The Pension Benefit Guaranty Corp. disclosed in its annual financial report that as of Sept. 30, it had $56.5 billion in assets to cover $79.2 billion in pension liabilities.
There has been an explosion in recent years in the number of big, ailing companies — especially in labor-heavy industries like airlines and steel — transferring their pension liabilities to the PBGC. With billions of dollars flying out of the agency's door, concern has been mounting in Congress and elsewhere over its financial footing.
The PBGC's $22.8 billion deficit for fiscal 2005 is slightly narrowed from the $23.3 billion shortfall it reported a year ago, which was a record. If other liabilities it assumed after the end of the fiscal year on Sept. 30 had been counted, the 2005 deficit would have been $25.7 billion, the agency said.
Without a legislative overhaul of the private pension system, the PBGC eventually will run out of money to pay the pension claims of the retirees of companies whose plans it has assumed, some experts predict. That would mean that people retiring from financially troubled companies would have nowhere else to turn for their promised pension payments — raising the possibility of a taxpayer bailout.
Traditional employer-paid pension plans, giving retirees a fixed monthly amount based on salary and years of employment, are now estimated to be underfunded by as much as $450 billion. That could jeopardize the retirement security of millions of Americans, lawmakers have warned.
United Airlines and US Airways used bankruptcy earlier this year, with judges' blessings, to slash costs by dumping their employee pension liabilities — a combined $9.6 billion — onto the PBGC.
Delta Airlines and Northwest Airlines, which both filed for Chapter 11 bankruptcy protection on Sept. 14, may seek to do the same. The pension plans of Delta and Northwest, the nation's No. 3 and No. 4 airlines, are underfunded by an estimated $16.3 billion.
And there is speculation that auto parts maker Delphi Corp., which filed for protection from creditors last month, also could terminate its pension plan and transfer liability to the federal agency.