U.S. pension insurer reports record $34 billion shortfall

Adrian Dennis/AFP/Getty Images

WASHINGTON The federal agency that insures pensions for more than 40 million Americans last year ran the widest deficit in its 38-year history.

The Pension Benefit Guaranty says its deficit grew to $34 billion for the budget year that ended Sept. 30. That compares with a $26 billion shortfall in the previous year.

Pension obligations grew by $12 billion to $119 billion last year. Assets used to cover those obligations increased by only $4 billion to $85 billion.

The agency has now run deficits for 10 straight years. The gap has grown wider in recent years because the weak economy has triggered more corporate bankruptcies and failed pension plans.

If the trend continues, the agency could struggle to pay benefits without an infusion of taxpayer funds.

Agency Director Josh Gotbaum said Friday that continued deficits "will ultimately threaten" the PBGC's ability to pay pension benefits to retired workers.

"There's no imminent threat that we're going to stop cutting checks," Gotbaum said during a conference call with reporters. However, he said, Congress must act "long before 10 years from now" to increase the insurance premiums that companies pay to the agency.

The Obama administration has proposed raising the premiums and tailoring them to the size of companies and their level of financial risk. Under the plan, bigger companies and those at greater risk of failing would pay larger premiums. The fees haven't been raised in six years.

Companies whose pension plans failed in the latest year included Great Atlantic & Pacific Tea Co., known as A&P, newspaper publisher Lee Enterprises and Houghton Mifflin Harcourt Publishing.

The PBGC joined with unions at American Airlines earlier this year to oppose the company's plan to terminate its pension plans. The move would have dumped billions of dollars of new obligations on the agency. American ended up freezing pensions for most workers instead of terminating them.

The American Benefits Council, which represents businesses, called the $34 billion deficit figure misleading and said it was based on faulty math.

"The public should not be led to believe the PBGC is in danger of a bailout, and Congress and the Obama administration should not use this number as a pretext to raise (insurance) premiums," the group said in a statement. The group has been critical of the PBGC.

The PBGC was created in 1974 as a government insurance program for traditional employer-paid pension plans. 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.

The number of companies offering traditional pension plans has shrunk dramatically in recent decades. U.S. employees increasingly have turned to defined-contribution plans such as 401(k)s to fund their retirement.

The PBGC has been in the red for 31 of its 38 years of operation. It did have surpluses in some years in the late 1990s and early 2000s, when fewer companies failed.

[hypnotoad72]

This article seems more accurate:

http://forward.com/articles/166154/americans-and-our-stuff/?p=all

Still, coworkers remember the days when people were encouraged to switch from pensions to the newly formed 401k system. You know, the stock market - the same one where you're told "You can make $x million in $y years, but also remember - don't afford to invest what you can't afford to lose." People (blindly) chose to put retirement money into what is nothing more than a casino, and what more and more people are saying is a rigged one.

Then, over the span of time as pension plans dwindle and stock market crashes happen as top-end "investors" sell out, reducing the value of their empty paper, and leaving those of us who do honest work with nothing.

People voted for change. Compromise only goes so far.

[longtime2123]

I spent 25 years with a company that had been around since 1817. A "corporate raider", much like Bain, came in and acquired 70% of the stock in the 1980's. They raided everything from the employee retirement program to financial reserves we were required by law to maintain (ins company). In the early 1990's he shut everything down even tho we were making a profit, and laid off 7000 employees. We lost our retirements and our savings since we were required to keep it in company stock. He is sitting high living in NYC and various other "vacation spots" while we wait for our checks monthly from the PBGC. The "corporate raider" even made $30m making a run on Disney using us as a base. They had to buy him out. At least the PBGC was able to come in and rescue us. I know 7000 people who I am sure did not vote for the Bain Capital guy.

[hypnotoad72]

Yup. Required to keep it as company stock.

By now, most people probably forgot about what Enron leaders did: They told workers to buy stock, as it would be safe. Months later, guess who sold their shares and left everyone with nothing? That's right, the same entities that told the workers it was great to invest.

Yet people say "redistribution of wealth" for precisely the OPPOSITE reasons, when - out here in real life - the real redistribution of wealth always goes from worker to "top" boss.

[Istillcare]

Maybe you 2 geniuses should take a look at who the PBGC is. It's a UNITED STATES GOVERNMENT agency, not a private organization that you're so quick to demonize. So why don't you explain just how Bain Capital stole money from a government agency. Wake up!

[hypnotoad72]

*zing*

[rayward73446]

Many of the losses that PBGC acquires is due to venture capital companies, such as Bain Capital, that buy companies and then liquidates them to make a profit while raiding the worker funded pension funds the acquired company owns. This practice started about the time that PBGC was founded to prevent workers from losing their retirement funds that were raided by purchasers.
We need a federal law that makes this kind of predatory raiding illegal. These venture capitalist simply do not care about the workers, and routinely close the businesses that they buy, after depleting all assets, like pension funds, purely seeking profit.

Hostess Baking is the latest victim of these vultures, and the venture capital company that acquired them are closing the business down as I write this post. Thousands of Americans are losing their jobs at Hostess because the new owners will not pay decent wages, and have shut down the pension fund, which probably predicts their plans to raid that pension fund as well. When does the stealing of workers investments for their retirement come to an end.

[reformed_druid]

Hostess hasn't been 'acquired' by anyone. They are closing because the Baker's Union refused to make a deal that would have allowed them to stay open. They chose to go on strike instead.

[rayward73446]

REFORMED_DRUID
Hostess was acquired by a foreign venture capitalist, I believe in England, so you are dead wrong stating that Hostess was not acquired by anyone. Gosh don't you ever read the news? This raider tried to reduce the workers wages by nearly half, and canceled their retirement program, so he could reap big profits from raiding their pension fund. Did the workers get pis*ed off and go on strike? Absolutely, they did not feel that there was any other option available for them.
The union had very little to do with the strike, except to support the workers at Hostess.

[TimeToEvolve]

Who in god's name is running these corrupt, fraudulent organizations. This is money that was paid in by workers and should be safe. I smell corporate shennanigans. Are we so stupid that we actually want inefficient, wasteful and arrogant corporations to run ANYTHING in our country?

[hypnotoad72]

I can't disagree with that. For-profit entities often do cross the lines of ethics to get what they want at everyone else's expense, but then turn around and tell everyone else how bad *they* are...