Do more to fix pensions

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Do more to fix pensions

Kansas City Star, August 21, 2003

A rising stock market is improving the health of private pension plans. And though it may seem counterintuitive, a recent rise in interest rates is helping, too.

That's a relief, but it doesn't fix everything wrong with the nation's private pension system. Major worries remain for many private-sector employees.

So Congress must make sure pension rules protect people who are counting on what they have earned for a secure retirement. And employees must stay informed so they know how proposed changes might affect them.

The big worry has been underfunded pension plans. More than 300 of the companies in the Standard & Poors 500 stock index have pension plans that lack enough money to meet future needs.

But the rising stock market has boosted the value of the assets in those plans. Rising interest rates are also helping because of the way federal regulations require companies to calculate their pension obligations.

When interest rates are low, companies must project lower earnings for their pension plans. Higher interest rates allow companies to assume more growth in the plans.

The Pension Benefit Guaranty Corp., however, remains on shaky financial ground. It was established to insure pension plans and, when companies go bankrupt, pay at least some of the retirement benefits owed to their workers.

The General Accounting Office, the investigative arm of Congress, last month designated the pension agency as “high risk” because the weak economy had forced it to pay out more money to retirees.

Congress should consider additional financial support for the agency and tougher rules to make sure companies put enough money into their employee pension plans. Federal rules to require more timely reporting of how and when companies put money into their pension plans would be useful, too. That would help people who buy stock better evaluate the future profitability of those companies.

American workers should be able to rely on pension benefits they have earned.