- WASHINGTON (Reuters) -- The
deficit at the federal agency that rescues failed U.S. corporate pensions
more than doubled to $23.3 billion in fiscal year 2004, officials said
on Monday, with analysts largely blaming bankrupt airlines.
- The Pension Benefit Guaranty Corp. insures the traditional
"defined benefit" pensions of about 44 million workers. It started
the year with a then-record deficit of $11.2 billion in its program for
pension plans sponsored by a single employer.
- The agency was hit by a $14.7 billion loss from "completed
and probable" pension plan terminations during the year ending Sept.
30, which was only partially offset by premium and investment income.
- While the agency did not name the companies whose pension
plans had caused the flood of red ink, the PBGC said its largest exposure
came from the transportation, communications and utilities sector.
- Analysts said looming liabilities from struggling airlines
clearly had hurt the PBGC balance sheet.
- Expected pension plan terminations at bankrupt carriers
United Airlines and US Airways must have figured in the loss because both
companies plan to scrap employee plans to save money, said Douglas Elliott,
president of the Center on Federal Financial Institutions, a think tank
- "The legal threshold for including the amount is
only that they are 'probable' terminations," Elliott said. "So
United has got to be in there as well as US Air."
- "These guys are in trouble," he said of the
- The PBGC has said in court that termination of pension
plans at United, a unit of UAL Corp., would add $6.4 billion to its liabilities.
The agency would have to pick up $2.1 billion in liabilities at US Airways'
if that airline scraps its three remaining defined benefit plans.
- CONGRESSMAN CITES AIRLINES' PROBLEMS
- The chairman of the House Committee on Education and
the Workforce, Rep. John Boehner, said airlines' woes were aggravating
the trend in underfunded pension plans. The PBGC slipped into a deficit
in 2002 after having to rescue failed pension plans in the steel industry.
- While the agency is funded by corporate premiums, its
problems are "putting taxpayers' interests in real jeopardy,"
said Boehner, a Republican from Ohio.
- He vowed to move forward with comprehensive legislation
to reform and strengthen traditional "defined benefit" pensions,
which have a fixed payout at retirement.
- In addition to losses booked for fiscal 2004, the PBGC
calculated its "reasonably possible" exposure, which is an estimate
of the amount of unfunded benefits in pension plans sponsored by companies
at greater risk of default. This was estimated at $96 billion, up from
$82 billion a year earlier.
- Total underfunding of pensions at U.S. companies whose
single-employer pension plans are insured by the PBGC jumped in fiscal
2004 to $450 billion -- up from $350 billion a year earlier.
- The PBGC's separate insurance program for multi-employer
pensions had a deficit of $236 million in fiscal 2004 -- smaller than the
deficit of $261 million a year earlier.
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