Pension insurer ran deficit high of $62B
Washington – — The deficit run up by the federal agency that insures pensions for about 41 million Americans has nearly doubled, to $62 billion. And the agency says that without changes, its program for pension plans covering 10 million of those workers will be insolvent within 10 to 15 years.
It was the widest deficit in the 40-year history of the Pension Benefit Guaranty Corp., which has now run shortfalls for 12 straight years. The gap grew wider in recent years because the weak economy triggered more corporate bankruptcies and failed pension plans. If the trend continues, the agency could need an infusion of taxpayer funds to pay retirees, who are guaranteed their pensions by law.
The PBGC said Monday that the increased deficit was due to worsening finances of some multi-employer pension plans, which are pension agreements between labor unions and a group of companies, usually in the same industry. The $62 billion deficit reported for the year ended Sept. 30 compared with $36 billion in the previous fiscal year.
Labor Secretary Thomas Perez said fixing the problem is vital to the retirement security of the nation’s middle-class. Agency officials called for Congress to enact legislation submitted by President Barack Obama designed to shore up the program’s finances.
The PBGC was created in 1974 as a government insurance program for traditional employer-paid pension plans, which have become much less common in recent decades as most employers turn to retirement accounts such as 401(k)s. The traditional plans are most prevalent in industries such as auto manufacturing, steel and airlines.
If an employer can no longer support its pension plan, the PBGC takes over the assets and liabilities, and pays promised benefits to retirees up to certain limits.
The agency didn’t name the multi-employer plans that it expects to run out of money or how many are involved. It said they represent a minority of the total 1,400 or so multi-employer pension plans.