overhauls of the funding system have been delayed by congressional bickering, meanwhile.