Senate OKs Vast Pension Bill

Legislation To Hold Companies Accountable For Pensions Moves To House

(CBS/AP)  In recent years there has been an explosion of big, ailing companies — especially in labor-heavy industries such as airlines and steel — shifting their pension liabilities to the PBGC.

"Unfortunately, the financial health of the PBGC is not improving," the agency's executive director, Bradley D. Belt, said in a statement. "The money available to pay benefits is eventually going to run out unless Congress enacts comprehensive pension reform to get plans better funded and provide the insurance program with additional resources."

For the fiscal year, the PBGC assumed 120 terminated pension plans. It reported $4 billion in losses from pension liabilities while it collected only $1.5 billion in insurance premiums from companies. The agency earned $3.9 billion in investment income.

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 do the same.

The pension plans of 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 end its pension plan and transfer liability to the federal agency.

Many companies are replacing traditional defined-benefit pension plans with less expensive defined-contribution programs, such as 401(k) plans — in which employers contribute to a retirement fund and workers receive only what the investments have earned.

The PBGC backs only defined-benefit plans, which are most prevalent in older industries such as automobile manufacturing, steel and airlines.

The agency was created in 1974 as a government insurance program for traditional employer-paid pension plans. Companies pay insurance premiums to the agency.