Pension insurer's deficit shrinks

$22.8 billion for fiscal 2005 versus $23.3 billion for 2004


While lawmakers continued to grapple with pension reform, the federal agency that insures private pensions reported a $22.8 billion long-term deficit yesterday and warned that the money to pay benefits eventually will run out.

The Pension Benefit Guaranty Corp.'s shortfall was slightly smaller than last fiscal year's $23.3 billion because of better investment results and other factors. But the agency's exposure to losses from bankrupt and financially struggling companies in the airline and automotive industries looms larger than ever.

The agency estimated its "reasonably possible" future exposure at $108 billion, up 12 percent from last year's estimated $96 billion. It does not disclose the companies included in the estimates.

"Unfortunately, the financial health of the PBGC is not improving," the agency's executive director, Bradley 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 dollars."

The agency, which guarantees pensions for 44 million workers and retirees, would run out of cash about 2020 if nothing were done, according to an analysis by the nonpartisan Center on Federal Financial Institutions.

The insurance system is financed by employers' premiums, but many fear that taxpayers would be on the hook if the agency defaulted.

The PBGC's report for the fiscal year that ended Sept. 30 listed $56.5 billion in assets to cover $79.2 billion in long-term liabilities.

"The PBGC does not appear to have a corner yet in the real world," said Douglas Elliott, president of the Center on Federal Financial Institutions. "The positive results this year compared to last are a result of accounting decisions as to how much of the longer-term losses to reflect last year, this year, and presumably next year. We still have an average loss of $7 billion to $8 billion a year for the last four years."

One reason the agency's deficit grew only slightly even though the failure of United Airlines added $6.6 billion to liabilities in April is that the airline was included in last year's numbers. The agency is required to book all liabilities that are "likely and estimable," even though it does not disclose which companies' liabilities are included.

The smaller deficit "reflects fewer-than-expected bankruptcies and plan terminations as well as ongoing recoveries in both the real economy and equities markets," said the group's corporate tax and finance director, Bob Shepler.

Business groups, lawmakers and administration officials all agree that the system needs fixing soon, but agreement on reforms has been slow because the issues are complex and contentious.

Proposed reform measures include raising premiums, requiring better disclosure and changing formulas for determining the amount employers must contribute to their plans.

Reform bills are pending inthe House and Senate, but it is unclear whether Congress will act before the end of the year.

Senate Majority Leader Bill Frist said Monday that the leadership was close to agreement and that a vote is possible before Thanksgiving.

A separate reform bill passed the House Ways and Means Committee last week.

Barbara Rose writes for the Chicago Tribune.

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