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Federal pension guarantor runs $34 billion deficit

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The Pension Benefit Guaranty Corporation, responsible for the pensions of nearly 43 million Americans, says it has run a $34 billion deficit, the largest in its 38-year history.

In its fiscal 2012 annual report (.pdf) published Nov. 16, PBGC says that despite the alarm bells a $34 billion deficit might ring, it has funds to meet its obligations for years. PBGC notes that it had a $26 billion shortfall for fiscal 2011, and its obligations grew to $119 billion in fiscal 2012. The assets used to cover its obligations increased by a mere $4 billion to a total of $85 billion.

The agency has run deficits for 10 straight years and it attributes the widening gap to the recession causing corporate bankruptcies and failed pension plans. Overall, the agency has been in the red for 31 of its 38 years.

"Continuing financial deficits will ultimately threaten its ability to pay benefits," said PBGC Director Josh Gotbaum. The report says if the downward trend continues, it will need an infusion of taxpayer funds to pay out benefits unless it gets "the tools to set its financial house in order and to encourage responsible companies to keep their plans."

Gotbaum clarified that "there's no imminent threat that we're going to stop cutting checks."

In fiscal 2012, the agency reports it protected 130,000 pensions in American Airline's plans, 37,000 pensions from companies that went through bankruptcy, and tens of thousands of plans from companies in ongoing bankruptcies.

For its insurance programs in fiscal 2012, PBGC paid nearly $5.5 billion in benefits to 887,000 retirees whose plans had failed and says 614,000 future retirees will receive benefits when they become eligible. The agency also assumed responsibility for the benefits of 47,000 people in newly failed plans.

The agency warns of new trends in the American workforce that it and Congress must be aware of for future action. It says Americans are spending more time in retirement than ever before; businesses are reducing their contributions and support of retirement plans; individuals are saving less and investing less well; and that 92 percent of Americans feel there is a retirement crisis.

For more:
- read the full report (.pdf)
- see the message from Gotbaum

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